Bellatrix Exploration Ltd. (“Bellatrix”, "we", "us", "our" or the
“Company”) (TSX, NYSE: BXE) announces its financial and operating
results for the three and nine months ended September 30,
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 and nine
months ended September 30, 2018 and 2017. Bellatrix's
unaudited interim condensed financial statements and notes, and the
MD&A for the three and nine months ended September 30, 2018 and
2017 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 September 30, |
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Nine months ended September 30, |
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2018 |
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2017 |
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2018 |
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2017 |
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SELECTED
FINANCIAL RESULTS |
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|
|
|
(CDN$000s except share
and per share amounts) |
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|
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Cash flow from operating
activities |
|
|
7,617 |
|
|
23,031 |
|
|
34,236 |
|
|
41,785 |
|
Per
diluted share (1) |
|
$0.12 |
|
$0.47 |
|
$0.62 |
|
$0.85 |
|
Adjusted funds flow
(2) |
|
|
7,705 |
|
|
8,300 |
|
|
32,517 |
|
|
42,540 |
|
Per
diluted share (1) |
|
$0.12 |
|
$0.17 |
|
$0.59 |
|
$0.86 |
|
Net profit (loss) |
|
|
(8,882 |
) |
|
(22,124 |
) |
|
(56,551 |
) |
|
(78,310 |
) |
Per diluted share (1) |
|
($0.14 |
) |
($0.45 |
) |
($1.02 |
) |
($1.59 |
) |
Capital – exploration
and development |
|
|
7,042 |
|
|
39,683 |
|
|
36,676 |
|
|
94,896 |
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Total
capital expenditures – net (3) |
|
|
2,716 |
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|
18,421 |
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31,430 |
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|
38,872 |
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Credit Facilities |
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|
57,059 |
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|
8,279 |
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|
57,059 |
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|
8,279 |
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Second Lien Notes |
|
|
110,367 |
|
|
— |
|
|
110,367 |
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|
— |
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Senior Notes |
|
|
195,373 |
|
|
304,515 |
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|
195,373 |
|
|
304,515 |
|
Convertible Debentures
(liability component) |
|
|
41,120 |
|
|
38,894 |
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|
41,120 |
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|
38,894 |
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Adjusted
working capital deficiency (2) |
|
|
14,899 |
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|
48,144 |
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|
14,899 |
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|
48,144 |
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Total net
debt (2) |
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|
418,818 |
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|
399,832 |
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|
418,818 |
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|
399,832 |
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SELECTED OPERATING RESULTS |
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Total revenue (3) |
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|
51,525 |
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|
48,153 |
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|
171,762 |
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|
188,502 |
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Average daily sales
volumes |
|
|
|
|
|
Crude
oil, condensate and NGLs |
(bbl/d) |
|
9,275 |
|
|
9,342 |
|
|
9,739 |
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|
9,054 |
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Natural
gas |
(mcf/d) |
|
145,527 |
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|
170,210 |
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|
156,654 |
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|
166,492 |
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Total oil
equivalent (4) |
(boe/d) |
|
33,530 |
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|
37,710 |
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|
35,848 |
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|
36,803 |
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Average realized
prices |
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Crude oil
and condensate |
($/bbl) |
|
82.47 |
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|
55.36 |
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80.92 |
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|
60.93 |
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NGLs
(excluding condensate) |
($/bbl) |
|
26.31 |
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|
18.79 |
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|
25.76 |
|
|
19.19 |
|
Natural
gas |
($/mcf) |
|
1.42 |
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|
1.54 |
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|
1.63 |
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|
2.44 |
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Total oil
equivalent |
($/boe) |
|
16.17 |
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|
13.56 |
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|
17.14 |
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|
18.35 |
|
Total oil equivalent (including risk management (5)) |
($/boe) |
|
18.68 |
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|
17.49 |
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|
19.39 |
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|
20.33 |
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Selected Key Operating
Statistics |
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Commodity
sales |
($/boe) |
|
16.17 |
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13.56 |
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|
17.14 |
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|
18.35 |
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Other
income |
($/boe) |
|
0.53 |
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|
0.32 |
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|
0.41 |
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|
0.41 |
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Royalties |
($/boe) |
|
(1.84 |
) |
|
(1.12 |
) |
|
(1.88 |
) |
|
(1.78 |
) |
Production expenses |
($/boe) |
|
(7.71 |
) |
|
(7.84 |
) |
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(7.80 |
) |
|
(8.48 |
) |
Transportation |
($/boe) |
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(2.23 |
) |
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(2.01 |
) |
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(2.08 |
) |
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(1.69 |
) |
Operating
netback (3) |
($/boe) |
|
4.92 |
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|
2.91 |
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|
5.79 |
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|
6.81 |
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Realized gain (loss) on risk management contracts |
($/boe) |
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2.51 |
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|
3.93 |
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|
2.25 |
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|
1.97 |
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Operating netback (3) (including risk management (5)) |
($/boe) |
|
7.43 |
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|
6.84 |
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|
8.04 |
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|
8.78 |
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Three months ended September 30, |
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Nine months ended September 30, |
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SHARE STATISTICS |
2018 |
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2017 |
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2018 |
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2017 |
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COMMON
SHARES |
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Common shares
outstanding (6) |
61,764,109 |
|
49,378,026 |
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61,764,109 |
|
49,378,026 |
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Weighted
average shares (1) |
61,763,344 |
|
49,378,026 |
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55,454,603 |
|
49,343,026 |
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SHARE TRADING
STATISTICS |
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TSX and Other
(7) |
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(CDN$, except volumes)
based on intra-day trading |
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High |
1.35 |
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3.90 |
|
2.22 |
|
6.83 |
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Low |
1.07 |
|
2.77 |
|
1.07 |
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2.77 |
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Close |
1.35 |
|
3.56 |
|
1.35 |
|
3.56 |
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Average
daily volume |
430,717 |
|
171,423 |
|
613,688 |
|
180,064 |
|
NYSE |
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(US$, except volumes)
based on intra-day trading |
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High |
1.06 |
|
3.10 |
|
1.78 |
|
5.15 |
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Low |
0.84 |
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2.23 |
|
0.84 |
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2.23 |
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Close |
1.06 |
|
2.84 |
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1.06 |
|
2.84 |
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Average
daily volume |
81,286 |
|
80,673 |
|
122,788 |
|
87,531 |
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(1) Basic weighted average shares for the three
and nine months ended September 30, 2018 were 61,763,344 (2017:
49,378,026) and 55,454,603 (2017: 49,343,026),
respectively. In computing weighted average diluted profit
(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 and nine months ended
September 30, 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, a
total of nil (2017: nil) common shares issuable on conversion of
the Company's outstanding 6.75% convertible unsecured subordinated
debentures (the "Convertible Debentures") were added to the
denominator, and a total of nil (2017: nil) common shares issuable
on exercise of the Company's outstanding warrants were added to the
denominator for the three and nine month periods resulting in
diluted weighted average common shares outstanding of 61,763,344
(2017: 49,378,026) and 55,454,603 (2017: 49,343,026),
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 and nine months ended September 30,
2018 were 72,577,386 (2017: 57,210,780) and 72,577,386 (2017:
57,210,780), respectively. This includes 1,552,232 (2017:
1,659,914) and 1,552,232 (2017: 1,659,914), respectively of share
options outstanding, 6,172,840 (2017: 6,172,840) and 6,172,840
(2017: 6,172,840), respectively of shares issuable on conversion of
the Convertible Debentures, and 3,088,205 (2017: nil) and 3,088,205
(2017: nil), respectively of warrants outstanding. 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 third quarter results highlight our
tight focus on cost and debt reduction initiatives and continued
improvement in operational performance. Production volumes for the
nine months ended September 30, 2018 have exceeded full year
average production guidance by approximately 3%. Given strong
results experienced year to date, Bellatrix is announcing increased
full year 2018 corporate guidance metrics, which includes an
increase to our full year average production guidance range, and a
decrease to both our full year capital expenditure and full year
production expenditure guidance ranges.
Third quarter 2018 performance included the
following operational and financial achievements:
- Production volumes in the third quarter of 2018 averaged 33,530
boe/d (72% natural gas weighted). Average production volumes of
35,848 boe/d over the first nine months of 2018 represent 3%
outperformance compared with the mid-point of Bellatrix’s previous
full year average production guidance range (34,000 to 35,500
boe/d).
- Production expenses in the third quarter of 2018 averaged
$7.71/boe, down 2% compared with first half 2018 production
expenses of $7.84/boe. Production expenditures in the nine
months ended September 30, 2018 of $7.80/boe were in line with
Bellatrix’s previous full year 2018 production expenditure guidance
range of $7.65/boe to $8.00/boe. Completion of Phase 2 of the
Bellatrix O’Chiese Nees-Ohpawganu’ck deep-cut gas plant at Alder
Flats (the “Alder Flats Plant”) and the redirection of volumes from
higher cost third party plants have contributed to the achieved
production expenditure level.
- Bellatrix continues to improve drilling efficiency and reduce
costs. During the third quarter of 2018, Bellatrix drilled its 4-23
operated Cardium well (100% working interest), achieving
approximately 8 days from spud to rig release, representing a 32%
improvement compared with 2017 Cardium drilling results. In 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 $3.4 million.
- Bellatrix reduced total net debt by $11.4 million and increased
its liquidity by $14.4 million as at September 30, 2018, compared
with the previous quarter. Borrowings under our syndicated
revolving credit facilities (the "Credit Facilities") were $57.1
million and total net debt was $418.8 million at September 30,
2018. At September 30, 2018, Bellatrix had approximately $37.9
million of undrawn capacity (approximately 40% undrawn) against
total commitments of $95 million under the Company’s Credit
Facilities, before deducting outstanding letters of credit of $11.5
million that reduce the amount otherwise available to be drawn on
the Credit Facilities.
- On September 11, 2018, Bellatrix announced that it closed a
debt refinancing transaction which extended the maturity of over
one-third of the Company’s unsecured senior notes due 2020 by three
years and reduced outstanding debt by approximately $10.5
million.
Bellatrix delivered strong operational
performance in the first nine months of 2018 relative to guidance
expectations as summarized below:
|
First Nine
Month2018 Results |
|
2018
AnnualGuidance (1) |
|
Actual
ResultsVersusGuidance |
Average daily production (boe/d) |
35,848 |
|
34,750 |
|
3% |
Average product mix |
|
|
|
Natural gas (%) |
73 |
|
74 |
|
(1)% |
Crude oil, condensate and NGLs (%) |
27 |
|
26 |
|
4% |
Capital Expenditures ($000’s) |
|
|
|
Total net capital expenditures(2) |
37,698 |
|
55,000 |
|
n/a |
Production expense ($/boe) |
7.80 |
|
7.83 |
|
—% |
(1) 2018 Annual Guidance metrics represent the
mid-point of the previously set guidance range (August 2, 2018)
where applicable.
(2) Capital spending includes exploration and
development capital projects and corporate assets, and excludes
property acquisitions, property dispositions and facilities.
REDUCED SUSTAINING CAPITAL
The combination of structurally lower capital
costs and improved well performance have reduced overall sustaining
capital requirements for our business. All-in average Spirit
River well costs (drill, complete, equip and tie-in) have been
lowered to approximately $3.4 million in 2018 (from $3.8 million in
2017). In addition to capital cost savings, Bellatrix
delivered productivity improvements with average well performance
from the Company's 2018 Spirit River well program outperforming
expected results by approximately 38% on an IP90 basis. Enhanced
productivity has led to a reduction in the assumed number of Spirit
River wells from 15 to 12 per year (assuming an average 6.0 Bcf
performance curve versus a 5.2 Bcf performance curve) required to
maintain corporate production volumes in the mid 30,000 boe/d
range. Bellatrix has drilled and/or participated in only 7.2 net
wells during the first nine months of 2018, while delivering
average production volumes of 35,848 boe/d over the nine-month
period.
With our long-term infrastructure build out
complete, Bellatrix expects the majority of future 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 the Company's existing facilities and
processing capacity provide the capability to grow production
volumes beyond 60,000 boe/d, with minimal future facility related
capital.
COMMODITY PRICE RISK MANAGEMENT
PROTECTION AND MARKET DIVERSIFICATION INITIATIVES
Bellatrix maintains strong commodity price risk
management and market diversification coverage through 2020 which
is expected to reduce the impact of commodity price volatility on
our business. Bellatrix has approximately 69 MMcf/d of natural gas
volumes hedged in the fourth quarter of 2018, at an average fixed
price of approximately $2.98/mcf, representing approximately 45% of
2018 daily average natural gas volumes (based on the mid-point of
updated 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 with increased volume exposure
beginning in November 2018. This long-term diversification strategy
reduces Bellatrix’s exposure to AECO pricing on approximately 40%
of the Company’s forecast fourth quarter 2018 natural gas
volumes.
In combination, market diversification sales and
fixed price hedges cover approximately 85% of natural gas volumes
in the fourth quarter of 2018, and approximately 55% in 2019 (based
on the mid-point of 2018 average production guidance). A
summary of Bellatrix’s commodity price risk management contracts as
at September 30, 2018 include:
Product |
Financial Contract |
Period |
Volume |
Average Price (1) |
Natural gas |
Fixed price swap |
October 1, 2018 to December 31, 2018 |
67 MMcf/d |
$3.03/mcf |
Natural gas |
Fixed price swap |
October 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, 2019 to October 31, 2020 |
10,000 MMBtu/d |
-US$1.24/MMBtu |
Propane |
Fixed price differential |
October 1, 2018 to December 31, 2018 |
1,000 bbl/d |
47% of NYMEX WTI |
Crude oil |
Sold C$WTI call |
October 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 |
October 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 September 30, 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 |
|
|
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|
|
INCREASED CORPORATE NGL YIELD ACHIEVED
IN THE SECOND AND THIRD QUARTERS
The Phase 2 expansion project of the Alder Flats
Plant was fully commissioned and began selling volumes mid-March
2018 which more than doubled throughput capacity at the Alder Flats
Plant to 230 MMcf/d (from 110 MMcf/d). Total NGL recoveries
(including plant condensate) at the Alder Flats Plant have
increased in the second and third quarters of 2018, with NGL sales
yields of approximately 70 bbl/MMcf, up approximately 15% from
first quarter total sales yields of approximately 60
bbl/MMcf. The Bellatrix Alder Flats Plant deep-cut process
provides enhanced NGL yields of approximately 10 to 35 bbl/MMcf
over third-party plants in our core area, resulting in an average
corporate liquid weighting of approximately 27% in 2018.
THIRD QUARTER 2018 OPERATIONAL
ACTIVITIES AND PERFORMANCE
Drilling and completion activities in the third
quarter were hampered by unseasonably wet weather. During the
third quarter, Bellatrix participated in four gross (2.0 net)
wells, including three gross operated wells drilled (two Spirit
River and one Cardium well). The three operated wells were
spud late in the third quarter, with the two Spirit River wells
brought on-stream during late October, and the Cardium well
anticipated to be on-stream in early November.
OPERATIONAL AND FINANCIAL SUMMARY
- Production volumes in the third quarter of 2018 averaged 33,530
boe/d (72% natural gas weighted), down from second quarter 2018
volumes of 37,309 boe/d, reflecting natural volume declines and
proactive volume curtailments during periods of weak natural gas
pricing. Production volumes averaged 35,848 boe/d for the
nine months ended September 30, 2018, above the high end of
Bellatrix’s previous full year average production guidance range
(34,000 to 35,500 boe/d).
- Adjusted funds flow generated in the three months ended
September 30, 2018 was $7.7 million ($0.12 per basic and diluted
share), compared to $10.1 million ($0.18 per basic share and
diluted share) in the second quarter of
2018.
- Exploration and development capital expenditures were $7.0
million in the third quarter of 2018. Total exploration and
development capital expenditures for the first nine months of 2018
were $36.7 million, in line with budget expectations. Capital
expenditures year to date have primarily been allocated to
drilling, completion and equipping activity.
- Bellatrix’s borrowings under its Credit Facilities were $57.1
million, and total net debt was $418.8 million at September 30,
2018. At September 30, 2018, Bellatrix had approximately
$37.9 million of undrawn capacity (approximately 40% undrawn)
against total commitments of $95 million within the Company’s
Credit Facilities before deducting outstanding letters of credit of
$11.5 million that reduce the amount otherwise available to be
drawn on the Credit Facilities.
- For the quarter ended September 30, 2018, Bellatrix’s Senior
Debt to EBITDA (as defined in the MD&A) ratio was 2.78 times,
well below the financial covenant of 5.0 times as permitted by the
agreement governing the Credit Facilities and Bellatrix's First
Lien Debt to EBITDA (as defined in the MD&A) ratio was 1.24
times, well below the financial covenant of 3.0 times as permitted
by the agreement governing the Credit Facilities.
- Total revenue was $51.5 million for the third quarter of 2018,
compared to $54.0 million in the second quarter of 2018, as
modestly higher natural gas and liquids pricing mitigated lower
production volumes over the comparative periods.
- The corporate royalty rate in the three months ended September
30, 2018 averaged 13% of sales (after transportation), comparable
with the 13% average rate in the second quarter of 2018.
- Production expenses in the third quarter of 2018 averaged
$7.71/boe, down 2% compared with first half 2018 production
expenses of $7.84/boe. Production expenses in the nine months
ended September 30, 2018 of $7.80/boe remain in line with
Bellatrix’s full year 2018 production expense guidance range.
- Our corporate operating netback (including risk management)
realized for the three months ended September 30, 2018 was
$7.43/boe, down 2% compared with $7.58/boe realized in the second
quarter 2018. This change reflects lower realized hedging gains
mitigated by higher average commodity sales prices over the
comparable periods.
- Net general and administrative (“G&A”) expenses (after
capitalized costs and recoveries) for the three months ended
September 30, 2018 were $6.4 million ($2.08/boe), down $0.4 million
from $6.8 million ($2.01/boe) in the second quarter of 2018.
- Bellatrix recorded a net loss for the three months ended
September 30, 2018 of $8.9 million compared to a net loss of $34.8
million for the three months ended June 30, 2018. The decrease in
net loss period over period is primarily due to a decrease in
unrealized loss on commodity contracts, an increase in unrealized
foreign exchange gains, an increase in gains on Senior Note
settlements, and a decrease in production expenses, partially
offset by a 10% decrease in total sales volumes.
- As at September 30, 2018, Bellatrix had approximately 134,206
net undeveloped acres of land principally in Alberta.
- As at September 30, 2018, Bellatrix had approximately $1.37
billion in tax pools available for deduction against future
income.
- Bellatrix maintained a strong Liability Management Rating of
10.32 in Alberta versus an industry average of 4.87 as at October
6, 2018.
OUTLOOK & 2018 CORPORATE GUIDANCE
Year to date average production volumes of
35,848 boe/d continue to track near the high end of Bellatrix’s
prior 2018 full year guidance range of 34,000 to 35,500
boe/d. Bellatrix is announcing today, an increase in its
average production guidance range, and an associated decrease in
its full year 2018 net capital expenditure guidance range, given
strong results year to date. Average well performance
continues to exceed expectations, resulting in lower sustaining
capital requirements for Bellatrix’s business. Bellatrix has been
stewarding its full year 2018 capital investment level near the low
end of its previous guidance range, therefore the Company is
adjusting its full year capital guidance to $50 to $55 million.
|
Revised
2018Annual Guidance(November 1,
2018) |
|
Previously
Set 2018Annual Guidance(August 2,
2018) |
|
Previously
Set 2018Annual Guidance(April 3,
2018) |
|
Production |
|
|
|
|
|
|
2018
Average daily production (boe/d) |
35,000
- 35,500 |
|
34,000
- 35,500 |
|
34,000
- 35,500 |
|
Average product mix |
|
|
|
|
|
|
Natural
gas (%) |
73 |
|
74 |
|
74 |
|
Crude
oil, condensate and NGLs (%) |
27 |
|
26 |
|
26 |
|
Net capital expenditures |
|
|
|
|
|
|
Total net
capital expenditures ($000) (1) |
50,000
- 55,000 |
|
50,000
- 60,000 |
|
55,000
- 65,000 |
|
Expenses |
|
|
|
|
|
|
Production expense ($/boe) (2) |
7.65 - 7.90 |
|
7.65 - 8.00 |
|
7.65 - 8.00 |
|
(1) Net capital spending includes exploration
and development capital projects and corporate assets, and excludes
property acquisitions and dispositions. Net capital spending also
excludes the previously received prepayment portion of Bellatrix's
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’s fourth quarter drilling and
completion program includes plans to drill up to three gross
operated wells, including a two mile Spirit River well.
Capital investment in the fourth quarter will also include the
completion of the 4-23 Cardium well drilled in September and tying
in all three operated wells previously drilled in the third
quarter.
The 2018 capital program will remain flexible
and focused on optimizing forecast return on invested capital
through development of the Spirit River liquids rich natural gas
play and higher liquids weighted opportunities in the Cardium
play.
CONFERENCE CALL INFORMATION
A conference call to discuss Bellatrix's second
quarter results will be held on November 1, 2018 at 3:30 pm MT /
5:30 pm 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, second lien
notes, 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, updated 2018 annual guidance including forecast
average annual production and commodity mix, capital expenditures
and production expense, expectations as to the number of Spirit
River wells required to be drilled annually to maintain corporate
production volumes in the mid 30,000 boe/d range, expectations that
improved well performance will result in lower sustaining capital
requirements for Bellatrix’s business, expectation of production
performance for present and future wells drilled by the Company,
expectations that the Company commodity price risk management and
market diversification coverage in 2018 through 2020 will reduce
the impact of commodity price volatility on our business, the
expectation of the percentage of production hedged or subject to
other market diversification strategies, expectations regarding the
enhanced NGL yields of Phase 2 of the Alder Flats Plant,
expectations of drilling, completion, equip and tie-in plans and
the timing thereof for the remainder of 2018, expectations of
timing for bringing certain previous drilled wells on-stream,
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 and expectations
that the Company’s existing facilities and processing capacity will
provide the capability to grow production volumes beyond 60,000
boe/d. To the extent that any forward-looking information contained
herein constitute a financial outlook, they were approved by
management on November 1, 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.
TYPE CURVES
In this press release certain information
relating to the total cumulative production associated with type
curves for Bellatrix's Spirit River wells have been presented. The
5.2 Bcf type curve set forth herein is based on all Bellatrix
operated, Notikewin and Falher B wells drilled between 2013 and
2017, and represents the mean (P50) performance curve. The 6.0 Bcf
type curve set forth herein is based on all Bellatrix operated,
Notikewin and Falher wells drilled in 2017 and represents the mean
(P50) performance curve. The type curve numbers have been presented
to provide readers with information on the assumptions used for
management's budgeting process and future planning. There is no
certainty that future wells will generate results to match historic
type curves presented herein. The actual performance of wells may
not match historic type curves as a result of a number of factors
including the risks identified above under "Forward Looking
Statements" and as such type curves are not reliable indicators of
future performance.
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