TSX: BXE
CALGARY, March 14, 2019
/PRNewswire/ - Bellatrix Exploration Ltd. ("Bellatrix", "we",
"us", "our" or the "Company") (TSX: BXE) announces its financial
and operating results for the fourth quarter and year ended
December 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 years ended December 31,
2018 and 2017. Bellatrix's audited financial statements for
the year ended December 31, 2018 and
notes thereto (the "financial statements"), 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,
|
|
|
2018
|
2017
|
2018
|
2017
|
SELECTED FINANCIAL
RESULTS
|
|
|
|
|
|
(CDN$000s except
share and per share amounts)
|
|
|
|
|
|
Cash flow from
operating activities
|
|
28,239
|
13,425
|
62,475
|
55,210
|
Per diluted share
(1)
|
|
$0.39
|
$0.27
|
$1.05
|
$1.12
|
Funds flow from
operations (2)
|
|
15,508
|
15,700
|
48,025
|
58,240
|
Per diluted share
(1)
|
|
$0.21
|
$0.32
|
$0.80
|
$1.18
|
Net profit
(loss)
|
|
(89,788)
|
(13,053)
|
(146,339)
|
(91,363)
|
Per diluted share
(1)
|
|
($1.24)
|
($0.26)
|
($2.45)
|
($1.85)
|
Capital – exploration
and development
|
|
13,654
|
25,755
|
50,329
|
120,651
|
Total capital
expenditures – net (2)
|
|
44,187
|
26,212
|
75,604
|
65,084
|
Credit
Facilities
|
|
47,763
|
52,066
|
47,763
|
52,066
|
Second Lien
Notes
|
|
137,097
|
—
|
137,097
|
—
|
Senior
Notes
|
|
196,000
|
305,409
|
196,000
|
305,409
|
Convertible
Debentures (liability component)
|
|
41,732
|
39,426
|
41,732
|
39,426
|
Adjusted working
capital deficiency (2)
|
|
20,740
|
23,926
|
20,740
|
23,926
|
Total net debt
(2)
|
|
443,332
|
420,827
|
443,332
|
420,827
|
|
|
|
|
|
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SELECTED OPERATING RESULTS
|
|
|
|
|
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Total revenue
(2)
|
|
56,949
|
60,897
|
228,712
|
249,399
|
Average daily sales
volumes
|
|
|
|
|
|
Crude oil, condensate
and NGLs
|
(bbl/d)
|
10,281
|
9,602
|
9,876
|
9,192
|
Natural
gas
|
(mcf/d)
|
148,319
|
164,848
|
154,553
|
166,078
|
Total oil equivalent
(3)
|
(boe/d)
|
35,001
|
37,077
|
35,635
|
36,872
|
Average realized
prices
|
|
|
|
|
|
Crude oil and
condensate
|
($/bbl)
|
50.98
|
69.64
|
73.63
|
62.93
|
NGLs (excluding
condensate)
|
($/bbl)
|
20.89
|
27.68
|
24.46
|
21.52
|
Natural
gas
|
($/mcf)
|
2.24
|
1.79
|
1.78
|
2.27
|
Total oil
equivalent
|
($/boe)
|
17.21
|
17.42
|
17.16
|
18.12
|
Total oil equivalent
(including risk management (4))
|
($/boe)
|
19.86
|
20.80
|
19.50
|
20.45
|
Selected Key
Operating Statistics
|
|
|
|
|
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Commodity
sales
|
($/boe)
|
17.21
|
17.42
|
17.16
|
18.12
|
Other
income
|
($/boe)
|
0.46
|
0.43
|
0.43
|
0.41
|
Royalties
|
($/boe)
|
(1.68)
|
(1.78)
|
(1.83)
|
(1.78)
|
Production
expenses
|
($/boe)
|
(6.59)
|
(7.81)
|
(7.50)
|
(8.31)
|
Transportation
|
($/boe)
|
(2.15)
|
(1.92)
|
(2.10)
|
(1.75)
|
Operating netback
(2)
|
($/boe)
|
7.25
|
6.34
|
6.16
|
6.69
|
Realized gain (loss)
on risk management contracts
|
($/boe)
|
2.65
|
3.38
|
2.35
|
2.33
|
Operating netback
(3) (including risk management
(4))
|
($/boe)
|
9.90
|
9.72
|
8.51
|
9.02
|
|
Three months ended
December 31,
|
Year ended
December 31,
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|
2018
|
2017
|
2018
|
2017
|
COMMON
SHARES
|
|
|
|
|
Common shares
outstanding (5)
|
80,909,225
|
49,378,026
|
80,909,225
|
49,378,026
|
Weighted average
shares (1)
|
72,436,105
|
49,378,026
|
59,734,872
|
49,351,848
|
SHARE TRADING
STATISTICS
|
|
|
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TSX and Other
(6)
|
|
|
|
|
(CDN$, except
volumes) based on intra-day trading
|
|
|
|
|
High
|
1.60
|
3.52
|
2.22
|
6.83
|
Low
|
0.60
|
1.85
|
0.60
|
1.85
|
Close
|
0.63
|
2.15
|
0.63
|
2.15
|
Average daily
volume
|
580,438
|
371,933
|
605,342
|
227,648
|
NYSE(7)
|
|
|
|
|
(US$, except
volumes) based on intra-day trading
|
|
|
|
|
High
|
1.24
|
2.80
|
1.78
|
5.15
|
Low
|
0.45
|
1.44
|
0.45
|
1.44
|
Close
|
0.47
|
1.72
|
0.47
|
1.72
|
Average daily
volume
|
95,282
|
125,134
|
115,884
|
96,969
|
|
|
(1)
|
Basic weighted
average shares for the three months and year ended December 31,
2018 were 72,436,105 (2017: 49,378,026) and 59,734,872 (2017:
49,351,848), 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, 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: 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 72,436,105 (2017: 49,378,026) and 59,734,872 (2017:
49,351,848), respectively.
|
(2)
|
The terms
"adjusted funds flow", "adjusted funds flow per share", "total net
debt", "adjusted working capital deficiency", "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.
|
(3)
|
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.
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(4)
|
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.
|
(5)
|
Fully
diluted common shares outstanding for the three months and year
ended December 31, 2018 were 91,122,802 (2017: 57,172,998). This
includes 952,532 (2017: 1,622,132) 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.
|
(6)
|
TSX and Other
includes the trading statistics for the Toronto Stock Exchange
("TSX") and other Canadian trading markets.
|
(7)
|
Bellatrix
voluntarily delisted the Company's common shares from the New York
Stock Exchange (the "NYSE") on February 11, 2019.
|
FINANCIAL & OPERATIONAL HIGHLIGHTS
Fourth quarter 2018 performance included the following
operational and financial achievements:
- Production volumes in the fourth quarter of 2018 averaged
35,001 boe/d (71% natural gas weighted). Full year 2018 average
production volumes of 35,635 boe/d represented 1% outperformance
compared with the mid-point of Bellatrix's full year average
production guidance range (35,000 to 35,500 boe/d).
- Record low production expenses in the fourth quarter of 2018
averaged $6.59/boe, down 15% compared
with average production expenses of $7.80/boe over the first nine months of
2018. The Company achieved full year 2018 average production
expenditures of $7.50/boe, 4% below
the mid point of the guidance range of $7.65/boe to $7.90/boe. Completion of Phase 2 of the
Bellatrix O'Chiese Nees-Ohpawganu'ck deep-cut gas plant at
Alder Flats (the "Alder Flats
Plant"), the redirection of volumes from higher cost third
party plants, and the renegotiation of processing agreements
contributed to reduced production expenditures.
- Bellatrix continues to improve drilling efficiency and reduce
costs. During the fourth quarter of 2018, Bellatrix averaged 8.7
days from spud to rig release on single mile horizontal
Spirit River natural gas wells.
This represented a 13% improvement as compared to the first nine
months of 2018. All-in Spirit
River well costs continue to track approximately
$3.4 million (drill, complete, equip
and tie-in).
- Borrowings under our syndicated revolving credit facilities
(the "Credit Facilities") were $47.8
million at December 31, 2018,
representing $9.3 million in improved
liquidity as compared with September 30,
2018 balances. At December 31,
2018, Bellatrix had approximately $47.2 million of undrawn capacity (approximately
50% undrawn) against total commitments of $95 million under the Company's Credit
Facilities, before deducting outstanding letters of credit.
- In 2018, Bellatrix drilled and/or participated in 14 gross (9.2
net) total wells including 10 gross (7.7 net) operated Spirit River liquids rich natural gas wells, 1
gross (1.0 net) Cardium well and 3 gross (0.5 net) non-operated
wells (two Spirit River and one
Cardium). Bellatrix's operated drilling activity in 2018 included,
a total of 49,027 meters drilled, 18,026 meters of which was
horizontal length.
Bellatrix full year 2018 operational performance relative to
guidance expectations is summarized below:
|
Full Year 2018
Results
|
2018 Annual
Guidance (1)
|
Actual
Results
Versus
Guidance
|
Average daily
production (boe/d)
|
35,635
|
35,250
|
1%
|
Average product
mix
|
|
|
|
Natural
gas (%)
|
72
|
73
|
(1)%
|
Crude
oil, condensate and NGLs (%)
|
28
|
27
|
4%
|
Capital Expenditures
($000's)
|
|
|
|
Total
net capital expenditures(2)
|
51,640
|
52,500
|
(2)%
|
Production expense
($/boe)
|
7.50
|
7.78
|
(4)%
|
(1)
|
2018 Annual
Guidance metrics represent the mid-point of the previously set
guidance range (November 1, 2018) where applicable.
|
(2)
|
Capital spending
includes exploration and development capital projects and corporate
assets, and excludes property acquisitions, property dispositions,
and facilities.
|
FOURTH QUARTER 2018 OPERATIONAL ACTIVITIES AND 2018 SPIRIT
RIVER WELL PERFORMANCE
During the fourth quarter, Bellatrix drilled and/or participated
in 4 gross (2.0 net) wells, including 3 gross (2.0 net) operated
Spirit River liquids rich natural
gas wells and 1 gross (0.02 net) non-operated Cardium well. One
Spirit River well was brought on
stream in November with the remaining 3 wells brought on stream in
January 2019. Single mile operated
Spirit river wells averaged 8.7 days spud to rig release in the
fourth quarter, further improving on drill times achieved over the
first nine months of 2018.
The Company's 2018 operated Spirit
River drilling program delivered the following initial
production rates:
- 100/16-01-045-10W5 Spirit
River (100% working interest) well IP125: 8.0 MMcf/d
- 102/01-35-044-10W5 Spirit
River (100% working interest) well IP315: 9.9 MMcf/d
- 100/03-35-044-10W5 Spirit
River (100% working interest) well IP210: 7.7 MMcf/d
- 103/02-36-044-10W5 Spirit
River (100% working interest) well IP210: 6.3 MMcf/d
- 102/15-01-045-10W5 Spirit
River (100% working interest) well IP180: 5.2 MMcf/d
- 100/01-22-043-9W5 Spirit River
(45% working interest) well IP115: 7.0 MMcf/d
- 102/04-15-043-9W5 Spirit River
(24% working interest) well IP115: 7.2 MMcf/d
- 100/03-26-044-7W5 Spirit River
(100% working interest) well IP110: 9.5 MMcf/d
- 102/04-01-044-10W5 Spirit
River (55% working interest) well IP40: 5.9 MMcf/d
- 102/01-06-044-09W5 Spirit
River (44% working interest) well IP45: 7.1 MMcf/d
LOW FD&A COSTS AND STRONG RESERVE GROWTH ACHIEVED IN
2018
Bellatrix maintained a focused capital program in 2018 adding
Proved Developed Producing ("PDP") reserves at a finding,
development and acquisition ("FD&A") cost of $3.12/boe excluding capital invested in the Alder
Flats Plant, and $3.22/boe including
the Alder Flats Plant. The PDP recycle ratio excluding Alder
Flats Plant capital was 2.7 times. Bellatrix's Proved plus
Probable ("2P") and Proved ("1P") FD&A costs including changes
in future development capital ("FDC") in 2018 averaged $1.99/boe and $2.28/boe, respectively. On a three year
average basis (2016 to 2018), Bellatrix delivered strong 2P and 1P
FD&A costs including changes in future development capital of
$3.05/boe and $3.57/boe, respectively.
Overall, the Company achieved 13% total growth in PDP, 1P, and
2P reserves. With an inventory of 382 net well locations in the
Spirit River liquids rich natural gas play and 251 net well
locations in the higher liquids Cardium play, Bellatrix maintains a
long runway of low cost development drilling opportunities. The
Company's calculated 1P and 2P reserve life indices improved year
over year to 14.7 years and 19.2 years, respectively.
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 have decreased to
approximately $3.4 million in 2018
(down 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 35% on an IP180 basis. Enhanced
productivity has led to a reduction in the assumed number of
Spirit River wells required to
maintain corporate production volumes in the mid 30,000 boe/d range
from 15 to 12 per year (assuming an average 6.0 Bcf performance
curve versus a 5.2 Bcf performance curve). Bellatrix drilled and/or
participated in only 9.2 net wells during 2018, with production
volumes averaging 35,635 boe/d for the year.
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 will provide the capability to grow production volumes
beyond 60,000 boe/d, with minimal future facility related
capital.
Bellatrix has sustaining capital requirements of approximately
$45 million for 2019. Sustaining
capital refers to capital expenditures to maintain production from
existing facilities at current production levels. Sustaining
capital does not have any standardized meaning and therefore may
not be comparable to similar measures presented by other
entities.
Bellatrix's operational teams recently implemented a project to
reduce vented emissions. We focused on fuel gas driven pneumatic
devices that emit vent gas at a high rate. We completed 402 device
retrofits across our core area and because of this change,
Bellatrix projects a reduction of our greenhouse gas emissions in
2019 by 16,833 tonnes of CO2 equivalent. This is the
equivalent of taking 3,574 passenger vehicles off the road for one
year. Furthermore, Bellatrix anticipates funding this project
through utilizing carbon offsets, resulting in a project payout of
less than one year. This is an example of our initiatives to
deliver win-win projects in terms of environmental stewardship and
shareholder value.
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 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 50% of the
Company's 2019 projected natural gas volumes (based on the
mid-point of 2019 average production guidance).
A summary of Bellatrix's commodity price risk management
contracts as at March 1, 2019
include:
Product
|
Financial
Contract
|
Period
|
Volume
|
Average Price
(1)
|
Natural
gas
|
Fixed price
swap
|
January
1, 2019 to February 28, 2019
|
30,000
MMBtu/d
|
$4.29/mcf
(2)
|
Natural
gas
|
Fixed price
swap
|
March 1, 2019 to
March 31, 2019
|
30,000
MMBtu/d
|
$3.26/mcf
(2)
|
Natural
gas
|
Fixed price
swap
|
March 1, 2019 to
March 31, 2019
|
35.2
MMcf/d
|
$2.38/mcf
|
Natural
gas
|
Fixed price
swap
|
January 1, 2019 to
January 31, 2019
|
8.8 MMcf/d
|
$2.86/mcf
|
Natural
gas
|
Fixed price
swap
|
February 1, 2019 to
February 28, 2019
|
8.8 MMcf/d
|
$2.74/mcf
|
Natural
gas
|
Fixed price
swap
|
April 1, 2019 to
October 31, 2019
|
17.6
MMcf/d
|
$2.01/mcf
|
Natural
gas
|
AECO/NYMEX basis
swap
|
November 1, 2019 to
October 31, 2020
|
10,000
MMBtu/d
|
-US$1.24/MMBtu
|
Crude oil
|
Sold C$WTI
call
|
January 1, 2019 to
December 31, 2019
|
500 bbl/d
|
$80.00/bbl
|
Crude oil
|
Sold C$WTI
call
|
January 1, 2019 to
December 31, 2019
|
500 bbl/d
|
$95.00/bbl
|
Crude oil
|
Sold C$WTI
call
|
January 1, 2020 to
December 31, 2020
|
1,000
bbl/d
|
$77.90/bbl
|
(1) Prices for natural gas
fixed price swap contracts assume a conversion of $/GJ to $/mcf
based on an average corporate heat content rate of
40.3Mj/m3.
|
(2) Net Canadian equivalent
price is calculated as the US$ fixed price, less the contracted
differential, adjusted to Canadian dollars at an assumed exchanged
rate of $1.30 USD/CAD.
|
In summary, Bellatrix's market diversification contracts include
a total of 75,000 MMbtu/d of market exposure as follows:
Product
|
Market
|
End
Date
|
Volume(1)
|
Natural
gas
|
Chicago
|
October 31,
2020
|
30,000
MMBtu/d
|
Natural
gas
|
Dawn
|
October 31,
2020
|
30,000
MMBtu/d
|
Natural
gas
|
Malin
|
October 31,
2020
|
15,000
MMBtu/d
|
(1) Includes both physical
and financial risk management contracts.
|
INCREASED CORPORATE NGL YIELD ACHIEVED AFTER PLANT
COMMISIONED IN FIRST QUARTER 2018
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 since the first quarter of 2018,
with NGL sales yields of 73 bbl/MMcf, up approximately 18% from
first quarter total sales yields of 62 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 guidance of 28% in 2019.
OPERATIONAL AND FINANCIAL SUMMARY
- Production volumes in the fourth quarter of 2018 averaged
35,001 boe/d (71% natural gas weighted), up 4% from third quarter
2018 volumes of 33,530 boe/d, reflecting new wells brought on
stream and the contribution of two joint venture partner
acquisitions completed in the fourth quarter. Production
volumes averaged 35,635 boe/d for 2018, exceeding the high end of
Bellatrix's full year average production guidance range (35,000 to
35,500 boe/d).
- Adjusted funds flow generated in the three months ended
December 31, 2018 was $15.5 million ($0.21 per basic and diluted share), compared to
$7.7 million ($0.12 per basic share and diluted share) in the
third quarter of 2018. The increase in adjusted funds flow in the
fourth quarter of 2018 compared to the third quarter of 2018 is
primarily a result of an increase in revenue from a 4% increase in
total sales volumes and a 58% increase in realized natural gas
prices as well as a decrease in production expenses.
- Exploration and development capital expenditures were
$13.7 million in the fourth quarter
of 2018. Total exploration and development capital
expenditures for 2018 were $50.3
million, meeting the low end of full year guidance. Capital
expenditures in 2018 were primarily allocated to drilling,
completion and equipping activity and completion of Phase 2 of the
Alder Flats Plant in March 2018.
- Bellatrix's borrowings under its Credit Facilities were
$47.8 million, and total net debt was
$443 million at December 31, 2018. Bellatrix had
approximately $47.2 million of
undrawn capacity at year end (approximately 50% undrawn) against
total commitments of $95 million
within the Company's Credit Facilities before deducting outstanding
letters of credit of $13.9 million
that reduce the amount otherwise available to be drawn on the
Credit Facilities.
- For the fourth quarter ended December
31, 2018, Bellatrix was in compliance with all financial
covenants under the agreements governing its Credit Facilities and
8.5% second lien notes due 2023 (the "Second Lien Notes").
Bellatrix's Senior Debt to EBITDA (as defined in the agreements
governing its credit facilities and Second Lien Notes) ratio was
2.88 times, below the financial covenant maximum of 5.0 times and
Bellatrix's First Lien Debt to EBITDA (as defined in the agreements
governing its credit facilities and Second Lien Notes) ratio was
1.15 times, below the financial covenant maximum of 3.0 times.
- Total revenue was $56.9 million
for the fourth quarter of 2018, up from $51.5 million recognized in the third quarter of
2018, as higher natural gas prices and increased volumes helped
mitigate wider oil and condensate differentials over the
comparative periods.
- Our corporate royalty rate in the three months ended
December 31, 2018 averaged 11% of
sales (after transportation), compared to 13% in the third quarter
of 2018, as lower liquids prices contributed to lower overall
royalty rates.
- Production expenses in the fourth quarter of 2018 averaged
$6.59/boe, down 16% compared with
average production expenses of $7.80/boe over the first nine months of
2018. Production expenses for 2018 averaged $7.50/boe, 2% below ($0.15/boe) the lower end of full year Company
guidance ($7.65 - $7.90/boe). Renegotiation of processing
agreements effective July 1, 2018
contributed to the decrease in production expenses in the 2018
year.
- Our corporate operating netback (including risk management)
realized for the three months ended December
31, 2018 was $9.91/boe, up 33%
compared with $7.43/boe realized in
the third quarter of 2018. This improvement reflects higher
realized pricing and lower production, royalty, and transportation
costs as wells as increased realized gains from risk management
activities over the comparable periods.
- Net general and administrative ("G&A") expenses (after
capitalized costs and recoveries) in the fourth quarter of 2018
were $7.9 million ($2.46/boe), down $0.9
million from $8.8 million
($2.57/boe) in the fourth quarter of
2017.
- Bellatrix recorded a net loss for the three months ended
December 31, 2018 of $89.8 million compared to a net loss of
$8.9 million for the three months
ended September 30, 2018. The
increase in net loss period over period is primarily due to an
increase in the deferred tax expense, unrealized hedging and
foreign exchange gains and losses and loss on onerous contracts,
offset partially by an increase in revenues, and decrease in
realized foreign exchange gains.
- As at December 31, 2018,
Bellatrix had approximately 133,814 net undeveloped acres of land
principally in Alberta.
- As at December 31, 2018,
Bellatrix had approximately $1.4
billion in tax pools available for deduction against future
income.
- Bellatrix maintained a strong Liability Management Rating of
9.54 in Alberta versus an industry
average of 4.86 as at January 5,
2019.
OUTLOOK & 2018 CORPORATE GUIDANCE
Bellatrix's Board of Directors approved a 2019 capital budget
between $40 to $50 million, designed to maintain average
production volumes of between 34,000 to 36,000 boe/d.
Bellatrix plans to fund the 2019 capital budget primarily through
cash flow from operating activities. The capital budget
incorporates forward pricing expectations of US$65/bbl WTI, $1.60/GJ AECO, a $1.34 CAD/USD exchange rate, and is underpinned
by strong commodity price risk management protection and natural
gas market diversification contracts.
|
2019 Annual
Guidance
(January 15,
2019)
|
Production
|
|
Average daily
production (boe/d)
|
34,000 -
36,000
|
Average product
mix
|
|
Natural gas
(%)
|
72
|
Crude oil, condensate
and NGLs (%)
|
28
|
Net Capital
Expenditures
|
|
Total net capital
expenditures ($000) (1)
|
40,000 -
50,000
|
(1) Excludes property
acquisitions and dispositions
|
As previously announced by the Company, Bellatrix has been
advancing efforts and evaluating potential alternatives to optimize
its capital structure, improve liquidity and enhance long term
stakeholder value. Such efforts include, among other things,
Bellatrix's ongoing discussions with parties across the Company's
capital structure in connection with potential transaction
alternatives, including refinancing its outstanding US$145.8 million of 8.5% senior unsecured notes
due May 15, 2020 (the "Senior Notes")
and extending the maturity of the Credit Facilities beyond
November 30, 2019. The Company
cautions that it can make no assurances as to whether any agreement
with respect to a potential transaction may be reached, or the
terms or timing of any such potential transaction. Readers are
cautioned to review note 2(c) and note 7 of the Financial
Statements for additional information in this regard.
CONFERENCE CALL INFORMATION
A conference call to discuss Bellatrix's fourth quarter and year
end 2018 results and reserves will be held on March 14, 2019 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.
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.
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. The
reconciliation between "total net debt" and "net debt" and "total
liabilities" can be found in the MD&A.
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,
runway of low cost development drilling opportunities, the expected
number of wells required to maintain production, the expectation
that the majority of future 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, management's
expectation that the Company's existing facilities and processing
capacity will provide the capability to grow production volumes
beyond 60,000 boe/d, with minimal future facility related capital,
Bellatrix's expected required sustaining capital requirements of
approximately $45 million for 2019,
the expected reduction in greenhouse gas emissions from Bellatrix's
project to reduce vented emissions, Bellatrix anticipates funding
the project to reduce vented emissions through utilizing carbon
offsets with a payout of less than one year, 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, the expectation that
Bellatrix has 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, the expected percentage of the Company's 2019
projected natural gas volumes subject to long-term diversification
strategy, 2019 outlook and corporate guidance including expected
2019 average production, forecast average product type mix with
respect to 2019 production, expected details of the Company's 2019
capital budget, Bellatrix's intent to fund its budget from cash
flow from operating activities, the intent of the Company to
advance and evaluate potential alternatives to optimize its capital
structure, improve liquidity and enhance long term stakeholder
value, the intent of the Company to continue discussions with
parties across the Company's capital structure in connection with
potential transaction alternatives, including refinancing the
remaining Senior Notes and extending the maturity of the Credit
Facilities and the expected ability of the Company to settle its
liabilities, including debt maturities, when due. To the extent
that any forward-looking information contained herein constitute a
financial outlook, they were approved by management on March 14, 2019 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 the ability of the
Company to refinance its debt prior to maturity, 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 Company's ability to
refinance the outstanding Senior Notes prior to maturity; 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, 2018, 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, reserve life index, and sustaining capital.
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 2018
is calculated by dividing reserves as at December 31, 2018 by 2019 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.
Sustaining capital refers to capital expenditures to maintain
production from existing facilities at current production levels.
Additional details of how certain of these measures have been
calculated are included in the press release of the Company dated
March 14, 2019, 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, 2018 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 382 net Spirit River drilling
locations identified herein, 132 are proved or probable locations
and 250 are unbooked locations. Of the 251 net Cardium drilling
locations identified herein, 127 are proved or probable locations
and 124 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, 2018. 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.
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SOURCE Bellatrix Exploration Ltd.