Bellatrix Exploration Ltd. (“Bellatrix”, "we", "us", "our" or the
“Company”) (TSX, NYSE: BXE) announces its financial and operating
results for the three and six months ended June 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 six
months ended June 30, 2018 and 2017. Bellatrix's unaudited
interim condensed financial statements and notes, and the MD&A
for the three and six months ended June 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.
|
|
Three months ended June
30, |
Six months ended June
30, |
|
|
2018 |
2017 |
2018 |
2017 |
SELECTED FINANCIAL RESULTS |
|
|
|
|
|
(CDN$000s
except share and per share amounts) |
|
|
|
|
|
Cash flow
from operating activities |
|
12,004 |
10,495 |
|
26,619 |
|
18,754 |
|
Per diluted share (1) |
|
$0.22 |
$0.21 |
|
$0.51 |
|
$0.38 |
|
Adjusted
funds flow (2) |
|
10,142 |
19,347 |
|
24,812 |
|
34,240 |
|
Per diluted share (1) |
|
$0.18 |
$0.39 |
|
$0.47 |
|
$0.69 |
|
Net profit
(loss) |
|
(34,768) |
(69,236) |
|
(47,669) |
|
(56,186) |
|
Per diluted share (1) |
|
$(0.63) |
$(1.40) |
|
$(0.91) |
|
$(1.14) |
|
Capital –
exploration and development |
|
5,402 |
11,235 |
|
29,634 |
|
55,213 |
|
Total capital expenditures – net (3) |
|
6,641 |
(30,768) |
|
28,715 |
|
20,452 |
|
Credit
Facilities |
|
71,432 |
13,100 |
|
71,432 |
|
13,100 |
|
Senior
Notes |
|
301,435 |
315,308 |
|
301,435 |
|
315,308 |
|
Convertible
Debentures (liability component) |
|
40,530 |
38,380 |
|
40,530 |
|
38,380 |
|
Adjusted working capital deficiency (2) |
|
16,829 |
15,773 |
|
16,829 |
|
15,773 |
|
Total net debt (2) |
|
430,226 |
382,561 |
|
430,226 |
|
382,561 |
|
SELECTED OPERATING RESULTS |
|
|
|
|
|
Total
revenue (3) |
|
54,022 |
74,325 |
|
120,237 |
|
140,349 |
|
Average
daily sales volumes |
|
|
|
|
|
Crude oil, condensate and NGLs |
(bbl/d) |
10,467 |
9,182 |
|
9,975 |
|
8,908 |
|
Natural gas |
(mcf/d) |
161,052 |
172,402 |
|
162,309 |
|
164,602 |
|
Total oil equivalent (4) |
(boe/d) |
37,309 |
37,916 |
|
37,027 |
|
36,342 |
|
Average
realized prices |
|
|
|
|
|
Crude oil and condensate |
($/bbl) |
83.93 |
59.49 |
|
80.31 |
|
63.28 |
|
NGLs (excluding condensate) |
($/bbl) |
24.70 |
20.57 |
|
25.49 |
|
19.42 |
|
Natural gas |
($/mcf) |
1.30 |
2.94 |
|
1.73 |
|
2.91 |
|
Total oil equivalent |
($/boe) |
15.71 |
20.94 |
|
17.58 |
|
20.88 |
|
Total oil equivalent (including risk management
(5)) |
($/boe) |
18.77 |
21.83 |
|
19.71 |
|
21.82 |
|
Selected
Key Operating Statistics |
|
|
|
|
|
Commodity sales |
($/boe) |
15.71 |
20.94 |
|
17.58 |
|
20.88 |
|
Other income |
($/boe) |
0.20 |
0.61 |
|
0.36 |
|
0.45 |
|
Royalties |
($/boe) |
(1.80) |
(1.92) |
|
(1.90) |
|
(2.13) |
|
Production expenses |
($/boe) |
(7.55) |
(8.30) |
|
(7.84) |
|
(8.81) |
|
Transportation |
($/boe) |
(2.03) |
(1.98) |
|
(2.01) |
|
(1.53) |
|
Operating netback (3) |
($/boe) |
4.53 |
9.35 |
|
6.19 |
|
8.86 |
|
Realized gain (loss) on risk management contracts |
($/boe) |
3.05 |
0.89 |
|
2.13 |
|
0.94 |
|
Operating netback (3) (including risk management
(5)) |
($/boe) |
7.58 |
10.24 |
|
8.32 |
|
9.80 |
|
|
|
|
|
Three months ended June
30, |
Six months ended June
30, |
SHARE STATISTICS |
2018 |
2017 |
2018 |
2017 |
COMMON SHARES |
|
|
|
|
Common
shares outstanding (6) |
61,762,974 |
|
49,378,026 |
|
61,762,974 |
|
49,378,026 |
|
Weighted average shares (1) |
55,086,338 |
|
49,333,217 |
|
52,247,951 |
|
49,325,235 |
|
SHARE TRADING STATISTICS |
|
|
|
|
TSX
and Other (7) |
|
|
|
|
(CDN$,
except volumes) based on intra-day trading |
|
|
|
|
High |
2.17 |
|
5.65 |
|
2.22 |
|
6.83 |
|
Low |
1.28 |
|
3.55 |
|
1.24 |
|
3.55 |
|
Close |
1.32 |
|
3.70 |
|
1.32 |
|
3.70 |
|
Average daily volume |
879,361 |
|
175,847 |
|
703,721 |
|
184,317 |
|
NYSE |
|
|
|
|
(US$,
except volumes) based on intra-day trading |
|
|
|
|
High |
1.69 |
|
4.25 |
|
1.78 |
|
5.15 |
|
Low |
0.96 |
|
2.72 |
|
0.96 |
|
2.72 |
|
Close |
0.99 |
|
2.90 |
|
0.99 |
|
2.90 |
|
Average daily volume |
149,075 |
|
81,132 |
|
143,704 |
|
90,987 |
|
(1) Basic weighted average shares for the six
months ended June 30, 2018 were 55,086,338 (2017: 49,333,217) and
52,247,951 (2017: 49,325,235), 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 six
months ended June 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, and a total of nil (2017: nil) common shares issuable on
conversion of the Convertible Debentures (as defined below) were
added to the denominator for the three and six month periods
resulting in diluted weighted average common shares outstanding of
55,086,338 (2017: 49,333,217) and 52,247,951 (2017: 49,325,235),
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 six months ended June 30, 2018
were 69,569,546 (2017: 57,360,955) and 69,569,546 (2017:
57,360,955), respectively. This includes 1,633,732 (2017:
1,810,089) and 1,633,732 (2017: 1,810,089) respectively,of share
options outstanding and 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. 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 strong operational performance
continued through the second quarter of 2018, delivering average
well performance and corporate production volumes that exceeded
budget expectations and guidance. Bellatrix’s first half 2018
production volumes exceeded full year average production guidance
by approximately 7% despite the proactive curtailment of
approximately 12 MMcfe/d to 24 MMcfe/d (2,000 to 4,000 boe/d) of
natural gas volumes during periods of weak daily AECO natural gas
prices during the second quarter. In addition, the Company
delivered material reductions in both operating and capital costs,
both of which are expected to contribute to improved long term
corporate results.
Second quarter 2018 performance included the
following operational and financial achievements:
- Production volumes in the second quarter of 2018 averaged
37,309 boe/d (72% natural gas weighted), roughly 2% higher than
first quarter 2018 volumes. First half 2018 average
production volumes of 37,027 boe/d represent 7% outperformance
compared with the mid-point of Bellatrix’s full year average
production guidance range (34,000 to 35,500 boe/d).
- Production expenses in the second quarter of 2018 averaged
$7.55/boe, down 7% compared with first quarter 2018 production
expenses. 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 has contributed to the decrease in expenditures
quarter over quarter.
- Bellatrix continues to improve drilling efficiency and reduce
costs. 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 previously announced the renewal and extension of its
syndicated revolving credit facilities (“Credit Facilities”) and
the semi-annual redetermination of the borrowing base
thereunder. Bellatrix’s borrowings under its Credit
Facilities were $71.4 million at June 30, 2018 providing $28.6
million of undrawn capacity (before deducting outstanding letters
of credit of $11.6 million). Other than amounts outstanding under
our Credit Facilities, Bellatrix has no debt maturities until 2020
and 2021.
Bellatrix delivered strong operational
performance in the first half of 2018 relative to guidance
expectations as summarized below:
|
First Half 2018
Results |
2018 Annual Guidance
(1) |
Actual
ResultsVersus Guidance |
Average daily production (boe/d) |
37,027 |
|
34,750 |
|
7 |
% |
Average product mix |
|
|
|
Natural gas (%) |
73 |
|
74 |
|
(1 |
)% |
Crude oil, condensate and NGLs (%) |
27 |
|
26 |
|
4 |
% |
Capital Expenditures ($000’s) |
|
|
|
Total net capital expenditures(2) |
30,299 |
|
60,000 |
|
n/a |
Production expense ($/boe) |
7.55 |
|
7.83 |
|
(4 |
)% |
(1) 2018 Annual Guidance metrics represent the
mid-point of the previously set guidance range (April 3, 2018)
where applicable.
(2) Capital spending includes exploration and
development capital projects and corporate assets, and excludes
property acquisitions, property dispositions and facilities.
STRUCTURAL REDUCTIONS IN BOTH OPERATING
AND CAPITAL COSTS
Upon completion of Phase 2 of the Alder Flats
Plant in March 2018, 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, providing
significant cost benefits for the Company. Corporate
operating costs in the second quarter of 2018 were $7.55/boe, down
approximately 7% from first quarter 2018 operating cost levels of
$8.13/boe. The redirection of natural gas volumes from more
expensive third-party plants are anticipated to drive long term
sustained operating cost reductions for the Company.
A series of incremental improvements and
operational measures have delivered a step change reduction for
all-in average Spirit River well costs (drill, complete, equip and
tie-in) to approximately $3.4 million in 2018 (from $3.8 million in
2017). An enhanced focus on pad drilling to reduce surface
disturbance (reduced need for pipeline infrastructure and improved
efficiency for operating wells), increased monobore style drilling,
other proprietary drilling techniques, and reduced nitrogen use are
examples of cost reduction efforts achieved. In addition,
drilling efficiency gains have continued in 2018, averaging
approximately 10 days from spud to rig release for the Spirit River
program down from a full program average of 13.5 days in 2017. In
addition to the cost savings, Bellatrix delivered productivity
improvements with average well performance from the Company's 2018
Spirit River well program outperforming expected results by
approximately 38% on an IP90 basis. The combination of lower
capital costs and improved well performance are expected to provide
enhanced corporate competitiveness against weak natural gas
prices.
COMMODITY PRICE RISK MANAGEMENT
PROTECTION AND MARKET DIVERSIFICATION INITIATIVES
Bellatrix maintains strong commodity price risk
management and market diversification coverage in 2018 through 2020
which is expected to reduce the impact of commodity price
volatility on our business. Bellatrix has approximately 72 MMcf/d
of natural gas volumes hedged from July through December 2018, at
an average fixed price of approximately $2.94/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 35% of the Company’s forecast July
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 June 30, 2018 include:
Product |
Financial Contract |
Period |
Volume |
Average Price (1) |
Natural gas |
Fixed price swap |
July 1, 2018 to December 31, 2018 |
67 MMcf/d |
$3.03/mcf |
Natural gas |
Fixed price swap |
July 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$1.24/MMBtu |
Propane |
Fixed price differential |
July 1, 2018 to December 31, 2018 |
1,000 bbl/d |
47% of NYMEX WTI |
Crude oil |
Sold C$WTI call |
July 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 |
July 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 June 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 |
ALDER FLATS PHASE 2 FULLY COMMISSIONED
IN MARCH CONTRIBUTING TO MATERIALLY HIGHER NGL YIELDS IN THE SECOND
QUARTER
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). Completion of Phase 2
adds an incremental 30 MMcf/d ownership capacity net to Bellatrix's
25% working interest.
The turbo expander is operational on Phase 2,
which was designed with a colder process, thereby enhancing natural
gas liquid (“NGL”) extraction capabilities. Total NGL
recoveries (including plant condensate) at the Alder Flats Plant
have increased in the second quarter 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 26% in 2018, which we expect to, in
turn, drive enhanced corporate profit margins and cash flow.
The Phase 2 expansion project represented 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 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 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.
FIRST HALF 2018 OPERATIONAL
PERFORMANCE
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. No
wells were drilled or completed during the second quarter of
2018. Well results for the first half 2018 program continue
to exceed budget expectations; the average rate for the five
operated Spirit River wells has averaged an IP90 rate of 8.6
MMcf/d, outperforming budget expectations by approximately 38%.
Exploration and development capital expenditures
invested during the second quarter were $5.4 million. First
half 2018 exploration and development capital expenditures were
$29.6 million, resulting in expected second half 2018 capital
expenditures of approximately $20 to $30 million based on the
Company’s updated full year annual capital expenditure guidance
budget range of $50 to $60 million.
OPERATIONAL AND FINANCIAL SUMMARY
- Production volumes in the second quarter of 2018 averaged
37,309 boe/d (72% natural gas weighted), roughly 2% higher than
first quarter 2018 volumes. First half 2018 average
production volumes of 37,027 boe/d represent 7% outperformance
compared with the mid-point of Bellatrix’s full year average
production guidance range (34,000 to 35,500
boe/d).
- Adjusted funds flow generated in the three months ended June
30, 2018 was $10.1 million ($0.18 per basic and diluted share),
compared to $14.7 million ($0.30 per basic share and diluted share)
in the first quarter of 2018.
- Exploration and development capital expenditures were $5.4
million in the second quarter of 2018. Total exploration and
development capital expenditures for the first six months of 2018
were $29.6 million, in line with budget expectations and updated
guidance for a full year 2018 capital expenditure range of $50 to
$60 million. The majority of first half 2018 capital
expenditures were allocated to drilling, completion and equipping
activity.
- Bellatrix’s borrowings under its Credit Facilities were $71.4
million and total net debt was $430.2 million at June 30,
2018. At June 30, 2018, Bellatrix had approximately $28.6
million of undrawn capacity (approximately 17% undrawn) on its $100
million Credit Facilities after deducting outstanding letters of
credit of $11.6 million that reduce the amount otherwise available
to be drawn on the Credit Facilities.
- For the quarter ended June 30, 2018, Bellatrix’s Senior Debt to
EBITDA (as defined in the MD&A) ratio was 1.36 times, well
below the financial covenant of 3.0 times as permitted by the
agreement governing the Credit Facilities.
- Total revenue was $54.0 million for the second quarter 2018,
compared to $66.2 million in the first quarter of 2018, primarily
attributed to a 40% decrease in average realized natural gas prices
over the comparative periods.
- The corporate royalty rate in the three months ended June 30,
2018 averaged 13% of sales (after transportation), compared with
11% averaged in the first quarter of 2018.
- Production expenses in the second quarter of 2018 averaged
$7.55/boe, down 9% compared with second quarter 2017 production
expenses of $8.30/boe. Bellatrix has provided a full year
2018 production expenditure guidance range of $7.65/boe
to $8.00/boe in 2018 given continued cost suppression activity,
production volume guidance, and the contribution from lower costs
attributed to Phase 2 of the Bellatrix Alder Flats Plant.
- Our corporate operating netback (including risk management)
realized for the three months ended June 30, 2018 was $7.58/boe,
down 16% compared with $9.07/boe realized in the first quarter
2018. 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 June
30, 2018 were $6.8 million ($2.01/boe), down 6% compared with $7.3
million ($2.10/boe) in the second quarter of 2017.
- Bellatrix recorded a net loss for the three months ended June
30, 2018 of $34.8 million compared to a net loss of $12.9 million
for the three months ended March 31, 2018. The decrease in net
profit period over period is primarily due to an increase in total
loss on commodity contracts and a 19% decrease in commodity prices,
offset partially by a decrease in production expenses.
- As at June 30, 2018, Bellatrix had approximately 137,893 net
undeveloped acres of land principally in Alberta.
- As at June 30, 2018, Bellatrix had approximately $1.36 billion
in tax pools available for deduction against future income.
- Bellatrix maintained a strong Liability Management Rating of
10.69 in Alberta versus an industry average of 4.81 as at July 7,
2018.
OUTLOOK & 2018 CORPORATE GUIDANCE
Solid operational momentum from the first half
2018 drilling program has carried forward into the third quarter as
a result of strong well performance and operational
execution. Bellatrix is announcing today, a decrease in its
full year 2018 net capital expenditure guidance with no associated
reduction in average production guidance given strong results year
to date. Our Spirit River wells continue to outperform budget
expectations, resulting in lower sustaining capital requirements
for the remainder of 2018. As a result, Bellatrix is reducing
its full year net capital expenditures to a range of $50 to $60
million, down approximately 8% from the prior guidance range of $55
to $65 million.
|
Revised 2018Annual
Guidance(August 2, 2018) |
Previously Set 2018 Annual
Guidance(April 3, 2018) |
Production |
|
|
2018 Average daily production (boe/d) |
34,000 - 35,500 |
34,000 - 35,500 |
Average product mix |
|
|
Natural gas (%) |
74 |
74 |
Crude oil, condensate and NGLs (%) |
26 |
26 |
Net Capital Expenditures |
|
|
Total net capital expenditures ($000) (1) |
50,000 - 60,000 |
55,000 - 65,000 |
Expenses |
|
|
Production expense ($/boe) (2) |
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 plans to resume drilling activity in
mid-August and to use one rig for its second half 2018 capital
program. Bellatrix currently plans to drill five gross
operated Spirit River wells and one gross operated Cardium well in
the second half of 2018.
Bellatrix plans to fund its second half 2018
capital budget through adjusted funds flow while reducing the need
for additional debt or bank line utilization through the end of
2018. 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.
CONFERENCE CALL INFORMATION
A conference call to discuss Bellatrix's second
quarter results will be held on August 2, 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, 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 material reductions in
operating and capital costs will contribute to improved long term
corporate results, expectations regarding the impact of redirecting
volumes from third party plants, expectations that the combination
of lower capital costs and improved well performance will provide
enhanced corporate competitiveness against weak natural gas prices,
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
performance of, and benefits from, the commissioning of Phase 2 of
the Alder Flats Plant, including throughput capacity, NGL
recoveries and condensate yields, corporate liquids weighting, and
expected impacts on corporate profit margins and cash flow,
expectations regarding the resumption of drilling activity in
mid-August and completion of the Company's second half 2018 capital
program, 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, expectations regarding the Company’s ability
to fund its 2018 capital budget through adjusted funds flow, while
reducing the need for additional debt of bank line utilization
through the end of 2018, and expectations that 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. To the extent that any
forward-looking information contained herein constitute a financial
outlook, they were approved by management on August 2, 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
Bellatrix Exploration Ltd.1920,
800 – 5th Avenue SWCalgary, Alberta, Canada T2P 3T6Phone:
(403) 266-8670Fax: (403) 264-8163www.bxe.com