TSX, NYSE: BXE
CALGARY, Aug. 5, 2015 /PRNewswire/ - Bellatrix Exploration Ltd. ("Bellatrix" or the "Company") (TSX, NYSE:
BXE) announces its financial and operating results for the three and
six months ended June 30, 2015. 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,
2015 and 2014. Bellatrix's unaudited condensed consolidated financial
statements and notes, and the MD&A are available on Bellatrix's website
at www.bellatrixexploration.com, and are filed on SEDAR at www.sedar.com.
SECOND QUARTER 2015 HIGHLIGHTS |
| Three months ended June 30, | Six months ended June 30, |
| 2015 | 2014 | 2015 | 2014 |
SELECTED FINANCIAL RESULTS |
|
|
|
|
(CDN$000s except share and per share amounts) |
|
|
|
|
Total revenue (2) |
88,941
|
152,311
|
179,127
|
315,896
|
Funds flow from operations (2) |
28,378
|
71,014
|
53,235
|
148,656
|
|
Per basic share (3) |
$0.15
|
$0.40
|
$0.28
|
$0.85
|
|
Per diluted share (3) |
$0.15
|
$0.39
|
$0.28
|
$0.84
|
Cash flow from operating activities
|
16,475
|
60,063
|
39,027
|
144,363
|
|
Per basic share (3) |
$0.09
|
$0.34
|
$0.20
|
$0.83
|
|
Per diluted share (3) |
$0.09
|
$0.33
|
$0.20
|
$0.81
|
Adjusted net profit (loss) (2) |
(18,134)
|
27,005
|
(32,086)
|
69,929
|
|
Per basic share (3) |
($0.09)
|
$0.15
|
($0.17)
|
$0.40
|
|
Per diluted share (3) |
($0.09)
|
$0.15
|
($0.17)
|
$0.39
|
Net profit (loss)
|
(24,427)
|
38,252
|
(37,116)
|
63,419
|
|
Per basic share (3) |
($0.13)
|
$0.22
|
($0.19)
|
$0.36
|
|
Per diluted share (3) |
($0.13)
|
$0.21
|
($0.19)
|
$0.36
|
Capital - exploration and development
|
37,454
|
131,362
|
118,799
|
284,049
|
Capital - corporate assets
|
1,957
|
3,206
|
3,111
|
3,161
|
Property acquisitions
|
48
|
-
|
749
|
3,000
|
Capital expenditures - cash
|
39,459
|
134,568
|
122,659
|
290,210
|
Property dispositions - cash
|
(1,790)
|
(8,613)
|
(1,811)
|
(8,392)
|
Total net capital expenditures - cash
|
37,669
|
125,955
|
120,848
|
281,818
|
Other non-cash items
|
(3,921)
|
3,602
|
3,554
|
8,592
|
Total capital expenditures - net (2) |
33,748
|
129,557
|
124,402
|
290,410
|
Bank debt
|
387,132
|
323,007
|
387,132
|
323,007
|
Senior notes
|
298,125
|
-
|
298,125
|
-
|
Adjusted working capital deficiency (2) |
30,276
|
40,426
|
30,276
|
40,426
|
Total net debt (2) |
715,533
|
363,433
|
715,533
|
363,433
|
Total assets
|
2,233,516
|
1,837,242
|
2,233,516
|
1,837,242
|
Total shareholders' equity
|
1,214,627
|
1,141,830
|
1,214,627
|
1,141,830
|
|
|
|
|
|
SELECTED OPERATING RESULTS |
Three months ended June 30, | Six months ended June 30, |
|
| 2015 | 2014 | 2015 | 2014 |
Average daily sales volumes
|
|
|
|
|
|
|
Crude oil, condensate and NGLs
|
(bbl/d)
|
11,477
|
12,640
|
12,058
|
12,524
|
|
Natural gas
|
(mcf/d)
|
173,693
|
142,214
|
182,085
|
139,051
|
|
Total oil equivalent
|
(boe/d) (4) |
40,426
|
36,342
|
42,406
|
35,699
|
Average realized prices
|
|
|
|
|
|
Crude oil and condensate
|
($/bbl)
|
66.95
|
103.25
|
57.69
|
100.72
|
|
Crude oil and condensate (including risk management (1))
|
|
66.73
|
88.98
|
58.28
|
89.00
|
|
NGLs (excluding condensate)
|
($/bbl)
|
15.15
|
42.70
|
16.69
|
49.72
|
|
Crude oil, condensate and NGLs
|
($/bbl)
|
37.77
|
74.73
|
35.14
|
77.53
|
|
Natural gas
|
($/mcf)
|
2.91
|
5.04
|
2.95
|
5.45
|
|
Natural gas (including risk management (1))
|
($/mcf)
|
2.94
|
4.40
|
2.99
|
4.64
|
|
Total oil equivalent
|
($/boe) (4) |
23.23
|
45.72
|
22.66
|
48.43
|
|
Total oil equivalent (including risk management (1))
|
($/boe) (4) |
23.30
|
40.78
|
22.98
|
43.01
|
|
|
|
|
|
|
|
Net wells drilled
|
2.8
|
9.0
|
6.0
|
34.6
|
Selected Key Operating Statistics
|
|
|
|
|
|
|
Operating netback (2) |
($/boe) (4) |
11.92
|
29.26
|
10.42
|
31.31
|
|
Operating netback (2) (including risk management (1))
|
($/boe) (4) |
11.99
|
24.31
|
10.74
|
25.89
|
|
Transportation
|
($/boe) (4) |
1.26
|
0.82
|
1.24
|
1.20
|
|
Production expenses
|
($/boe) (4) |
8.58
|
7.80
|
8.57
|
7.96
|
|
General & administrative
|
($/boe) (4) |
1.81
|
1.37
|
1.82
|
1.56
|
|
Royalties as a % of sales (after transportation)
|
|
11%
|
18%
|
15%
|
17%
|
COMMON SHARES |
|
|
|
|
Common shares outstanding
|
191,963,910
|
191,091,741
|
191,963,910
|
191,091,741
|
Share options outstanding
|
13,847,836
|
11,576,839
|
13,847,836
|
11,576,839
|
Fully diluted common shares outstanding
|
205,811,746
|
202,668,580
|
205,811,746
|
202,668,580
|
Weighted average shares (3) |
191,960,174
|
180,975,410
|
191,956,654
|
177,408,647
|
SHARE TRADING STATISTICS |
|
|
|
|
TSX and Other (5) |
|
|
|
|
(CDN$, except volumes) based on intra-day trading |
|
|
|
|
High
|
4.05
|
11.65
|
4.46
|
11.65
|
Low
|
2.87
|
8.88
|
2.38
|
7.64
|
Close
|
2.91
|
9.26
|
2.91
|
9.26
|
Average daily volume
|
1,852,296
|
3,266,310
|
2,382,730
|
2,563,117
|
NYSE |
|
|
|
|
(US$, except volumes) based on intra-day trading |
|
|
|
|
High
|
3.38
|
10.70
|
3.81
|
10.70
|
Low
|
2.31
|
8.15
|
1.86
|
6.93
|
Close
|
2.33
|
8.71
|
2.33
|
8.71
|
Average daily volume
|
733,698
|
371,163
|
809,725
|
265,351
|
(1) | 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. |
(2) | The terms "funds flow from operations", "funds flow from operations per
share", "adjusted net profit (loss)", "total net debt", "operating
netbacks", "total capital expenditures - net", "adjusted working
capital deficiency (excess)", and "total revenue" do not have a
standard meaning under generally accepted accounting principles
("GAAP"). Refer to "Non-GAAP and other measures" disclosed at the end
of this Press Release. |
(3) | Basic weighted average shares for the three and six months ended June
30, 2015 were 191,960,174 (2014: 177,847,190), and 191,956,654 (2014:
174,754,132), respectively. |
| In computing weighted average diluted profit (loss) per share, weighted
average diluted cash flow from operating activities per share, and
weighted average diluted funds flow from operations per share for the
three and six months ended June 30, 2015, a total of nil (2014:
3,128,220), and nil (2014: 2,654,515) common shares were added to the
denominator as a consequence of applying the treasury stock method to
the Company's outstanding share options, resulting in diluted weighted
average common shares of 191,960,174 (2014: 180,975,410), and
191,956,654 (2014: 177,408,647), respectively. |
(4) | In accordance with National Instrument 51-101 Standards of Disclosure
for Oil and Gas Activities ("NI 51-101"), 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) | TSX and Other includes the trading statistics for the Toronto Stock
Exchange ("TSX") and other Canadian trading markets. |
PRESIDENT'S MESSAGE
Bellatrix maintains a large inventory of future drilling locations in
the highly prolific Spirit River formation and oil and liquids weighted
opportunities in the Cardium. The Company continues to focus on
profitable growth for our shareholders, preserving these opportunities
when necessary, to maximize production growth when commodity prices and
rates of return are supportive. Our balanced portfolio of opportunities
provides flexibility in terms of capital allocation decisions and
enables Bellatrix to dedicate capital to its highest rate of return
projects. This is clearly reflected in our 2015 capital plan which
remains focused on development of our Spirit River play.
The Spirit River continues to be one of the most active plays in Canada
given its superior rate of return expectations and Bellatrix has proven
itself one of the premier operators in the play over the past several
years. Spirit River well performance continues to drive improved
capital efficiencies and reduced capital spending in 2015 and beyond.
On a half cycle basis Bellatrix's P50 type curve (5.2 Bcf) delivers
extremely competitive capital efficiencies of less than $8,000/boe/d on
an IP365 basis. The principal focus for Bellatrix in the second half of
the year will be development drilling in the high impact Spirit River
play. With the aforesaid capital efficiency and focus on the Spirit
River play in 2016, Bellatrix anticipates drill bit focused capital of
approximately $100 million will be sufficient to offset forecast
production declines.
UPDATED CORPORATE GUIDANCE
In light of the current protracted weak commodity prices, Bellatrix is
honing its 2015 net capital budget from up to $200 million to a maximum
of $160 million. With the majority of facilities and infrastructure
spending now complete in 2015, our revised budget contemplates a focus
in the second half of the year drilling 20 gross (9.5 net) wells. Net
capital spending of up to $40 million in the last six months of 2015 is
expected to represent approximately 80% of forecast cash flow during
the balance of the year. The revised capital budget incorporates plans
to access up to $65 million of partner capital under joint venture
("JV") arrangements, thereby providing an uplift in net Bellatrix
production volumes and cash flow relative to its net proportion of
capital spend on drilling and completion activity.
Strong well performance and shallowing production decline rates have
partially mitigated the impact of a reduced capital spending budget.
Bellatrix anticipates full year annual average production of
approximately 40,500 to 41,500 boe/d, down 2,500 boe/d relative to the
Company's previous guidance range, reflecting the reduced capital
budget. As previously announced on May 21, 2015, Bellatrix successfully
completed an offering of US$250 million of 8.50% senior notes due 2020
(the "Senior Notes"), and used the net proceeds from the offering to
partially repay indebtedness outstanding on its bank credit facilities,
thereby creating additional liquidity of approximately $235 million.
Following this successful Senior Note offering, Bellatrix has recently
finalized amendments to the agreement governing its bank credit
facilities to permanently remove two of the three existing financial
covenants, as detailed below. All of these developments provide
enhanced financial flexibility to the Company.
2015 Guidance |
| Revised 2015 Guidance | Original 2015 Guidance | Change |
Average daily production (boe/d)
|
|
|
|
|
Low range
|
40,500
|
43,000
|
(2,500)
|
|
High range
|
41,500
|
44,000
|
(2,500)
|
Average product mix
|
|
|
|
|
Crude oil, condensate and NGLs (%)
|
30
|
33
|
(3)
|
|
Natural gas (%)
|
70
|
67
|
3
|
Capital spending ($ millions) (1) |
160
|
200
|
(40)
|
Expenses ($/boe)
|
|
|
|
|
Production
|
8.25
|
8.25
|
-
|
|
General and administrative ("G&A") (2) |
1.65
|
1.50
|
0.15
|
(1) | Capital spending includes exploration and development capital projects
and corporate assets, and excludes property acquisitions and
dispositions. |
(2) | G&A expenses are after capitalized G&A and recoveries |
SUCCESSFUL COMPLETION OF PHASE 1 OF THE BELLATRIX ALDER FLATS DEEP-CUT
GAS PLANT
The second quarter marked the successful completion of construction of
Phase 1 of the Bellatrix O'Chiese Nees-Ohpawganu'ck deep-cut gas plant
in the Alder Flats area of Alberta ("Bellatrix Alder Flats Plant" or
the "Plant") ahead of schedule and on budget. Completion of the Plant
represents a significant milestone for the Company and highlights the
culmination over the last 3 years work of planning, design, and
construction. The construction, commissioning and start-up phases of
this major project were safely performed with zero lost time incidents.
Initial Plant start-up commenced on May 22, 2015, followed by first
delivery of natural gas volumes to sales. Subsequent to Plant start-up,
Bellatrix successfully increased volume throughput at the Plant,
ultimately achieving inlet gas volumes of over 110 MMcf/d by mid-June
with overall Plant reliability over the last month at approximately
98%. Performance testing of the Plant confirmed design rate recoveries
for ethane, propane, and butane. The Plant design capacity has also
been tested during a trial with an inlet rate of 125 MMcf/d.
The benefits of the Plant are threefold. Firstly, the Plant is the most
modern and efficient plant in our greater core West Central Alberta
area, thus it enhances overall operational reliability and control of
natural gas processing. Secondly, the Plant provides an estimated 64%
reduction in the operating costs attributed to net Bellatrix natural
gas volumes relative to volumes processed at third party facilities in
the greater Ferrier region. Finally, the Plant was designed with
enhanced NGL recovery capability providing greater revenue capture from
our significant resource base.
With Phase 1 of the Plant now completed, Bellatrix has unfettered
processing capability to grow company volumes to approximately 60,000
boe/d without material capital spending on infrastructure over the near
term. Reduced facility capital spending is anticipated to enhance
overall corporate capital efficiencies, and reduce total finding and
development costs. With significant pre-build and flexibility for
Phase 2 already incorporated into our design and footprint at Alder
Flats, Bellatrix remains committed to construction of Phase 2 with an
expected on-stream date in mid-2017. Remaining capital spending over
the next two fiscal years for Phase 2 net to Bellatrix's interest is
estimated at approximately $50 million. Phase 2 will double the base
design capacity of the Plant to 220 MMcf/d and provide further growth
potential to Bellatrix of up to a total of 80,000 boe/d.
ALDER FLATS PLANT PROVIDES ENHANCED OPERATIONAL CONTROL AND EXPECTED
RELIABILITY
The industry continued to face natural gas takeaway constraints in West
Central Alberta during the second quarter as work continued on various
laterals, compressor maintenance, and ongoing improvements on the
Canadian mainline natural gas transmission system. At times during the
second quarter interruptible takeaway capacity was entirely restricted
with additional limitations on producers to approximately 90% of firm
takeaway capacity. Additional transmission system maintenance and
restrictions are expected during the summer, however, with the
Bellatrix Alder Flats Plant now fully operational, the Company expects
to meaningfully realize improvements in operational control and
reliability of processing during the second half of the year which we
expect will mitigate impacts from third party facility downtime and
potential negative impacts from ongoing maintenance on the Canadian
mainline gas transmission system.
In addition Bellatrix added approximately 110 MMcf/d of firm takeaway
capacity on the Canadian mainline gas transmission system upon
completion of the Plant, thereby providing more than sufficient
capacity for existing net volumes and providing room for future
growth. With completion of the Plant, and incremental firm service
capacity, Bellatrix has seen a significant improvement in operational
reliability and reduced impact from system constraints and curtailments
during July.
PROACTIVE FINANCIAL MANAGEMENT THROUGH THE CURRENT COMMODITY PRICE
ENVIRONMENT
Proactive management of the balance sheet and financial position
continued in the second quarter of 2015. Subsequent to the early
negotiation of covenant relief from our syndicate of lenders in the
first quarter, on May 21, 2015 the Company completed a US$250 million
offering of 8.50% senior unsecured notes due 2020 thereby providing
Bellatrix enhanced liquidity and increased financial flexibility to
successfully navigate the current commodity price environment. In
addition, the semi-annual review of the borrowing base under the
Company's revolving credit facilities was approved at $600 million in
June 2015. At June 30, 2015, the Company had $212.9 million of undrawn
capacity on its credit facility, excluding outstanding letters of
credit of $5.7 million that reduce the amount otherwise available to be
drawn on the facility.
More recently, and subsequent to the end of the second quarter,
Bellatrix's syndicate of lenders have approved elimination of two of
the three financial covenants contained in the agreement governing its
bank credit facilities. Specifically, the syndicate has agreed to
remove both the Total Debt to EBITDA and EBITDA to interest expense
covenants leaving only one financial covenant being a maximum
consolidated Senior Debt to EBITDA ratio of 3.5 to 1, stepping down to
3.0 to 1 for the quarter ending June 30, 2017 but including thereafter
an expander of 0.5 times for the two quarters immediately following a
material acquisition (for details of how Total Debt, EBITDA and Senior
Debt are defined under the agreement governing the credit facilities
see "Long Term Debt" in this Press Release). As part of the agreement
to remove these financial covenants, the Company agreed that any
further issuances of subordinated indebtedness (but excluding
refinancing of the existing Senior Notes) will require majority lender
approval. All other aspects of the facilities including the borrowing
base and the next redetermination on November 30, 2015 remain
unchanged. The amended agreement provides further financial
flexibility to the Company.
Additionally, during the second quarter, Bellatrix enhanced its risk
management program with the addition of longer term risk management
contracts in 2016 and 2017 through a mix of fixed price and basis swap
hedging contracts. Bellatrix has begun adding longer term risk
management contracts as part of its strategy to mitigate natural gas
price volatility and exposure, and to provide increased predictability
of revenue and cash flow beyond the current calendar year. By employing
both fixed price and basis swap risk management contracts, Bellatrix
maintains fixed price protection on a portion of its forecast natural
gas volumes, and retains upside potential on US dollar natural gas
prices in the future while mitigating potential adverse movements in
the AECO basis differential over the 2016 to 2017 timeframe.
Bellatrix's hedging program is part of its overall risk management
strategy focused on providing reduced price risk volatility, and
greater assurance of future revenue and cash flow which drive the
capital and reinvestment decisions within our business.
CONTINUED FOCUS ON COST REDUCTION AND ACTIVITY OPTIMIZATION EFFORTS
In addition to the aforementioned bank credit facility covenant
amendment and added liquidity created by terming up a portion of the
Company's bank debt, Bellatrix continues to work diligently to ensure
balance sheet stability. The Company spends capital in three principal
areas: capital and project expenditures, G&A costs, and operating
costs. Service cost deflation and efficiency gains have resulted in
average capital expenditure costs reduced by approximately 10% year
over year. A continued focus on G&A reductions and other internal cost
reduction initiatives also remains ongoing across all departments with
full year G&A costs (before recoveries) expected to be reduced by
approximately $9 million year over year. Finally, operational
initiatives have contributed approximately $10 million in cost savings.
JOINT VENTURE PARTNERSHIPS PROVIDE STRATEGIC BENEFITS
Bellatrix's JV strategy provides access to third party capital on
promoted terms, supporting continued development of the Company's large
resource base during periods of higher infrastructure capital
spending. Over the past ten quarters, Bellatrix has invested over $300
million in net infrastructure and facilities capital, thus JV
arrangements have provided Bellatrix access to additional capital for
drilling and completion activity to facilitate production growth during
this period of higher infrastructure capital outlay. Our
infrastructure footprint in West Central Alberta provides significant
benefits and barriers to competition.
In the second half of 2015, Bellatrix intends to access up to $65
million of partner capital under its JV arrangements, principally with
Grafton Energy Co. I Ltd ("Grafton"). Capital spent under the Grafton
JV enhances Bellatrix internal rate of return expectations on wells
drilled relative to organic development opportunities, providing clear
benefits during periods of lower commodity prices. Furthermore, JV
directed capital provides an uplift in net Bellatrix production volumes
and cash flow relative to its net proportion of capital spent on
drilling and completion activity. Pursuant to the Grafton JV terms,
Grafton contributes 82% of the drill, complete, equip and tie-in costs
to earn 54% of Bellatrix's working interest before payout (being
recovery of Grafton's capital investment plus an 8% internal rate of
return), reverting to a 33% working interest after payout (convertible
to a 17.5% gross overriding royalty). The JV arrangements provide an
alternative source of funding without equity or debt dilution to
shareholders.
OPERATIONAL AND FINANCIAL HIGHLIGHTS
-
Production in the second quarter 2015 averaged 40,426 boe/d (72% natural
gas weighted). Second quarter 2015 production increased 11% from an
average of 36,342 boe/d realized in the second quarter of 2014.
-
Capital spending on exploration and development activities of $37.5
million included $21.5 million on facilities and equipment as we
successfully completed construction of Phase 1 of the Bellatrix Alder
Flats Plant in the second quarter of 2015. Also included in second
quarter capital was approximately $4.0 million of capital spent on
Phase 2 of the Plant that is expected to be on-stream in mid-2017.
-
Operating costs averaged $8.58/boe in the second quarter 2015.
Excluding one-time adjustments related to prior periods, production
expenses per boe for the six months ended June 30, 2015 were $7.99/boe,
below our current full year corporate expectation.
-
In the second quarter of 2015, Bellatrix drilled and/or participated in
4 gross (2.8 net) Spirit River liquids-rich gas wells. Two of the
operated Spirit River liquids-rich gas wells were drilled under our
Grafton JV.
-
As at June 30, 2015, Bellatrix had approximately 372,926 net undeveloped
acres of land in Alberta, British Columbia, and Saskatchewan.
-
Bellatrix successfully completed a private offering of US$250 million of
8.50% Senior Notes due 2020 during the second quarter 2015. The Company
used the net proceeds from the Senior Note offering to partially repay
borrowings outstanding under its credit facility. The semi-annual
review of the borrowing base under the Company's revolving credit
facilities was approved at $600 million in June 2015 which provides
continued financial flexibility and an improved liquidity position. At
June 30, 2015, Bellatrix had $212.9 million of undrawn capacity on its
credit facility, excluding outstanding letters of credit of $5.7
million that reduce the amount otherwise available to be drawn on the
facility.
-
Adjusted net profit (loss) for the three and six months ended June 30,
2015 was a loss of $18.1 million and $32.1 million, respectively. The
adjusted net loss of $32.1 million incurred in the first six months of
2015 compared to an adjusted net profit of $69.9 million realized in
the same period in 2014 was primarily due to the continued weak
commodity price environment throughout the first half of 2015. Realized
prices in the first half of 2015 decreased by 43% in crude oil and
condensate, 66% in NGLs, and 46% in natural gas from the first six
months of 2014.
-
Total revenue decreased by 42% to $88.9 million for the three months
ended June 30, 2015, compared to $152.3 million realized in the second
quarter of 2014. Total crude oil, condensate, and NGL revenues
contributed 44% of total revenue realized in the second quarter of
2015, compared to 56% in the second quarter of 2014. Total revenue
decreased by 43% to $179.1 million for the six months ended June 30,
2015, compared to $315.9 million realized in the first six months of
2014. Total crude oil, condensate, and NGL revenues contributed 43% of
total revenue realized in the first half of 2015, compared to 56% in
the first half of 2014.
-
Funds flow from operations generated in the three months ended June 30,
2015 was $28.4 million ($0.15 per basic share), a decrease of 60% from
$71.0 million ($0.40 per basic share) in the second quarter of 2014.
Funds flow from operations generated in the six months ended June 30,
2015 was $53.2 million ($0.28 per basic share), a decrease of 64% from
$148.7 million ($0.85 per basic share) in the first half of 2014.
-
The corporate operating netback realized for the three months ended June
30, 2015 decreased by 59% to $11.92/boe compared to $29.26/boe in the
second quarter of 2014. After including commodity risk management
contracts, the corporate operating netback for the second quarter of
2015 was $11.99/boe, compared to $24.31/boe in the second quarter of
2014.
-
G&A expenses net of capitalized G&A and recoveries for the three and six
months ended June 30, 2015 were $6.7 million ($1.81/boe) and $14.0
million ($1.82/boe), compared to $4.5 million ($1.37/boe) and $10.1
million ($1.56/boe) in the comparative 2014 periods, respectively. G&A
net costs are higher year over year given lower recoveries in 2015
related to reduced capital spending compared to 2014.
-
At June 30, 2015, Bellatrix had approximately $1.71 billion in tax pools
available for deduction against future income.
OUTLOOK
With the majority of facilities and infrastructure spending now complete
in 2015, we shift our focus to development drilling and leveraging
joint venture capital in the high impact Spirit River play in the
second half of the year. This concentrated development program is
expected to enhance overall corporate operating and capital
efficiencies. Bellatrix is currently operating three drilling rigs
which we expect to maintain through the third quarter principally
drilling wells within our JV arrangements and focused on Falher and
Notikewin opportunities in the Spirit River formation.
Drill, complete, equip and tie-in costs for our Spirit River wells year
to date are down approximately 10% relative to 2014 average costs.
Bellatrix's low cost structure and high quality asset base position the
Company to successfully navigate this protracted period of low
commodity prices. The Company continues to focus on profitable growth
and ultimate value maximization for its shareholders. Our unwavering
focus on cost containment and capital discipline will continue through
2015 and beyond. Finally, our financial position continues to improve
and we look forward to executing additional value enhancing strategies
to further strengthen all aspects of our business.
("Raymond G. Smith")
Raymond G. Smith, P.Eng.
President and CEO
August 4, 2015
OPERATIONAL REVIEW
Sales Volumes |
| Three months ended June 30, | Six months ended June 30, |
|
| 2015 | 2014 | 2015 | 2014 |
|
Crude oil and condensate
|
(bbl/d)
|
5,012
|
6,686
|
5,425
|
6,829
|
|
NGLs (excluding condensate)
|
(bbl/d)
|
6,465
|
5,954
|
6,633
|
5,695
|
Total crude oil, condensate and NGLs
|
(bbl/d)
|
11,477
|
12,640
|
12,058
|
12,524
|
|
Natural gas
|
(mcf/d)
|
173,693
|
142,214
|
182,085
|
139,051
|
Total sales volumes (6:1 conversion)
|
(boe/d)
|
40,426
|
36,342
|
42,406
|
35,699
|
|
|
|
|
|
|
Sales volumes for the three months ended June 30, 2015 averaged 40,426
boe/d, an increase of 11% from an average of 36,342 boe/d realized in
the second quarter of 2014. The weighting towards crude oil,
condensate and NGLs for the three months ended June 30, 2015 was 28%,
compared to 35% in the second quarter of 2014.
Sales volumes for the six months ended June 30, 2015 averaged 42,406
boe/d, an increase of 19% from an average of 35,699 boe/d realized in
the first six months 2014. The weighting towards crude oil, condensate
and NGLs for the six months ended June 30, 2015 was 28%, compared to
35% in the same period in 2014.
During the first half of 2015, the industry experienced system wide
curtailment of interruptible and firm transportation on the Canadian
mainline gas transmission system due to ongoing maintenance and
pipeline integrity management work and there were also more specific
curtailments at certain facilities utilized by Bellatrix. For the month
of May, Bellatrix's volumes were curtailed on average of approximately
1,500 boe/d due to a major turnaround at a non-operated facility. In
spite of these system constraints, Bellatrix has been able to maintain
production levels through proactive management of Bellatrix's firm
capacity on the Canadian mainline gas transmission system and
utilization of the Bellatrix's infrastructure by providing flexibility
to redirect volumes to unaffected plants and delivery points.
Drilling Activity - Three months |
| Three months ended June 30, 2015 | Three months ended June 30, 2014 |
|
| Gross | Net | Success Rate | Gross | Net | Success Rate |
Cardium oil
|
-
|
-
|
-
|
11
|
5.5
|
100%
|
Spirit River liquids-rich natural gas
|
4
|
2.8
|
100%
|
7
|
3.0
|
100%
|
Cardium natural gas
|
-
|
-
|
-
|
1
|
0.5
|
100%
|
Total
|
4
|
2.8
|
100%
|
19
|
9.0
|
100%
|
|
|
Drilling Activity - Six months |
| Six months ended June 30, 2015 | Six months ended June 30, 2014 |
|
| Gross | Net | Success Rate | Gross | Net | Success Rate |
Cardium oil
|
3
|
1.2
|
100%
|
47
|
27.4
|
100%
|
Spirit River liquids-rich natural gas
|
7
|
4.8
|
100%
|
14
|
6.0
|
100%
|
Cardium natural gas
|
-
|
-
|
-
|
2
|
1.2
|
100%
|
Total
|
10
|
6.0
|
100%
|
63
|
34.6
|
100%
|
In the three months ended June 30, 2015, Bellatrix posted a 100% success
rate, drilling and/or participating in 4 gross (2.8 net) Spirit River
liquids-rich gas wells. During the six months ended June 30, 2015,
Bellatrix drilled and/or participated in 10 gross (6.0 net) wells,
consisting of 3 gross (1.2 net) Cardium light oil horizontal wells and
7 gross (4.8 net) Spirit River liquids-rich gas wells. One operated
Cardium well drilled in the first six months of 2015 was included under
our Troika JV program and three operated Spirit River liquids-rich gas
wells were drilled under our Grafton JV. We anticipate directing the
majority of our drilling and completion capital for the remainder of
2015 to our Spirit River opportunities and plan to continue to lever JV
capital.
By comparison, during the three months ended June 30, 2014, Bellatrix
drilled and/or participated in 19 gross (9.0 net) wells, consisting of
11 gross (5.5 net) Cardium oil wells, 7 gross (3.0 net) Spirit River
liquids-rich gas wells, and 1 gross (0.5 net) Cardium gas well. During
the first six months of 2014, Bellatrix drilled and/or participated in
63 gross (34.6 net) wells, resulting in 47 gross (27.4 net) Cardium
light oil horizontal oil wells, 14 gross (6.0 net) Spirit River
liquids-rich gas wells, and 2 gross (1.2 net) Cardium gas wells.
Capital Expenditures
Bellatrix invested $118.8 million in exploration and development capital
projects, excluding property acquisitions and dispositions, during the
six months ended June 30, 2015, compared to $284.0 million in the first
six months of 2014. In the second quarter 2015, the Company closed an
arrangement to transfer ownership of a constructed pipeline to a third
party at project cost.
Capital Expenditures |
| Three months ended June 30, | Six months ended June 30, |
($000s) |
| 2015 | 2014 | 2015 | 2014 |
Lease acquisitions and retention
|
(289)
|
4,264
|
2,067
|
6,737
|
Geological and geophysical
|
24
|
931
|
627
|
1,676
|
Drilling and completion costs
|
16,183
|
51,159
|
39,884
|
151,539
|
Facilities and equipment
|
30,175
|
75,008
|
84,860
|
124,097
|
Property transfers - cash
|
(8,639)
|
-
|
(8,639)
|
-
|
|
Capital - exploration and development (1) |
37,454
|
131,362
|
118,799
|
284,049
|
Capital - corporate assets (2) |
1,957
|
3,206
|
3,111
|
3,161
|
Property acquisitions
|
48
|
-
|
749
|
3,000
|
|
Total capital expenditures - cash
|
39,459
|
134,568
|
122,659
|
290,210
|
Property dispositions - cash
|
(1,790)
|
(8,613)
|
(1,811)
|
(8,392)
|
|
Total net capital expenditures - cash
|
37,669
|
125,955
|
120,848
|
281,818
|
Other - non-cash (3) |
(3,921)
|
3,602
|
3,554
|
8,592
|
Total capital expenditures - net (4) |
33,748
|
129,557
|
124,402
|
290,410
|
(1) | Excludes capitalized costs related to decommissioning liabilities
expenditures incurred during the period. |
(2) | Capital - corporate assets includes office leasehold improvements,
furniture, fixtures and equipment before recoveries realized from
landlord lease inducements. |
(3) | Other includes non-cash adjustments for the current period's
decommissioning liabilities and share based compensation. |
(4) | Total capital expenditures - net is considered to be a non-GAAP
measure. 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. |
Major Capital Projects
Capital spending on exploration and development activities of $37.5
million included $21.5 million on facilities and equipment as we
successfully completed construction of Phase 1 and the related
pipelines of the Bellatrix Alder Flats Plant in the second quarter of
2015 culminating in the start-up on May 22, 2015, followed by first
delivery of natural gas volumes to sales. Bellatrix successfully
completed the 110 MMcf/d Plant Phase 1 ahead of schedule and on budget.
The Plant has been developed in two phases with a combined sales
capacity of 220 MMcf/d. Total net spending on the Plant (including
Phase 1, Phase 2 and related pipelines) in the first half of 2015 was
$56.8 million. With significant pre-build and flexibility for Phase 2
already incorporated into our design and footprint at Alder Flats,
Bellatrix remains committed to construction of Phase 2 with an expected
on-stream date in mid-2017. Remaining capital spending over the next
two fiscal years for Phase 2 of the Plant net to Bellatrix's interest
is estimated at approximately $50 million.
Undeveloped land
At June 30, 2015, Bellatrix had approximately 372,926 undeveloped acres
of land in Alberta, British Columbia, and Saskatchewan.
FINANCIAL REVIEW
Cash Flow from Operating Activities, Funds Flow from Operations, Net
Operating Income (Loss) and Net Profit (Loss) |
| Three months ended June 30, | Six months ended June 30, |
($000s, except per share amounts) | 2015 | 2014 | 2015 | 2014 |
Funds flow from operations
|
28,378
|
71,014
|
53,235
|
148,656
|
|
Basic ($/share)
|
0.15
|
0.40
|
0.28
|
0.85
|
|
Diluted ($/share)
|
0.15
|
0.39
|
0.28
|
0.84
|
Cash flow from operating activities
|
16,475
|
60,063
|
39,027
|
144,363
|
|
Basic ($/share)
|
0.09
|
0.34
|
0.20
|
0.83
|
|
Diluted ($/share)
|
0.09
|
0.33
|
0.20
|
0.81
|
Adjusted net profit (loss) (1) |
(18,134)
|
27,005
|
(32,086)
|
69,929
|
|
Basic ($/share)
|
(0.09)
|
0.15
|
(0.17)
|
0.40
|
|
Diluted ($/share)
|
(0.09)
|
0.15
|
(0.17)
|
0.39
|
Net profit (loss)
|
(24,427)
|
38,252
|
(37,116)
|
63,419
|
|
Basic ($/share)
|
(0.13)
|
0.22
|
(0.19)
|
0.36
|
|
Diluted ($/share)
|
(0.13)
|
0.21
|
(0.19)
|
0.36
|
(1) | The terms "funds flow from operations" and "adjusted net profit (loss)"
do not have a standardized meaning under GAAP. Refer to "Non-GAAP and other measures" disclosed at the end of this
Press Release. |
Bellatrix generated funds flow from operations of $28.4 million ($0.15
per basic and diluted share) in the second quarter of 2015, a decrease
of 60% from $71.0 million ($0.40 per basic share and $0.39 per diluted
share) generated in the comparative period in 2014. Bellatrix's cash
flow from operating activities for the three months ended June 30, 2015
decreased by 73% to $16.5 million ($0.09 per basic and diluted share)
from $60.1 million ($0.34 per basic share and $0.33 per diluted share)
generated in the second quarter of 2014. For the three months ended
June 30, 2015, Bellatrix recognized an adjusted net loss of $18.1
million ($0.09 per basic and diluted share), compared to an adjusted
net profit of $27.0 million ($0.15 per basic and diluted share) in the
second quarter of 2014.
Bellatrix generated funds flow from operations of $53.2 million ($0.28
per basic and diluted share) in the first six months of 2015, a
decrease of 64% from $148.7 million ($0.85 per basic share and $0.84
per diluted share) generated in the first half of 2014. Bellatrix's
cash flow from operating activities for the six months ended June 30,
2015 decreased by 73% to $39.0 million ($0.20 per basic and diluted
share) from $144.4 million ($0.83 per basic share and $0.81 per diluted
share) generated in the first six months of 2014. For the six months
ended June 30, 2015, Bellatrix recognized an adjusted net loss of $32.1
million ($0.17 per basic and diluted share), compared to an adjusted
net profit of $69.9 million ($0.40 per basic share and $0.39 per
diluted share) in the same period in 2014. The overall weak global
commodity price environment has continued through the first half of
2015 significantly impacting funds flow from operations and adjusted
net profit of the Company.
Adjusted Net Profit (Loss) |
| Three months ended June 30, | Six months ended June 30, |
($000s) |
| 2015 | 2014 | 2015 | 2014 |
Net profit (loss)
|
(24,427)
|
38,252
|
(37,116)
|
63,419
|
Add (deduct) non-operating items:
|
|
|
|
|
|
Unrealized (gain) loss on commodity contracts
|
2,341
|
(14,996)
|
611
|
8,680
|
|
Unrealized (gain) loss on foreign exchange
|
6,279
|
-
|
6,279
|
-
|
|
Tax impact on non-operating items
|
(2,327)
|
3,749
|
(1,860)
|
(2,170)
|
Adjusted net profit (loss)
|
(18,134)
|
27,005
|
(32,086)
|
69,929
|
Management believes that, in addition to net profit (loss), adjusted net
profit (loss) is a useful supplemental measure as it reflects the
underlying performance of Bellatrix's business activities by excluding
the after tax effect of non-cash commodity contracts mark to market
gains and losses, unrealized foreign exchange gains and losses, as
applicable, that may significantly impact net profit (loss) from period
to period.
Operating Netback - Corporate (before risk management) |
| Three months ended June 30, | Six months ended June 30, |
($/boe)
| 2015 | 2014 | 2015 | 2014 |
Sales (1) |
24.18
|
46.05
|
23.34
|
48.89
|
Production
|
(8.58)
|
(7.80)
|
(8.57)
|
(7.96)
|
Transportation
|
(1.26)
|
(0.82)
|
(1.24)
|
(1.20)
|
Royalties
|
(2.42)
|
(8.17)
|
(3.11)
|
(8.42)
|
Operating netback
|
11.92
|
29.26
|
10.42
|
31.31
|
(1) | Sales includes other income. |
Bellatrix's corporate operating netback before commodity price risk
management contracts for crude oil and natural gas during the three
months ended June 30, 2015 averaged $11.92/boe, a decrease of 59% from
$29.26/boe realized during the second quarter of 2014. After including
commodity risk management contracts, the corporate operating netback
for the three months ended June 30, 2015 was $11.99/boe, compared to
$24.31/boe in the second quarter of 2014. Per unit metrics including
risk management include realized gains or losses on commodity contracts
and exclude unrealized gains or losses on commodity contracts.
Bellatrix's corporate operating netback before commodity price risk
management contracts for crude oil and natural gas during six months
ended June 30, 2015 averaged $10.42/boe, a decrease of 67% from
$31.31/boe realized during the first six months of 2014. After
including commodity risk management contracts, the corporate operating
netback for the three months ended June 30, 2015 was $10.74/boe,
compared to $25.89/boe in the same period in 2014.
Total revenue decreased by 42% to $88.9 million for the three months
ended June 30, 2015, compared to $152.3 million realized in the second
quarter of 2014. Total crude oil, condensate, and NGL revenues
comprised 46% of total second quarter 2015 revenue before other income,
royalties, and commodity price risk management contracts, compared to
56% in the three months ended June 30, 2014.
Total revenue decreased by 43% to $179.1 million for the six months
ended June 30, 2015, compared to $315.9 million realized in the first
half of 2014. Total crude oil, condensate, and NGL revenues comprised
44% of total second quarter 2015 revenue before other income,
royalties, and commodity price risk management contracts, compared to
56% in the same period in 2014.
Production expenses totaled $31.6 million ($8.58/boe) for the three
months ended June 30, 2015, compared to $25.8 million ($7.80/boe) in
the second quarter of 2014. Production expenses totaled $65.8 million
($8.57/boe) for the six months ended June 30, 2015, compared to $51.4
million ($7.96/boe) in the first half of 2014. Production expenses
increased on a per boe basis between the six months ended June 30, 2015
and June 30, 2014 due to one-time adjustments related to prior periods
of $0.58/boe primarily attributable to third party realized facility
equalizations. Excluding these one-time adjustments, production
expenses per boe for the six months ended June 30, 2015 were $7.99/boe.
Production expenses are in line to achieve our $8.25/boe guidance in
2015 as cost reductions are anticipated to be realized from the startup
of the Bellatrix Alder Flats Plant during the remainder of the year and
continued field optimization work.
For the three months ended June 30, 2015, royalties incurred totaled
$8.9 million, compared to $27.0 million incurred in the second quarter
of 2014. In the second quarter 2015, the Alberta Energy Regulator
completed its annual review of Bellatrix's 2014 gas cost allowance
submissions resulting in a credit of $2.1 million. In the second
quarter 2014, the annual gas cost allowance increased royalties by $1.3
million. Overall royalties as a percentage of revenue (after
transportation costs) in the second quarter of 2015 were 11% compared
with 18% in the comparative period in 2014. For the six months ended
June 30, 2015, royalties incurred totaled $23.9 million, compared to
$54.4 million incurred in same period in 2014. Overall royalties as a
percentage of revenue (after transportation costs) in the second
quarter of 2015 were 15% compared with 17% in the first six months of
2014.
Commodity Prices
Average Commodity Prices |
| Three months ended June 30, | Six months ended June 30, |
| 2015 | 2014 | % Change | 2015 | 2014 | % Change |
|
|
|
|
|
|
|
Exchange rate (US$/CDN$1.00) |
0.8137
|
0.9164
|
(11)
|
0.8101
|
0.9115
|
(11)
|
|
|
|
|
|
|
|
Crude oil:
|
|
|
|
|
|
|
|
WTI (US$/bbl) |
57.95
|
102.99
|
(44)
|
53.34
|
100.84
|
(47)
|
|
Canadian Light crude blend ($/bbl) |
68.88
|
104.14
|
(34)
|
61.08
|
101.95
|
(40)
|
Bellatrix's average prices ($/bbl) |
|
|
|
|
|
|
|
|
Crude oil and condensate
|
66.95
|
103.25
|
(35)
|
57.69
|
100.72
|
(43)
|
|
|
NGLs (excluding condensate)
|
15.15
|
42.70
|
(65)
|
16.69
|
49.72
|
(66)
|
|
|
Total crude oil and NGLs
|
37.77
|
74.73
|
(49)
|
35.14
|
77.53
|
(55)
|
|
|
Crude oil and condensate (including risk management (1))
|
66.73
|
89.98
|
(26)
|
58.28
|
89.00
|
(35)
|
|
|
|
|
|
|
|
|
Natural gas:
|
|
|
|
|
|
|
|
NYMEX (US$/mmbtu) |
2.74
|
4.58
|
(40)
|
2.77
|
4.65
|
(40)
|
|
AECO daily index (CDN$/mcf) |
2.65
|
4.69
|
(43)
|
2.70
|
5.20
|
(48)
|
|
AECO monthly index (CDN$/mcf) |
2.67
|
4.68
|
(43)
|
2.81
|
4.72
|
(40)
|
|
|
Bellatrix's average price ($/mcf) |
2.91
|
5.04
|
(42)
|
2.95
|
5.45
|
(46)
|
|
|
Bellatrix's average price (including risk management (1)) ($/mcf) |
2.94
|
4.40
|
(33)
|
2.99
|
4.64
|
(36)
|
1) | Per unit metrics including risk management include realized gains or
losses on commodity contracts and exclude unrealized gains or losses on
commodity contracts. |
The overall weak global commodity price environment has continued
through the first half of 2015 as oil production from OPEC and non-OPEC
countries continued to climb, reaching almost 96 million barrels per
day in June, 2015. Shale production in the US and Canada has pushed US
oil inventories to record levels despite increased refinery
utilizations. Likewise, production of natural gas in North America has
reached record levels as supplies more than offset the continued
increase in demand for natural gas.
For crude oil and condensate, Bellatrix realized an average price of
$66.95/bbl before commodity price risk management contracts during the
three months ended June 30, 2015, a decrease of 35% from the average
price of $103.25/bbl received in the second quarter of 2014. In
comparison, the Canadian Light price decreased by 34% and the average
WTI crude oil benchmark price decreased by 44% between the second
quarters of 2014 and 2015. For crude oil and condensate, Bellatrix
realized an average price of $57.69/bbl before commodity price risk
management contracts during the six months ended June 30, 2015, a
decrease of 43% from the average price of $100.72/bbl received in the
first six months of 2014. In comparison, the Canadian Light price
decreased by 40% and the average WTI crude oil benchmark price
decreased by 47% between the first six months of 2014 and 2015.
Bellatrix's average realized price for NGLs (excluding condensate)
decreased by 65% to $15.15/bbl during the second quarter of 2015,
compared to $42.70/bbl received in the three months ended June 30,
2014. NGL pricing in Western Canada continues to remain challenged as
butane and propane were down 15% and 81%, respectively, quarter over
quarter. Butane pricing has been impacted by higher product supply from
key US natural gas plays impacting the overall supply/demand balance.
Propane pricing has also been impacted by supply/demand balance and
logistic issues in Western Canada to major markets. Propane inventories
remain at record levels across North America. Canadian inventories are
building mainly due to the 2014 reversal of the Cochin NGL line that
was a primary outlet for propane from Western Canada to eastern
markets. Bellatrix's average realized price for NGLs (excluding
condensate) decreased by 66% to $16.69/bbl during the six months ended
June 30, 2015, compared to $49.72/bbl received in the first half of
2014.
Bellatrix's natural gas sales are priced with reference to the daily or
monthly AECO indices. Bellatrix's natural gas sold has a higher heat
content than the industry average, which results in slightly higher
realized prices per mcf than the daily AECO index. During the three
months ended June 30, 2015, the AECO daily reference price decreased by
43% and the AECO monthly reference price decreased by 43% compared to
the second quarter of 2014. Bellatrix's natural gas average sales
price before commodity price risk management contracts for the three
months ended June 30, 2015 decreased by 42% to $2.91/mcf compared to
$5.04/mcf in the second quarter of 2014. During the six months ended
June 30, 2015, the AECO daily reference price decreased by 48% and the
AECO monthly reference price decreased by 40% compared to the first
half of 2014. Bellatrix's natural gas average sales price before
commodity price risk management contracts for the six months ended June
30, 2015 decreased by 46% to $2.95/mcf compared to $5.45/mcf in the
first six months of 2014.
As at June 30, 2015, Bellatrix was party to a series of commodity price
risk management contracts summarized below:
|
|
|
|
|
| Q3 2015 | Q4 2015 |
Natural gas volumes (MMcf/d)
|
|
156.7
|
85.9
|
Average price ($/mcf) (1) |
|
$2.93
|
$2.94
|
|
|
|
|
Oil volumes (bbl/d)
|
|
3,000
|
3,000
|
Average fixed price ($/bbl) (2) |
|
$70.34
|
$70.34
|
(1) | The conversion of $/GJ to $/mcf is based on an average corporate heat
content rate of 40.8Mj/m3. |
(2) | Oil hedges are Canadian dollar WTI equivalent. |
Additionally, Bellatrix entered into the following contracts for the
2016 and 2017 calendar years as summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
| Financial Contract |
|
| Period |
|
| Volume |
|
| Average Price(1) |
Natural gas
|
|
|
Fixed price swap
|
|
|
January 1, 2016 to December 31, 2017
|
|
|
44 MMcf/d
|
|
|
$3.38/mcf
|
Natural gas
|
|
|
AECO basis swap
|
|
|
January 1, 2016 to December 31, 2016
|
|
|
35 MMcf/d
|
|
|
US$0.70/mcf
|
Natural gas
|
|
|
AECO basis swap
|
|
|
January 1, 2017 to December 31, 2017
|
|
|
16 MMcf/d
|
|
|
US$0.70/mcf
|
(1) | The conversion of $/GJ to $/mcf is based on an average corporate heat
content rate of 40.0Mj/m3 in 2016 & 2017. |
Long Term Debt
Senior Notes
Bellatrix successfully completed a private offering of US$250 million of
8.50% Senior Notes due 2020 during the second quarter 2015. The Company
used the net proceeds from the offering to partially repay borrowings
outstanding under its credit facility. Interest on the Senior Notes is
payable semi-annually and the Senior Notes are redeemable at the
Company's option, in whole or in part, commencing on May 15, 2017 at
specified redemption prices.
Bank Debt
Bellatrix maintains extendible revolving reserves-based credit
facilities with a syndicate of lenders that mature May 2017. The
semi-annual review of the borrowing base under the Company's revolving
credit facilities was approved at $600 million in June 2015. The credit
facilities do not require any mandatory principal payments prior to
maturity and can be further extended beyond May 2017 with the consent
of the lenders. As of June 30, 2015, the Company's credit facilities
are available on an extendible revolving term basis and consist of a
$75 million operating facility provided by a Canadian bank and a $525
million syndicated facility provided by nine financial institutions,
subject to a borrowing base test. The available credit facilities and
related borrowing base are subject to semi-annual reviews in May and
November of each year.
Effective August 4, 2015, the Company's banking syndicate agreed to
amend the agreement governing the credit facilities with the removal of
the Total Debt to EBITDA and EBITDA to interest expense financial
covenants. At the same time, Bellatrix and the banking syndicate
agreed to modify the Senior Debt to EBITDA financial covenant so that
it must not exceed 3.5 times for the fiscal quarters ending on or
before March 31, 2017.
Until the beginning of the second quarter of 2017, the additional
automatic relaxation of the Senior Debt to EBITDA financial covenant
following a material acquisition will not apply. Commencing with the
second quarter of 2017, the maximum Senior Debt to EBITDA covenant will
return to 3.0 times (3.5 times for the two fiscal quarters immediately
following a material acquisition). All other aspects of the facilities
including the borrowing base and the next redetermination on November
30, 2015 remain unchanged.
Notes: |
(1) "Total Debt" is defined as the sum of the bank loan, the principal
amount of long-term debt and certain other liabilities defined in the
agreement governing the credit facilities. |
(2) "EBITDA" refers to earnings before interest, taxes, depreciation and
amortization. EBITDA is calculated based on terms and definitions set
out in the agreement governing the credit facilities, which adjusts net
income for financing costs, certain specific unrealized and non-cash
transactions, acquisition and disposition activity and is calculated
based on a trailing twelve month basis. |
(3) "Senior Debt" is defined as Total Debt, excluding any unsecured or
subordinated debt. Bellatrix currently does not have any subordinated
or unsecured debt. |
CONFERENCE CALL INFORMATION
A conference call to discuss Bellatrix's second quarter results will be
held on August 5, 2015 at 9:00 am MT / 11:00 am ET. To participate,
please call toll-free 1-888-231-8191 or 647-427-7450. The conference
call will also be recorded and available until August 12, 2015 by
calling 1-855-859-2056 or 403-451-9481 and entering passcode 92708615
followed by the pound sign.
Bellatrix Exploration Ltd. is a 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 in the provinces of Alberta, British Columbia, and
Saskatchewan.
Common shares of Bellatrix trade on the Toronto Stock Exchange and on
the New York Stock Exchange under the symbol "BXE".
NON-GAAP and other measures
This press release contains the term "funds flow from operations" 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 the additional GAAP measures of funds flow from operations, or funds
flow from operations per share may not be comparable with the
calculation of similar measures for other entities. Management uses
funds flow from operations to analyze operating performance and
leverage and considers funds flow from operations 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. The
reconciliation between cash flow from operating activities and funds
flow from operations can be found in the MD&A. Funds flow from
operations per share is calculated using the weighted average number of
common shares for the period.
"Total net debt" and "adjusted working capital deficiency (excess)" are
considered to be additional GAAP measures. Therefore reference to the
additional GAAP measures of total net debt or adjusted working capital
deficiency (excess) may not be comparable with the calculation of
similar measures for other entities. The Company's calculation of
total net debt excludes deferred lease inducements, decommissioning
liabilities, the long-term finance lease obligation, and the deferred
tax liability. Total net debt includes the adjusted working capital
deficiency (excess). The adjusted working capital deficiency (excess)
is an additional GAAP measure calculated as net working capital
deficiency (excess) excluding short-term commodity contract assets and
liabilities, current finance lease obligation, and current deferred
lease inducements. Management believes these measures are useful
supplementary measures of the total amount of current and long-term
debt. A reconciliation between total liabilities under GAAP and total
net debt as calculated by the Company is found in the MD&A.
"Total revenue" is considered to be a non-GAAP measure. Therefore
reference to the non-GAAP measure of total revenue may not be
comparable with the calculation of similar measures for other
entities. The Company's calculation of total revenue includes
petroleum and natural gas sales and other income, and excludes
commodity price risk management.
"Operating netbacks", "adjusted net profit (loss)", and "total capital
expenditures - net" are considered to be non-GAAP measures. Operating
netbacks are calculated by subtracting royalties, transportation, and
operating costs from total revenue. Adjusted net profit (loss) is
calculated by removing unrealized gains and losses on commodity
contracts, net of associated tax impacts, and unrealized gains and
losses on foreign exchange, net of associated tax impacts, from net
profit (loss). 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, adjustments to
the Company's decommissioning liabilities, and share based
compensation. The detailed calculations of operating netbacks are found
in the MD&A.
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.
FORWARD LOOKING STATEMENTS
Certain information contained herein may contain forward looking
statements including management's assessment of future plans,
operations and strategy, including capital allocation toward high rate
of return wells, the profitability of the Company's Spirit River
drilling opportunities, the expectation that the Company has a large
inventory of future drilling locations in the highly prolific Spirit
River formation and oil and liquids weighted opportunities in the
Cardium, the anticipation that drill bit focused capital of
approximately $100 million in 2016 would be sufficient to offset
forecast production declines, plans to maintain the Company's position
as a low cost finder and operator, expectations of year-end total net
debt, expected 2015 average production, forecast third quarter 2015 and
full-year capital spending, plans and expected timing related to Phase
2 of the Bellatrix Alder Flats Plant, that Phase 2 of the Bellatrix
Alder Flats Plant will provide further growth potential of up to 80,000
boe/d, the competitive advantages within the Company's greater Ferrier
region, the ability of the Company's strategic infrastructure assets to
anchor a reduced operating cost profile, the Company's access to
multiple processing facilities in addition to key receipt points along
the Canadian mainline gas transmission system, the ability of the
Company to have unfettered processing capacity to grow production
volumes to approximately 60,000 boe/d without the need for material
spending on infrastructure, the ability of the Company to reduce
infrastructure related spending to approximately 20% or less of total
capital spending going forward, and the ability for this reduced
infrastructure investment to drive improved corporate capital
efficiency metrics, finding and development costs, and result in
enhanced corporate profitability going forward, the Company's ability
to realize operating cost, production expenses and G&A expense savings
as anticipated, plans to access to JV capital and the expected benefits
therefrom, the Company's ability to control the timing of production
growth, reliability of processing capacity, and firm service
transportation and processing capacity, expected enhanced natural gas
liquids recovery from the Bellatrix Alder Flats Plant,the ability to profitably grow production in the years ahead, and plans
to direct the majority of the Company's drilling and completion capital
for the remainder of 2015 to Spirit River opportunities and continue to
lever joint venture capital, and details of the Company's future
strategy may constitute forward-looking statements under applicable
securities laws. To the extent that any forward-looking information
contained herein constitute a financial outlook, they were approved by
management on August 4, 2015 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, delays resulting from or
inability to obtain required regulatory approvals 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 or 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 on file with Canadian and US
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.bellatrixexploration.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 PRODUCTION RATES
Any references in this release to IP rates are useful in confirming the
presence of hydrocarbons, however, such rates are not determinative of
the rates at which such wells will continue to produce and decline
thereafter and are not necessarily indicative of long-term performance
or ultimate recovery. While encouraging, readers are cautioned not to
place reliance on such rates in calculating the aggregate production
for the Company. Such rates are based on field estimates and may be
based on limited data available at this time.
RESERVES INFORMATION
Unless indicated otherwise, reserve estimates and related future net
revenue and other reserves information is derived from Bellatrix's
independent reserve report prepared by Sproule Associates Limited as at
December 31, 2014 using forecast prices and costs (the "Sproule
Report").
ANALOGOUS INFORMATION
Certain information in this presentation may constitute "analogous
information" as defined in National Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities ("NI 51-101"), including, but not
limited to, the reservoir data, production rates of industry wells,
cumulative production information, and economics information relating
to the areas in which Bellatrix has an interest. Such information has
been obtained from government sources, regulatory agencies or other
industry participants. Management of Bellatrix believes the information
is relevant as it helps to define the reservoir characteristics and the
reserves and production potential in which Bellatrix holds an interest.
Such information has not been prepared in accordance with NI 51-101.
Bellatrix is also unable to confirm that the analogous information was
prepared by a qualified reserves evaluator or auditor. Such information
is not an estimate of the resources attributable to lands held or to be
held by Bellatrix and there is no certainty that the reservoir data,
resource estimates, production and decline rates and economics
information for the lands held by Bellatrix will be similar to the
information presented herein. The reader is cautioned that the data
relied upon by Bellatrix may be in error and/or may prove not be
analogous to the lands be held by Bellatrix.
TYPE CURVE AND CAPITAL EFFICIENCY
In this press release information relating to the type curve and capital
efficiency for Bellatrix's Spirit River wells have been presented. The
type curve set forth herein is generated from March 2011 - June 2014,
Bellatrix operated, Notikewin and Falher B wells and represents the
mean (P50) performance curve. Full cycle economics are based on
Bellatrix's current expectations of facilities, land, seismic and
related costs per well. Capital efficiency is a measure of expected
capital expenditures per well divided by average first year production
results (IP365) based on the type curve presented. The type curve and
capital efficiency numbers have been presented to provide readers with
information on the assumptions used for management's budgeting process
and future planning. The full cycle economics may not be achieved on
future wells as a result of a number of factors including the risks
identified above under "Forward-Looking Statements". In addition, there
is no certainty that future wells will generate results to match
historic type curves presented herein.
SOURCE Bellatrix Exploration Ltd.
PDF available at: http://stream1.newswire.ca/media/2015/08/05/20150805_C9341_DOC_EN_44082.pdf