TSX, NYSE: BXE
CALGARY,
Aug. 5, 2015 /CNW/ - 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.
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