Bellatrix Exploration Ltd. (“Bellatrix” or the “Company”) (TSX,
NYSE: BXE) announces that it has entered into a definitive
agreement to acquire complementary assets within its core Ferrier
area of west central Alberta from POSCO Daewoo E&P Canada
Corporation (“Daewoo”) for total consideration of approximately
$9.5 million. Bellatrix also announces updated commodity risk
management contracts.
Transaction Highlights
The acquisition includes approximately 1,250
boe/d (65% natural gas, 35% liquids) of low decline (<15%)
current production and represents the consolidation of working
interest ownership in existing producing wells and formation
rights. The acquisition consolidates 100% of partner assets
in the area further simplifying Bellatrix’s business and long-term
strategy.
The acquisition includes production volumes from
61 gross (19.6 net) producing wells and acreage originally acquired
by Daewoo International Corporation and Devonian Natural Resources
Private Equity Fund (“Devonian”) in 2013, and subsequently jointly
developed with Bellatrix. Total consideration of
approximately $9.5 million includes $1.75 million in cash and 6.75
million shares of Bellatrix. The transaction has an effective
date of September 1, 2018.
The transaction is consistent with Bellatrix's
strategy to consolidate operated production and acreage within its
core area at attractive metrics. The acquired volumes are
expected to be processed through Bellatrix owned and controlled
infrastructure and facilities, and as a result, the acquisition is
expected to have no incremental impact on general and
administrative expenses.
Details of the transaction include:
Total
consideration |
$9.5 million |
Estimated current production |
1,250 boe/d (65% natural gas, 35% liquids) |
Estimated base decline rate |
<15% |
Estimated 2019 net operating income1 |
$3.5 million |
Estimated acquisition metrics include:
Estimated current
production |
$7,600/boe/d |
|
Estimated 2019 net operating income multiple |
<3.0x |
|
Note (1): Estimated 2019 net operating income
based on prices of $1.66/GJ AECO and US$62.88/bbl WTI.
The asset acquisition will contribute
approximately one month of volumes (based on an estimated closing
date on or before November 30, 2018) to Bellatrix’s annual results
or the equivalent of approximately 100 boe/d, therefore Bellatrix
is not amending its 2018 full year production guidance range.
Updated Commodity Price Risk Management
Protection and Market Diversification Benefits
Bellatrix’s entered into a series of market
diversification contracts approximately one year ago that provide a
distinct advantage and benefit from recent North American natural
gas price improvement. Bellatrix’s market diversification
sales into the Dawn, Chicago and Malin markets represent
approximately 55% of Bellatrix’s natural gas volumes (based on the
mid-point of 2018 average production guidance). Each of these three
markets has demonstrated price improvement in concert with
strengthening Henry Hub prices.
Bellatrix has proactively fixed the prices on a
portion of these markets to reduce the impact of commodity price
volatility on our business. As at November 26, 2018 Bellatrix
has locked in fixed prices in December 2018 (approximately 30% of
natural gas volumes based on current annual 2018 production
guidance at a Canadian equivalent price of approximately $4.33/Mcf)
and the first quarter of 2019 (approximately 20% of natural gas
volumes at a Canadian equivalent price of approximately $4.20/Mcf)
as follows:
Month(s) |
Market |
Quantity |
US$/MMBtu Price |
Net Cdn$/Mcf Price(1) |
Dec
2018 |
NYMEX/Dawn/Chicago Avg. |
50,000 MMBtu |
US$4.59/MMBtu |
$4.33/Mcf |
Jan –
Feb 2019 |
NYMEX/Dawn Avg. |
30,000 MMBtu |
US$4.64/MMBtu |
$4.40/Mcf |
Mar 2019 |
Malin/Dawn Avg. |
30,000 MMBtu |
US$4.19/MMBtu |
$3.78/Mcf |
Note (1): Net Canadian equivalent price is
calculated as the US$ fixed price, less contracted differential,
adjusted to Canadian dollars at an assumed exchange rate of $1.30
USD/CAD.
In summary, Bellatrix ’s market diversification
contracts include a total of 75,000 MMBtu/d of market exposure as
follows:
Product |
Market |
Start Date |
End Date |
Volume |
Natural gas |
Chicago |
February 1, 2018 |
October 31, 2020 |
15,000 MMBtu/d |
Natural gas |
Chicago |
November 1, 2018 |
October 31, 2020 |
15,000 MMBtu/d |
Natural gas |
Dawn |
February 1, 2018 |
October 31, 2020 |
15,000 MMBtu/d |
Natural gas |
Dawn |
November 1, 2018 |
October 31, 2020 |
15,000 MMBtu/d |
Natural gas |
Malin |
February 1, 2018 |
October 31, 2020 |
15,000 MMBtu/d |
Bellatrix Exploration Ltd. is a publicly traded
Western Canadian based growth oriented oil and gas company engaged
in the exploration for, and the acquisition, development and
production of oil and natural gas reserves, with highly
concentrated operations in west central Alberta, principally
focused on profitable development of the Spirit River liquids rich
natural gas play.
For further information, please contact:
Steve Toth, CFA, Vice President, Investor
Relations & Corporate Development (403) 750-1270
Bellatrix Exploration Ltd.1920,
800 – 5th Avenue SWCalgary, Alberta, Canada T2P 3T6Phone: (403)
266-8670Fax: (403) 264-8163www.bxe.com
FORWARD LOOKING STATEMENTS: Certain information
contained in this press release may contain forward looking
statements within the meaning of applicable securities laws. The
use of any of the words "position", "continue", "opportunity",
"expect", "plan", "maintain", "estimate", "assume", "target",
"believe" "forecast", "intend", "strategy", "anticipate", "enhance"
and similar expressions are intended to identify forward-looking
statements. More particularly and without limitation, this document
contains forward-looking statements concerning the expected impacts
of the Daewooo acquisition; the expectation that the acquired
volumes will be processed through Bellatrix owned and controlled
infrastructure and facilities; the expectation that the acquisition
will not have any incremental impact on general and administrative
expenses; expectations regarding the production declines associated
with the assets; the expected closing date of the acquisition; the
expected 2019 net operating income (including the components
thereof) and the expected 2019 net operating income multiple
associated with the assets acquired. To the extent that any
forward-looking information contained herein constitute a financial
outlook, they were approved by management as at the date of this
press release 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, failure to
meet the conditions for closing the acquisition, inability to
retain drilling rigs and other services, incorrect assessment of
the value of acquisitions, failure to realize the anticipated
benefits of acquisitions and dispositions, delays resulting from or
inability to obtain required regulatory approvals, actions taken by
the Company's lenders that reduce the Company's available credit
and ability to access sufficient capital from internal and external
sources. Events or circumstances may cause actual results to differ
materially from those predicted, as a result of the risk factors
set out and other known and unknown risks, uncertainties, and other
factors, many of which are beyond the control of Bellatrix. In
addition, forward looking statements or information are based on a
number of factors and assumptions which have been used to develop
such statements and information but which may prove to be incorrect
and which have been used to develop such statements and information
in order to provide shareholders with a more complete perspective
on Bellatrix's future operations. Such information may prove to be
incorrect and readers are cautioned that the information may not be
appropriate for other purposes. Although the Company believes that
the expectations reflected in such forward looking statements or
information are reasonable, undue reliance should not be placed on
forward looking statements because the Company can give no
assurance that such expectations will prove to be correct. In
addition to other factors and assumptions which may be identified
herein, assumptions have been made regarding, among other things:
the impact of increasing competition; the general stability of the
economic and political environment in which the Company operates;
the timely receipt of any required regulatory approvals; the
ability of the Company to obtain qualified staff, equipment and
services in a timely and cost efficient manner; drilling results;
the ability of the operator of the projects which the Company has
an interest in to operate the field in a safe, efficient and
effective manner; the ability of the Company to obtain financing on
acceptable terms; field production rates and decline rates; the
ability to replace and expand oil and natural gas reserves through
acquisition, development of exploration; the timing and costs of
pipeline, storage and facility construction and expansion and the
ability of the Company to secure adequate product transportation;
the ability for all parties to satisfy all conditions for closing
the acquisition; future commodity prices; currency, exchange and
interest rates; the regulatory framework regarding royalties, taxes
and environmental matters in the jurisdictions in which the Company
operates; and the ability of the Company to successfully market its
oil and natural gas products. Readers are cautioned that the
foregoing list is not exhaustive of all factors and assumptions
which have been used. As a consequence, actual results may differ
materially from those anticipated in the forward-looking
statements. Additional information on these and other factors that
could affect Bellatrix's operations and financial results are
included in reports, including under the heading "Risk Factors" in
the Company's annual information form for the year ended December
31, 2017, on file with Canadian and United States securities
regulatory authorities and may be accessed through the SEDAR
website (www.sedar.com), through the SEC website (www.sec.gov), and
at Bellatrix's website (www.bxe.com). Furthermore, the forward
looking statements contained herein are made as at the date hereof
and Bellatrix does not undertake any obligation to update publicly
or to revise any of the included forward looking statements,
whether as a result of new information, future events or otherwise,
except as may be required by applicable securities laws.
NON-GAAP MEASURES: Throughout this press
release, the Company uses terms that are commonly used in the oil
and natural gas industry, but do not have a standardized meaning
presented by International Financial Reporting Standards ("IFRS")
and therefore may not be comparable to the calculations of similar
measures for other entities. Management believes that the
presentation of these non-GAAP measures provide useful information
to investors and shareholders as the measures provide increased
transparency and the ability to better analyze performance against
prior periods on a comparable basis.
Net operating income is calculated by
subtracting royalties, transportation, and operating expenses from
total revenue. Management believes this measure is a useful
supplemental measure of the amount of total revenue received after
transportation, royalties and operating expenses. Net operating
income multiple is calculated as the purchase price of an
acquisition divided by the net operating income from the related
acquisition. With respect to the assets acquired from Daewoo, the
net operating income multiple is calculated as follows: approximate
purchase price of $9.5 million divided by 2019 forecast net
operating income from such assets of $3.5 million. This non-IFRS
measure is used by management to analyze the metrics of an
acquisition.
These measures have been described and presented
in this news release in order to provide shareholders and potential
investors with additional information regarding the benefits of the
acquisition on Bellatrix's liquidity and its ability to generate
funds to finance its operations.