TSX, NYSE: BXE
CALGARY, Nov. 9, 2017
/PRNewswire/ - Bellatrix Exploration Ltd. ("Bellatrix", "we",
"us", "our" or the "Company") (TSX, NYSE: BXE) announces its
financial and operating results for the three and nine months ended
September 30, 2017. 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 nine months ended September 30, 2017 and 2016. Bellatrix's
unaudited condensed consolidated financial statements and notes,
and the MD&A are available on our website at www.bxe.com, and
are filed on SEDAR at www.sedar.com and on EDGAR at
www.sec.gov/edgar.
THIRD QUARTER 2017
HIGHLIGHTS
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|
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
2017
|
|
2016
|
|
2017
|
2016
|
SELECTED FINANCIAL
RESULTS
|
|
|
|
|
|
|
|
(CDN$000s except
share and per share amounts)
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|
|
|
|
|
|
|
Cash flow from
operating activities
|
23,031
|
|
2,425
|
|
41,785
|
|
20,432
|
|
Per basic share
(1)
|
$0.47
|
|
$0.05
|
|
$0.85
|
|
$0.50
|
|
Per diluted share
(1)
|
$0.47
|
|
$0.05
|
|
$0.85
|
|
$0.50
|
Funds flow from
operations (2)
|
8,300
|
|
10,556
|
|
42,540
|
|
32,479
|
|
Per basic share
(1)
|
$0.17
|
|
$0.23
|
|
$0.86
|
|
$0.80
|
|
Per diluted share
(1)
|
$0.17
|
|
$0.23
|
|
$0.86
|
|
$0.80
|
Net profit
(loss)
|
(22,124)
|
|
(13,907)
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|
(78,310)
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|
(49,753)
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Per basic share
(1)
|
($0.45)
|
|
($0.31)
|
|
($1.59)
|
|
($1.22)
|
|
Per diluted share
(1)
|
($0.45)
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|
($0.31)
|
|
($1.59)
|
|
($1.22)
|
Capital - exploration
and development
|
39,683
|
|
17,235
|
|
94,896
|
|
54,019
|
Capital - corporate
assets
|
443
|
|
4
|
|
1,648
|
|
58
|
Property
acquisitions
|
500
|
|
3
|
|
500
|
|
4
|
Capital expenditures
- cash
|
40,626
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|
17,242
|
|
97,044
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|
54,081
|
Property dispositions
- cash (3)
|
(16,388)
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|
(116,023)
|
|
(48,742)
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|
(193,852)
|
Total net capital
expenditures - cash
|
24,238
|
|
(98,781)
|
|
48,302
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|
(139,771)
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Property acquisitions
- non-cash
|
—
|
|
—
|
|
—
|
|
29,178
|
Other non-cash
capital items
|
(5,817)
|
|
784
|
|
(9,430)
|
|
2,337
|
Total capital
expenditures - net (4)
|
18,421
|
|
(97,997)
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|
38,872
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|
(108,256)
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Credit
Facilities
|
8,279
|
|
119,728
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|
8,279
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|
119,728
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Senior
Notes
|
304,515
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|
316,529
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|
304,515
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|
316,529
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Convertible
Debentures (liability component)
|
38,894
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|
36,950
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|
38,894
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|
36,950
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Adjusted working
capital deficiency (2)
|
48,144
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|
24,858
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|
48,144
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|
24,858
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Total net debt
(2)
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399,832
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|
498,065
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|
399,832
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|
498,065
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Total
assets
|
1,334,362
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|
1,528,077
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|
1,334,362
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|
1,528,077
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Total shareholders'
equity
|
786,827
|
|
829,518
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|
786,827
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|
829,518
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|
|
|
|
|
|
|
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Three months
ended
September 30,
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Nine months
ended
September 30,
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SELECTED OPERATING
RESULTS
|
|
2017
|
|
2016
|
|
2017
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|
2016
|
Total revenue
(4)
|
|
48,153
|
|
56,524
|
|
188,502
|
|
159,967
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Average daily sales
volumes
|
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Crude oil, condensate
and NGLs
|
(bbl/d)
|
9,342
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|
9,652
|
|
9,054
|
|
10,251
|
|
Natural
gas
|
(mcf/d)
|
170,210
|
|
148,539
|
|
166,492
|
|
160,189
|
|
Total oil
equivalent(5)
|
(boe/d)
|
37,710
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|
34,409
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|
36,803
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|
36,949
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Average realized
prices
|
|
|
|
|
|
|
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|
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Crude oil and
condensate
|
($/bbl)
|
55.36
|
|
50.08
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|
60.93
|
|
45.90
|
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NGLs (excluding
condensate)
|
($/bbl)
|
18.79
|
|
10.53
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|
19.19
|
|
11.34
|
|
Crude oil, condensate
and NGLs
|
($/bbl)
|
26.73
|
|
23.87
|
|
29.82
|
|
23.56
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|
Crude oil, condensate
and NGLs (including risk management (6))
|
($/bbl)
|
25.13
|
|
23.56
|
|
29.25
|
|
23.35
|
|
Natural
gas
|
($/mcf)
|
1.54
|
|
2.47
|
|
2.44
|
|
1.97
|
|
Natural gas
(including risk management (6))
|
($/mcf)
|
2.50
|
|
2.74
|
|
2.91
|
|
2.49
|
|
Total oil equivalent
(5)
|
($/boe)
|
13.56
|
|
17.36
|
|
18.35
|
|
15.09
|
|
Total oil equivalent
(including risk management (5)(6))
|
($/boe)
|
17.49
|
|
18.46
|
|
20.33
|
|
17.28
|
|
|
|
|
|
|
|
|
|
Net wells
drilled
|
|
10.2
|
|
2.3
|
|
22.0
|
|
8.0
|
|
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|
|
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Selected Key
Operating Statistics
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Operating netback
(4)(5)
|
($/boe)
|
2.91
|
|
7.09
|
|
6.81
|
|
5.67
|
|
Operating netback
(4)(5) (including risk management
(6))
|
($/boe)
|
6.84
|
|
8.18
|
|
8.78
|
|
7.87
|
|
Transportation
expense(5)
|
($/boe)
|
2.01
|
|
0.86
|
|
1.69
|
|
0.89
|
|
Production
expense(5)
|
($/boe)
|
7.84
|
|
8.69
|
|
8.48
|
|
8.16
|
|
General &
administrative expense(5)
|
($/boe)
|
2.11
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|
1.74
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|
2.05
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|
1.47
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Royalties as a % of
sales (after transportation)
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|
10%
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|
7%
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|
11%
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|
8%
|
COMMON
SHARES
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|
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|
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Common shares
outstanding (1)(7)
|
|
49,378,026
|
|
47,558,250
|
|
49,378,026
|
|
47,558,250
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Weighted average
shares (1)
|
|
49,378,026
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|
45,328,384
|
|
49,343,026
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|
40,841,510
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SHARE TRADING
STATISTICS
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TSX and Other
(7)
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|
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|
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|
|
|
|
(CDN$, except
volumes) based on intra-day trading
|
|
|
|
|
|
|
|
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High
|
|
3.90
|
|
6.90
|
|
6.83
|
|
9.40
|
Low
|
|
2.77
|
|
4.85
|
|
2.77
|
|
4.85
|
Close
|
|
3.56
|
|
5.65
|
|
3.56
|
|
5.65
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Average daily
volume
|
|
171,423
|
|
254,717
|
|
180,064
|
|
224,598
|
NYSE
|
|
|
|
|
|
|
|
|
(US$, except
volumes) based on intra-day trading
|
|
|
|
|
|
|
|
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High
|
|
3.10
|
|
5.55
|
|
5.15
|
|
7.40
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Low
|
|
2.23
|
|
3.77
|
|
2.23
|
|
3.77
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Close
|
|
2.84
|
|
4.25
|
|
2.84
|
|
4.25
|
Average daily
volume
|
|
80,673
|
|
122,963
|
|
87,531
|
|
220,849
|
(1)
Effective July 1, 2017, the Company consolidated its common
shares on the basis of 1 new common share for every 5 old common
shares outstanding. All figures in the condensed consolidated
financial statements have been adjusted to reflect the 5:1
consolidation. The number of outstanding share options, deferred
share units, restricted awards and performance awards have also
been adjusted proportionately. The corresponding exercise prices
have increased by the same ratio. The conversion price and ratio on
the Convertible Debentures have also been adjusted
proportionately.
|
|
Basic weighted
average shares outstanding for the three and nine months ended
September 30, 2017 were 49,378,026 (2016: 45,328,384) and
49,343,026 (2016: 40,841,510), 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 nine months ended September 30, 2017, a total of nil
(2016: nil) common shares were added to the denominator as a
consequence of applying the treasury stock method to the Company's
outstanding share options, and a total of nil (2016: nil) common
shares issuable on conversion of the Convertible Debentures (as
defined below) were added to the denominator for the three and nine
month periods resulting in diluted weighted average common shares
outstanding of 49,378,026 (2016: 45,328,384) and 49,343,026 (2016:
40,841,510), respectively.
|
|
(2) The terms "funds flow from
operations", "funds flow from operations per share", "total net
debt", and "adjusted working capital deficiency", do not have
standard meanings under generally accepted accounting principles
("GAAP"). Refer to "Capital performance measures" disclosed at the
end of this Press Release.
|
|
(3) Property dispositions - cash
does not include transaction costs.
|
|
(4) The terms "operating
netbacks", "total capital expenditures - net", and "total revenue"
do not have standard meanings under GAAP. Refer to "Non-GAAP
measures" disclosed at the end of this Press
Release.
|
|
(5)
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.
|
|
(6)
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.
|
|
(7) Fully diluted common shares
outstanding for the three and nine months ended September 30,
2017 were 57,210,780 (2016: 56,336,544). This includes 1,659,914
(2016: 2,605,454) of share options outstanding and 6,172,840 (2016:
6,172,840) of shares issuable on conversion of the Convertible
Debentures. Shares issuable on conversion of the Convertible
Debentures are calculated by dividing the $50 million principal
amount of the Convertible Debentures by the conversion price of
$8.10 per share.
|
|
(8) TSX and Other includes the
trading statistics for the Toronto Stock Exchange ("TSX") and other
Canadian trading markets.
|
PRESIDENT'S MESSAGE
Strong third quarter operational results once again highlight
the strength of Bellatrix's three foundational pillars that anchor
our sustainable long term value creation strategy: high quality
assets and acreage, infrastructure ownership and control, and
takeaway capacity and market egress. Our assets and people
continue to perform, and today we are pleased to announce the third
consecutive quarter of improved corporate guidance for 2017.
Third quarter 2017 performance included the following
operational and financial achievements:
- Production volumes in the third quarter of 2017 averaged 37,710
boe/d (75% natural gas weighted), representing the third
consecutive quarter that volumes have exceeded our full year 2017
average volume guidance.
- Third quarter production expenses averaged $7.84/boe, representing the third consecutive
quarter of reduced costs. Third quarter expenses were reduced by
$0.46/boe or 6% compared with second
quarter 2017 expenses and have been reduced by $2.73/boe or 26% compared with fourth quarter
2016 levels.
- Outstanding borrowings under our Credit Facilities at
September 30, 2017 were $8.3 million, providing the Company
with approximately $111.7 million of
available liquidity (before deducting outstanding letters of
credit). Other than amounts outstanding under our Credit
Facilities, Bellatrix has no debt maturities until 2020 and
2021.
- Average well performance from the Company's 2017 Spirit River
well program has outperformed type curve expectations by over 50%
on a IP150 basis.
THE SPIRIT RIVER IS ONE OF
NORTH AMERICA'S TOP NATURAL GAS
PLAYS
The Spirit River liquids rich natural gas play represents one of
North America's lowest supply cost
natural gas plays and delivers strong rates of return at current
natural gas prices. The Spirit River is relatively shallow compared
to other top natural gas plays, resulting in lower drilling
costs. The Spirit River formation is a conventional sandstone
which requires less intensive and expensive fracture stimulation
treatments. The formation within Bellatrix's core West
Central area produces sweet liquids rich natural gas and no water
which contributes to low processing costs and enhanced
profitability. In 2016, the Spirit River accounted for
approximately half of all western Canada total natural gas volumes from new
wells drilled during the year. Spirit
River well results continue to rank among the best in
Alberta on a consistent
basis. According to industry data, of the top 20 natural gas
wells in Alberta, ranked by
initial production over the first 90 days ("IP90") volumes over the
past year (September 2016 to
August 2017), 18 wells were produced
from the Spirit River, with one well from each of the Montney and Cardium formations. The Spirit
River remains a quiet giant given its importance to overall Western
Canadian Sedimentary Basin volume growth and its low supply
cost.
Rate of return expectations for the Spirit River rank among the
highest within our portfolio of investment opportunities, thereby
attracting the majority of anticipated capital investment in
2017. Bellatrix is a premier operator within the Spirit River
play, consistently delivering industry leading well productivity
results. Since 2009 Bellatrix has drilled over 120 Spirit River
horizontal wells with zero dry holes. Bellatrix's well
results consistently rank as some of the best in Alberta; we achieved two of the top 15 highest
IP90 well productivity results over the past year. Bellatrix
operates one of the premier acreage positions in the Spirit River
play within the greater Ferrier, Alder
Flats and Willesden Green areas of Alberta. At the
current pace of development, Bellatrix maintains an inventory of
over 15 years of identified development drilling opportunities.
INFRASTRUCTURE OWNERSHIP AND AMPLE MARKET EGRESS PROVIDE LONG
TERM COMPETITIVE ADVANTAGES
Strong operational results achieved over the first nine months
of 2017 continue to demonstrate the strategic advantage Bellatrix
has built behind its infrastructure and takeaway capacity.
Infrastructure ownership, operatorship and control ensure the
operational flexibility and the reliability to profitably process
our production volumes. The investment in key strategic
infrastructure and facilities provide the processing capacity and
capability to grow net Company production above 60,000 boe/d, with
minimal future facility related capital.
Bellatrix maintains several long term firm transportation ("FT")
agreements, ensuring market egress for current and forecast
production, representing approximately 120% of current gross
operated natural gas volumes at multiple receipt points on the Nova
Gas Transmission Ltd. (the "NGTL") system. The NGTL system
has experienced, and is expected to experience further curtailments
of both interruptible and firm service capacity as the operator
continues work through 2017 to expand capacity along the
system. Having secured excess FT relative to current
production levels, these recent system wide curtailments have had
minimal impact on our ability to deliver volumes in the third
quarter.
CONTINUED OPERATIONAL OUTPERFORMANCE ACHIEVED IN THE THIRD
QUARTER
Third quarter production averaged 37,710 boe/d (75% natural gas
weighted), once again outperforming our 2017 average annual
guidance estimate of 36,000 boe/d. Results from the 2017 Spirit
River drilling program continue to demonstrate the strength of
Bellatrix's asset base and people. Beginning early in 2017,
the Company has undergone significant management changes including
the appointment of a new President & CEO, the appointment of a
new CFO, and other key managerial changes. The new team has
brought fresh energy and ideas, and as a result, Bellatrix
continues to optimize well performance and mitigate service cost
pressure, thereby delivering strong operational results year to
date. Drilling efficiency gains have continued in 2017, averaging
approximately 13 days from spud to rig release for the Spirit River
program. An enhanced focus on pad drilling to reduce surface
disturbance (reduced need for pipeline infrastructure and improved
efficiency for operating wells), increased monobore style drilling
and reduced nitrogen use are examples of further cost containment
efforts. A number of incremental improvements have delivered
productivity improvements while maintaining average drill,
complete, equip and tie-in costs of $3.8
million for Spirit River
wells year to date.
Third quarter production expenses averaged $7.84/boe, representing the third consecutive
quarter of reduced costs. Third quarter expenses were reduced
by $0.46/boe or 6% compared with
second quarter expenses and are down $2.73/boe representing a reduction of 26% from
fourth quarter 2016 levels. Production expenses over the
first nine months of 2017 have averaged $8.48/boe, below our previously set full year
guidance of $8.75/boe. Production
expenditures are expected to decline further as a result of
continued cost suppression activity and strong production volumes.
Therefore, we are reducing our full year 2017 production
expenditure guidance target to $8.50/boe.
Bellatrix invested $39.7 million
in exploration and development initiatives during the third
quarter. We participated in 16 gross (10.2 net) wells including 13
gross (8.4 net) Spirit River
liquids rich natural gas wells, 1 gross (1.0 net) Cardium well, and
2 gross (0.8 net) non-operated Ellerslie wells.
During the three months ended September
30, 2017, Bellatrix completed the sale of certain non-core
oil and gas properties in the West Pembina area of Alberta for cash consideration of $16.0 million, effective July 1, 2017. The properties included
estimated fourth quarter 2017 production of approximately 570
boe/d, with limited planned capital reinvestment opportunity
relative to Bellatrix's core properties. Proceeds from the
sale were used to reduce amounts outstanding under our $120 million syndicated revolving credit
facilities (the "Credit Facilities") to $8.3
million as at September 30,
2017, providing the Company with approximately
$111.7 million of available liquidity
(before deducting outstanding letters of credit) under the Credit
Facilities. Other than approximately $8.3
million outstanding under our Credit Facilities, we have no
debt maturities until 2020 and 2021.
INCREASED HEDGING IN 2017 WITH STRONG RISK MANAGEMENT
PROTECTION IN 2018
During the third quarter, we also bolstered our risk management
protection for the balance of 2017 in order to further reduce
commodity price volatility on our business. For the fourth
quarter of 2017, we increased our hedged volumes by 18% to 121.1
MMcf/d compared with hedged volumes as reported on August 10, 2017. This increased level of
risk management protection represents approximately 74% of forecast
gross natural gas volumes in the quarter at an average fixed price
of approximately $3.13/mcf (based on
the mid-point of 2017 average gross production guidance of 36,000
boe/d; 76% natural gas weighted). For 2018, we have a total of 66.1
MMcf/d of 2018 natural gas volumes hedged at an average fixed price
of approximately $3.06/mcf; this
represents approximately 40% of volumes compared to the 2017 full
year average production guidance. Subsequent to the third quarter
we hedged 500 bbl/d of crude oil in calendar 2018 at a fixed price
of $69.28/bbl. Our hedging program is
part of our overall risk management strategy focused on providing
reduced commodity price volatility and greater assurance over
future revenue and cash flows, which help drive the capital and
reinvestment decisions within our business.
As at November 8, 2017, Bellatrix
was party to a series of commodity price risk management contracts
for 2017 and 2018 as summarized below:
|
|
|
|
|
Product
|
Financial
Contract
|
Period
|
Volume
|
Average Price
(1)
|
Natural
gas
|
Fixed price
swap
|
October 1, 2017 to
December 31, 2017
|
121.1
MMcf/d
|
$3.13/mcf
|
Natural
gas
|
Fixed price
swap
|
January 1, 2018 to
December 31, 2018
|
66.1
MMcf/d
|
$3.06/mcf
|
Propane
|
Fixed price
differential
|
October 1, 2017 to
December 31, 2017
|
2,000
bbl/d
|
51% of NYMEX
WTI
|
Propane
|
Fixed price
differential
|
January 1, 2018 to
December 31, 2018
|
1,000
bbl/d
|
47% of NYMEX
WTI
|
Crude oil
|
Fixed price
swap
|
January 1, 2018 to
December 31, 2018
|
500 bbl/d
|
$69.28/bbl
|
(1)
Prices for natural gas fixed price swap contracts assume a
conversion of $/GJ to $/mcf is based on an average corporate heat
content rate of 40.3Mj/m3.
|
ALDER FLATS PHASE 2
EXPANSION PROJECT REMAINS ON TIME AND ON BUDGET
The Phase 2 expansion project of the Alder Flats Plant remains
on time and on budget. The project represents the last stage
of our multi-year infrastructure build out and upon completion will
more than double gross throughput capacity at the plant to 230
MMcf/d (from 110 MMcf/d currently). Site activity continues
to advance with major equipment being installed this fall with
completion anticipated in November. Major mechanical
construction is scheduled for completion by mid-December.
Electrical and instrumentation installation activity began in
August with completion expected in early 2018.
Pre-commissioning activity remains on track for the first quarter
of 2018 with full commissioning of the Phase 2 expansion early in
the second quarter of 2018.
Completion of Phase 2 of the Alder Flats Plant, which will add
an incremental 30 MMcf/d ownership capacity net to Bellatrix's 25%
working interest, and forecasted 2018 production growth are
expected to deliver a favorable step change reduction in operating
costs down by approximately $1.00/boe
relative to our new 2017 average production expense guidance of
$8.50/boe announced today.
Capital costs remaining for the Phase 2 expansion, net to
Bellatrix's 25% working interest, are estimated at approximately
$4 million in the fourth quarter of
2017 and approximately $3 million in
calendar 2018 (excluding received partner prepayment).
Completion of Phase 2 is anticipated to drive improved revenue
generation through additional higher margin natural gas liquids
("NGL") extraction, resulting in an improvement in our average
corporate liquid weighting to approximately 26% in 2018 compared
with 24% in 2017, which we expect to, in turn drive improved
corporate profit margins and cash flow. Management expects
that completion of Phase 2 of the Alder Flats Plant will provide
the facilities and processing capacity to grow net production
volumes beyond 60,000 boe/d, with minimal future facility related
capital.
OPERATIONAL AND FINANCIAL HIGHLIGHTS
- Production volumes in the third quarter of 2017 averaged 37,710
boe/d (75% natural gas weighted), representing the third
consecutive quarter that volumes have exceeded the Company's full
year 2017 average volume guidance. Production levels in the third
quarter 2017 remained consistent with second quarter 2017 levels,
reflecting strong momentum achieved from the 2017 capital
program.
- Funds flow from operations generated in the three months ended
September 30, 2017 was $8.3 million ($0.17
per basic and diluted share), a decrease of 21% from $10.6 million ($0.23 per basic share and diluted share) in the
comparable period of 2016, largely reflecting a 38% decline in
realized natural gas prices (before risk management).
- Exploration and development capital expenditures were
$39.7 million in the third quarter of
2017 and $94.9 million for the nine
months ended September 2017, in line
with expectations. Bellatrix maintains an unchanged full year
capital expenditure guidance forecast of $120 million.
- The Company drilled and/or participated in 16 (10.2 net) wells
during the third quarter of 2017. Facilities related capital
investment was focused primarily on the Phase 2 expansion project
of the Alder Flats Plant.
- Bellatrix further reduced the borrowings under its Credit
Facilities at September 30, 2017 to
$8.3 million, down 37% compared with
June 30, 2017 levels. Total net debt
was $399.8 million at September 30, 2017, as Bellatrix applied
$16.0 million in proceeds from
non-core asset dispositions during the quarter towards further
reducing the borrowings under its Credit Facilities.
- At September 30, 2017, Bellatrix
had approximately $111.7 million of
undrawn capacity (approximately 93% undrawn) on its $120 million Credit Facilities excluding
outstanding letters of credit of $12.9
million that reduce the amount otherwise available to be
drawn on the Credit Facilities.
- For the quarter ended September 30,
2017, Bellatrix's Senior Debt to EBITDA (as defined below)
ratio was 1.27 times, well below the financial covenant of 3.0
times as permitted by the agreement governing the Credit
Facilities.
- Total revenue was $48.2 million
for the third quarter 2017, compared to $56.5 million realized in the third quarter 2016,
primarily attributable to a 22% decrease in corporate average
realized prices over the comparative period.
- Our corporate royalty rate in the three months ended
September 30, 2017 averaged 10% of
sales (after transportation), consistent with 10% averaged in the
second quarter of 2017.
- Production expenses in the third quarter of 2017 averaged
$7.84/boe and averaged $8.48/boe in the first nine months of
2017. Given continued cost suppression activity and
strong production volumes, Bellatrix has reduced its full year
2017 production expenditure guidance target to $8.50/boe from $8.75/boe.
- Our corporate operating netback (including risk management)
realized for the three months ended September 30, 2017 was $6.84/boe, down compared with $8.18/boe realized in the third quarter 2016,
reflecting lower realized natural gas prices mitigated by higher
production volumes and lower production expenditures over the
comparable periods.
- Net general and administrative ("G&A") expenses (after
capitalized costs and recoveries) for the three months ended
September 30, 2017 were $7.3 million ($2.11/boe), consistent with the $7.3 million ($2.10/boe) in the second quarter 2017.
- We recorded a net loss for the three months ended September 30, 2017 of $22.1 million compared to a net loss of
$13.9 million for the three months
ended September 30, 2016. The
decrease in net profit period over period is due to an increase in
the loss on property dispositions, partially offset by an increase
in the realized gain on commodity contracts.
- As at September 30, 2017, we had
approximately 153,519 net undeveloped acres of land principally in
Alberta.
- At September 30, 2017, we had
approximately $1.34 billion in tax
pools available for deduction against future income.
OUTLOOK
The combination of our high quality asset base, infrastructure
ownership and control, and ample market egress supported another
strong quarter of operational results. We currently have one rig
active and plan to complete our full year capital investment
program over the next month. Our exit rate guidance of 36,500
boe/d remains unchanged and provides a strong base for 2018.
UPDATED 2017 CORPORATE GUIDANCE
Strong well deliverability and operational performance was once
again achieved through the third quarter 2017. As a result of
continued strong Spirit River
results, we are updating our full year 2017 corporate guidance to
reduce our full year production expenditure guidance to
$8.50/boe. While our total net
capital expenditure budget remains unchanged at $120 million, the non-core asset sale completed
in September allows us to reduce our total net capital expenditures
after property dispositions to $69.5
million. Average daily production and product mix guidance
also remain unchanged. Bellatrix is committed to achieving
sustainable long term growth for shareholders, including delivery
of our 2017 capital program providing over 15% forecast production
growth. We plan to release our 2018 capital budget and related
guidance to the market in early January
2018, with a continued emphasis on profitable and
sustainable growth, while prudently managing our capital resources
and liquidity.
Bellatrix's full-year 2017 guidance estimates and a review of
2017 year-to-date actual results are outlined in the following
table.
|
|
|
|
|
|
New 2017
Annual
Guidance
(November 9,
2017)
|
Previous 2017
Annual Guidance
(August 10,
2017)
|
Year-to-date
2017 Results
|
Year-to-date %
Variance from
Previous
Guidance
|
Production
(boe/d)
|
|
|
|
|
|
2017 Average daily
production
|
36,000
|
36,000
|
36,803
|
2%
|
|
2017 Exit
production
|
36,500
|
36,500
|
n/a
|
|
Average product
mix
|
|
|
|
|
|
Natural gas
(%)
|
76
|
76
|
75
|
(1)%
|
|
Crude oil, condensate
and NGLs (%)
|
24
|
24
|
25
|
1%
|
Capital expenditures
($000's)
|
|
|
|
|
|
Total net capital
expenditures(1)
|
120,000
|
120,000
|
97,044
|
n/a
|
|
Property disposition
- cash(2)
|
(50,500)
|
(34,500)
|
(48,742)
|
n/a
|
Total net capital
expenditures after property disposition - cash
|
69,500
|
85,500
|
48,302
|
n/a
|
Production expense
($/boe)
|
8.50
|
8.75
|
8.48
|
(3)%
|
(1)
Capital spending includes exploration and development capital
projects and corporate assets, and excludes property acquisitions,
property dispositions, and facilities transferred.
|
(2)
Property disposition - cash guidance refers to the Strachan and
West Pembina asset sales and does not include transaction costs or
adjustments. Year-to-date results
include adjustments.
|
Bellatrix held its annual analyst update presentation on
September 6, 2017. The
presentation provided an overview and discussion of Bellatrix's
asset base, key operational areas, and corporate strategy. A
copy of the presentation is available on our website at
www.bxe.com. I invite all stakeholders to review the presentation
as we continue to provide enhanced transparency of our
business.
Bellatrix has delivered consistent outperformance including
strong growth in production volumes over the first nine months of
2017, while meaningfully reducing operating costs with an acute
focus on safe, reliable and compliant operations. Bellatrix
maintains a top-decile Liability Management Rating of 10.50 with
the Alberta Energy Regulator compared with an industry average
rating of 4.58 as at October 7,
2017.
A strong liquidity position remains a priority for management
and we have reduced outstanding bank debt to its lowest level since
early 2010. Our three pillars of strength include a high
quality asset base in one of the most profitable natural gas plays
in North America, underpinned by
strategic infrastructure ownership and control, and ample takeaway
capacity, which in combination provide the foundation for long term
profitable growth. Additionally, the Company's strong focus
on risk mitigation through an active hedging program provides
support against commodity price volatility. I want to personally
thank our employees for their substantial efforts that drive our
operational and financial achievements. As always I wish to
personally thank our shareholders and stakeholders for their long
term support, we remain focused on delivering our long term
strategy and enhancing shareholder value.
("Brent A. Eshleman")
Brent A. Eshleman, P.Eng.
President and CEO
November 9, 2017
OPERATIONAL REVIEW
Sales
Volumes
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Crude oil and
condensate (bbl/d)
|
2,029
|
|
3,256
|
|
2,306
|
|
3,624
|
|
NGLs (excluding
condensate) (bbl/d)
|
7,313
|
|
6,396
|
|
6,748
|
|
6,627
|
Total crude oil,
condensate and NGLs (bbl/d)
|
9,342
|
|
9,652
|
|
9,054
|
|
10,251
|
|
Natural gas
(mcf/d)
|
170,210
|
|
148,539
|
|
166,492
|
|
160,189
|
Total sales volumes
(6:1 conversion) (boe/d)
|
37,710
|
|
34,409
|
|
36,803
|
|
36,949
|
Sales volumes averaged 37,710 boe/d for the three months ended
September 30, 2017 an increase of 10%
compared to 34,409 boe/d in the third quarter of 2016. Third
quarter average production of 37,710 boe/d (75% natural gas
weighted) surpassed the Company's 2017 average annual guidance
(midpoint) estimate of 36,000 boe/d. Production volumes of 37,710
boe/d remained consistent with the previous quarter of 37,916
boe/d, and represented 18% growth compared with average fourth
quarter 2016 production volumes. Total sales volumes between the
three months ended September 30, 2017
and September 30, 2016 increased as a result of production
volumes added through strong results from development drilling in
the first nine months of 2017, partially offset by natural
production declines and non-core dispositions completed in the
fourth quarter of 2016 and in 2017. Sales volumes for the nine
months ended September 30, 2017
remained consistent at 36,803 boe/d compared to 36,949 boe/d in the
nine months ended September 30,
2016.
Bellatrix maintains several long term FT agreements, ensuring
market egress for current and forecast production, representing
approximately 120% of current gross operated natural gas volumes at
multiple receipt points on the NGTL system. The NGTL system
has experienced, and is expected to experience further curtailments
of both interruptible and firm service capacity as the operator
continues work through 2017 to expand capacity along the system.
Having secured excess FT relative to our current production levels,
these recent system wide curtailments have had minimal impact on
our ability to deliver volumes in the third quarter of 2017.
Drilling Activity
- 2017
|
|
Three months
ended
September 30, 2017
|
Nine months
ended
September 30, 2017
|
|
Gross
|
Net
|
Success
Rate
|
Gross
|
Net
|
Success
Rate
|
Spirit
River
|
13
|
8.4
|
100%
|
24
|
17.4
|
100%
|
Ellerslie
|
2
|
0.8
|
100%
|
4
|
1.6
|
100%
|
Cardium
|
1
|
1.0
|
100%
|
3
|
3.0
|
100%
|
Total
|
16
|
10.2
|
100%
|
31
|
22.0
|
100%
|
|
|
Drilling Activity
- 2016
|
|
Three months
ended
September 30, 2016
|
Nine months
ended
September 30, 2016
|
|
Gross
|
Net
|
Success
Rate
|
Gross
|
Net
|
Success
Rate
|
Spirit
River
|
4
|
2.3
|
100%
|
14
|
8.0
|
100%
|
Total
|
4
|
2.3
|
100%
|
14
|
8.0
|
100%
|
During the third quarter of 2017, Bellatrix drilled and/or
participated in 13 gross (8.4 net) Spirit
River liquids rich gas wells, 1 gross (1.0 net) Cardium
well, and 2 gross (0.8 net) non-operated Ellerslie liquids rich natural gas wells. The
Company continues to focus capital investment in its low cost
Spirit River natural gas play,
which continues to deliver strong results at current natural gas
and liquids prices.
Capital Expenditures
During the three months ended September
30, 2017, Bellatrix invested $39.7
million in exploration and development projects, compared to
$17.2 million in the same period in
2016.
Capital
Expenditures
|
|
Three months
ended
September 30,
|
Nine months
ended
September 30,
|
($000s)
|
2017
|
2016
|
2017
|
2016
|
Lease acquisitions
and retention
|
690
|
842
|
3,320
|
1,867
|
Drilling and
completion costs
|
33,317
|
12,420
|
80,533
|
40,041
|
Facilities and
equipment
|
5,676
|
3,973
|
11,043
|
12,111
|
|
Capital - exploration
and development (1)
|
39,683
|
17,235
|
94,896
|
54,019
|
Facilities
transferred
|
—
|
—
|
—
|
—
|
Capital - corporate
assets(2)
|
443
|
4
|
1,648
|
58
|
Property
acquisitions
|
500
|
3
|
500
|
4
|
|
Total capital
expenditures - cash
|
40,626
|
17,242
|
97,044
|
54,081
|
Property dispositions
- cash (3)
|
(16,388)
|
(116,023)
|
(48,742)
|
(193,852)
|
|
Total net capital
expenditures - cash
|
24,238
|
(98,781)
|
48,302
|
(139,771)
|
Property acquisitions
- non-cash
|
—
|
—
|
—
|
29,178
|
Other - non-cash
capital (4)
|
(5,817)
|
784
|
(9,430)
|
2,337
|
Total capital
expenditures - net (5)
|
18,421
|
(97,997)
|
38,872
|
(108,256)
|
(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)
Property dispositions - cash does not include transaction
costs.
|
(4)
Other includes non-cash capital adjustments for the current
period's decommissioning liabilities and share based
compensation.
|
(5)
Refer to "Non-GAAP measures" for the term "total capital
expenditures - net".
|
In the third quarter of 2017, capital spending on exploration
and development activities of $39.7
million was focused primarily on drilling and completing 13
gross (8.4 net) Spirit River
liquids rich gas wells, 1 gross (1.0 net) Cardium well, and 2 gross
(0.8 net) non-operated Ellerslie
liquids rich natural gas wells and the construction of the Phase 2
expansion project of the Alder Flats Plant.
The Alder Flats Plant Phase 2 expansion project remains on time
and on budget. Pre-commissioning activity remains on track for the
first quarter of 2018 with full commissioning of the Phase 2
expansion early in the second quarter of 2018. Capital costs
remaining for the Phase 2 expansion, net to Bellatrix's 25% working
interest, are estimated at approximately $4
million in the fourth quarter of 2017 and approximately
$3 million in calendar 2018
(excluding received partner prepayment).
Undeveloped Land
At September 30, 2017, Bellatrix
had approximately 153,519 undeveloped acres of land, principally in
Alberta.
FINANCIAL REVIEW
Cash Flow from
Operating Activities, Funds Flow from Operations, and Net
Loss
|
|
Three months
ended
September 30,
|
Nine months
ended
September 30,
|
($000s, except per
share amounts)
|
2017
|
2016
|
2017
|
2016
|
Cash flow from
operating activities
|
23,031
|
2,425
|
41,785
|
20,432
|
|
Basic
($/share)
|
0.47
|
0.05
|
0.85
|
0.50
|
|
Diluted
($/share)
|
0.47
|
0.05
|
0.85
|
0.50
|
Funds flow from
operations
|
8,300
|
10,556
|
42,540
|
32,479
|
|
Basic
($/share)
|
0.17
|
0.23
|
0.86
|
0.80
|
|
Diluted
($/share)
|
0.17
|
0.23
|
0.86
|
0.80
|
Net loss
|
(22,124)
|
(13,907)
|
(78,310)
|
(49,753)
|
|
Basic
($/share)
|
(0.45)
|
(0.31)
|
(1.59)
|
(1.22)
|
|
Diluted
($/share)
|
(0.45)
|
(0.31)
|
(1.59)
|
(1.22)
|
Management believes that, in addition to cash flow from
operating activities, funds flow from operations is a useful
supplemental measure as it demonstrates the Company's ability to
generate the cash necessary to fund future capital investments and
to repay debt. Funds flow from operations is calculated as cash
flow from operating activities, excluding decommissioning costs
incurred and changes in non-cash working capital incurred.
Bellatrix's cash flow from operating activities for the three
months ended September 30, 2017
increased to $23.0 million
($0.47 per basic share and diluted
share) from $2.4 million
($0.05 per basic share and diluted
share) generated in the third quarter of 2016. The increase in cash
flow from operating activities between the third quarter of 2016
and 2017 was mainly attributable to an increase in realized gain on
commodity contracts and change in non-cash working capital.
Bellatrix's cash flow from operating activities for the nine months
ended September 30, 2017 increased to
$41.8 million ($0.85 per basic share and diluted share) from
$20.4 million ($0.50 per basic share and diluted share)
generated in the first nine months of 2016.
Bellatrix generated funds flow from operations of $8.3 million ($0.17
per basic share and diluted share) in the third quarter of 2017, a
decrease of 21% from $10.6 million
($0.23 per basic share and diluted
share) generated in the comparative 2016 period. The decrease in
funds flow from operations mainly driven by a 38% decrease in
realized natural gas prices. Bellatrix generated funds flow from
operations of $42.5 million
($0.86 per basic and diluted share)
in the first nine months of 2017, an increase of 31% from
$32.5 million ($0.80 per basic share and diluted share)
generated in the comparative 2016 period.
For the three months ended September 30,
2017, Bellatrix recognized a net loss of $22.1 million ($0.45 per basic and diluted share), compared to a
net loss of $13.9 million
($0.31 per basic and diluted share)
in the third quarter of 2016. The increase in net loss recorded in
the third quarter of 2017 compared to the same period in 2016 was
primarily the result of an increase in the loss on property
dispositions and offset partially by an increase in the realized
gain on commodity contracts.
In the nine months ended September 30,
2017, Bellatrix recognized a net loss of $78.3 million ($1.59 per basic and diluted share), compared to a
net loss of $49.8 million
($1.22 per basic and diluted share)
in the first nine months of 2016. The increase in net loss recorded
in the first nine months of 2017 compared to the same period in
2016 was primarily the result of an increase in the loss on
property dispositions and the deferred tax expense, offset by an
increase in the operating netbacks as a result of increased
commodity prices, an increase in the unrealized gain on commodity
contracts and a decrease in depletion expense.
Operating Netback
- Corporate
|
|
Three months
ended
September 30,
|
Nine months
ended
September 30,
|
($/boe)
|
2017
|
2016
|
2017
|
2016
|
Total Revenue
(1)
|
13.88
|
17.86
|
18.76
|
15.80
|
Production
|
(7.84)
|
(8.69)
|
(8.48)
|
(8.16)
|
Transportation
|
(2.01)
|
(0.86)
|
(1.69)
|
(0.89)
|
Royalties
|
(1.12)
|
(1.22)
|
(1.78)
|
(1.08)
|
Operating
netback
|
2.91
|
7.09
|
6.81
|
5.67
|
Risk management gain
(loss)
|
3.93
|
1.09
|
1.97
|
2.20
|
Operating netback
after risk management
|
6.84
|
8.18
|
8.78
|
7.87
|
(1)
Total revenue includes petroleum and natural gas sales and other
income.
|
During the three months ended September
30, 2017, the Company's corporate operating netback before
commodity risk management contracts decreased by 59% to
$2.91/boe compared to $7.09/boe in the third quarter of 2016. The
reduced netback realized in the third quarter of 2017 was primarily
the result of the 38% decrease in average realized natural gas
prices and higher transportation expenses, offset by reduced
production expenses and royalty expenses. After including commodity
risk management contracts, the corporate operating netback for the
three months ended September 30, 2017
was $6.84/boe compared to
$8.18/boe in the third quarter of
2016. Per unit metrics including risk management include realized
gains or losses on commodity contracts and exclude unrealized gains
or losses on commodity contracts.
For the nine months ended September 30,
2017, the Company's corporate operating netback before
commodity risk management contracts increased by 20% to
$6.81/boe compared to $5.67/boe in the same period of 2016. The
improved netback realized in the first nine months of 2017 was
primarily the result of increased average realized commodity
prices, offset by higher production, transportation and royalty
expenses. After including commodity risk management contracts, the
corporate operating netback for the nine months ended September 30, 2017 was $8.78/boe compared to $7.87/boe in the comparative 2016 period.
Total revenue of $48.2 million for
the three months ended September 30,
2017 decreased by 15% compared to $56.5 million realized in the third quarter of
2016. During the first nine months of 2017, Bellatrix's total
revenue increased by 18% to $188.5
million compared to $160.0
million in the same period in 2016. The higher total revenue
realized in the first nine months of 2017 compared to 2016 was
primarily attributable to the 22% improvement in realized average
commodity prices.
Production expenses for the three and nine months ended
September 30, 2017 totaled $27.2
million ($7.84/boe) and
$85.2 million ($8.48/boe) respectively, compared to $27.5 million ($8.69/boe) and $82.6
million ($8.16/boe) in the
comparative 2016 periods. Given continued cost suppression activity
and strong production volumes, Bellatrix has reduced its full year
2017 production expenditure guidance target to $8.50/boe from $8.75/boe.
Royalties as a percentage of petroleum and natural gas sales
revenue (after transportation costs), were 10% in the three months
ended September 30, 2017, compared to
7% in the comparative 2016 period. For the nine months ended
September 30, 2017, royalties as a
percentage of petroleum and natural gas sales revenue (after
transportation costs) in the first nine months of 2017 were 11%,
compared with 8% in the same period in 2016. Higher average
corporate royalty rates in the first nine months of 2017 reflect
the impact from higher commodity prices, as well as decreased gas
cost allowance credits resulting from the infrastructure and
facilities dispositions in 2016.
Commodity Prices
Average Commodity
Prices
|
|
Three months
ended
September 30,
|
Nine months
ended
September 30,
|
|
2017
|
2016
|
%
Change
|
2017
|
2016
|
%
Change
|
|
|
|
|
|
|
|
Exchange rate
(CDN$/US$1.00)
|
1.2529
|
1.3041
|
(4)
|
1.3055
|
1.3206
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil:
|
|
|
|
|
|
|
|
WTI
(US$/bbl)
|
48.20
|
44.94
|
7
|
49.47
|
41.33
|
20
|
|
Canadian Light crude
blend ($/bbl)
|
57.15
|
54.19
|
5
|
60.57
|
50.14
|
21
|
Bellatrix's average
realized prices ($/bbl)
|
|
|
|
|
|
|
|
Crude oil and
condensate
|
55.36
|
50.08
|
11
|
60.93
|
45.90
|
33
|
|
NGLs (excluding
condensate)
|
18.79
|
10.53
|
78
|
19.19
|
11.34
|
69
|
|
Crude oil, condensate
and NGLs
|
26.73
|
23.87
|
12
|
29.82
|
23.56
|
27
|
|
Crude oil, condensate
and NGLs (including risk
management)(1)
|
25.13
|
23.56
|
7
|
29.25
|
23.35
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
gas:
|
|
|
|
|
|
|
|
NYMEX
(US$/MMBtu)
|
3.00
|
2.81
|
7
|
3.17
|
2.29
|
38
|
|
AECO daily index
($/mcf)
|
1.45
|
2.32
|
(38)
|
2.31
|
1.85
|
25
|
|
AECO monthly index
($/mcf)
|
2.04
|
2.20
|
(7)
|
2.58
|
1.85
|
39
|
Bellatrix's average
realized prices ($/mcf)
|
|
|
|
|
|
|
|
Natural
gas
|
1.54
|
2.47
|
(38)
|
2.44
|
1.97
|
24
|
|
Natural gas
(including risk management) (1)
|
2.50
|
2.74
|
(9)
|
2.91
|
2.49
|
17
|
(1) Per
unit metrics including risk management include realized gains or
losses on commodity contracts and exclude unrealized gains or
losses on commodity contracts.
|
In the third quarter of 2017, Bellatrix realized an average
price of $55.36/bbl before commodity
price risk management contracts for crude oil and condensate, an
increase of 11% from the average price of $50.08/bbl received in the third quarter of 2016,
partially due to a decrease in the condensate differential period
over period, resulting in higher netbacks. By comparison, Canadian
Light crude blend price increased by 5% and the average WTI crude
oil benchmark price increased by 7% between the third quarters of
2017 and 2016. The WTI/Canadian Light sweet differential has
remained in a historically tight range, averaging -US$2.89/bbl for the quarter.
Bellatrix's average realized price for NGLs (excluding
condensate) increased by 78% to $18.79/bbl during the third quarter of 2017,
compared to $10.53/bbl received in
the comparable 2016 period. Propane inventories in the United States remain in the lower half of
the five year average, closing the quarter 25% below levels at the
end of the third quarter of 2016. Increased exports and higher
domestic demand allowed inventories to move up from the five year
low range but still remain very low headed into the heating season.
Butane prices historically correlate closely with WTI oil prices
but traded much higher as a percentage of WTI during the third
quarter of 2017. Both propane and butane realized prices increased
materially during the third quarter of 2017.
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 AECO daily index.
During the third quarter of 2017, the AECO daily reference price
decreased 38% and the AECO monthly reference price decreased 7%
compared to the third quarter of 2016. The AECO market was severely
impacted in the third quarter of 2017 with a change in the
methodology used by a third party pipeline company to regulate the
flow of available gas out of the Alberta market. Reductions in export pipeline
capacity were significant and resulted in large volumes of natural
gas being trapped in the AECO market. As a result, in some cases,
spot prices dropped into negative territory. Bellatrix took steps
to shut in some natural gas volumes during the price interruptions,
however the extremely low spot prices impacted revenues during the
quarter. An additional 1.5 Bcf/d of firm transport contracts on the
TCPL mainline that will come into effect on November 1, 2017, taking some pressure off of the
AECO spot market. Prices are expected to rebound during the fourth
quarter as seasonal heating demand will create additional
intra-Alberta market demand.
Bellatrix's active hedging program provided significant support to
the quarter's cash flows and we expect these hedges will continue
to support our cash flow in the fourth quarter of 2017.
Bellatrix's natural gas average sales price before commodity
price risk management contracts for the third quarter of 2017
decreased by 38% to $1.54/mcf
compared to $2.47/mcf in the same
period in 2016. Bellatrix's natural gas average price, after
including commodity price risk management contracts for the three
months ended September 30, 2017,
averaged $2.50/mcf compared to
$2.74/mcf in the comparative 2016
period. Bellatrix was active in the second half of 2017 increasing
its 2017 risk management protection, with approximately 40% of 2018
gross natural gas volumes hedged at an average fixed price of
approximately $3.06/mcf.
Debt
Credit Facilities
At September 30, 2017, the Company had $8.3 million outstanding under its $120 million syndicated revolving Credit
Facilities. The Credit Facilities are available on an extendible
revolving term basis and consist of a $25
million operating facility and a $95
million syndicated facility. The Credit Facilities have an
initial term of one year and are extendible annually at the option
of the Company, subject to lender approval, with a one year
term-out period if not renewed. Availability under the Credit
Facilities is subject to a borrowing base test, which will be
subject to redetermination in May and November of each year, with
the next regularly scheduled redetermination to occur in November
2017. At September 30, 2017,
Bellatrix had $111.7 million of
available capacity (before deducting outstanding letters of
credit).
Senior Notes
As at September 30, 2017, the Company had outstanding
US$250 million of 8.50% senior
unsecured notes due May 15, 2020 (the
"Senior Notes"). Interest is payable on the Senior Notes
semi-annually and the Senior Notes are redeemable at the Company's
option, in whole or in part, at specified redemption prices.
Convertible Debentures
At September 30, 2017 Bellatrix had outstanding
$50 million principal amount of 6.75%
convertible unsecured subordinated debentures (the "Convertible
Debentures"). The Convertible Debentures bear interest at a rate of
6.75% per annum, payable semiannually in arrears on September 30 and March
31 of each year. The Convertible Debentures are convertible
at the option of the holder into common shares of Bellatrix at a
conversion price of $8.10 per common
share.
CONFERENCE CALL INFORMATION
A conference call to discuss Bellatrix's third quarter results
will be held on November 9, 2017 at
9:00 am MT / 11:00 am ET. To participate, please call
toll-free 1-800-319-4610 or 403-351-0324 or 416-915-3239. The call
can also be heard live through an internet webcast accessible via
the investors section of Bellatrix's website at
http://www.bxe.com/investors/presentations-events.cfm and will be
archived on the website for approximately 30 days following the
call.
Bellatrix Exploration Ltd. is a publicly traded Western Canadian
based growth oriented oil and gas company engaged in the
exploration for, and the acquisition, development and production of
oil and natural gas reserves, with highly concentrated operations
in west central Alberta,
principally focused on profitable development of the Spirit River
liquids rich natural gas play.
Common shares of Bellatrix trade on the Toronto Stock Exchange
and on the New York Stock Exchange under the symbol "BXE".
NON-GAAP MEASURES
Throughout this press release, the Company uses terms that
are commonly used in the oil and natural gas industry, but do not
have a standardized meaning presented by International Financial
Reporting Standards ("IFRS") and therefore may not be comparable to
the calculations of similar measures for other entities. Management
believes that the presentation of these non-GAAP measures provide
useful information to investors and shareholders as the measures
provide increased transparency and the ability to better analyze
performance against prior periods on a comparable basis.
Operating netbacks are calculated by subtracting royalties,
transportation, and operating expenses from total revenue.
Management believes this measure is a useful supplemental measure
of the amount of total revenue received after transportation,
royalties and operating expenses. The Company's calculation of
total revenue includes petroleum and natural gas sales and other
income, and excludes commodity price risk management. Total capital
expenditures – net includes the cash impact of capital expenditures
and property dispositions, as well as the non-cash capital impacts
of corporate acquisitions, property acquisitions, adjustments to
the Company's decommissioning liabilities, and share based
compensation.
These measures have been described and presented in this news
release in order to provide shareholders and potential investors
with additional information regarding Bellatrix's liquidity and its
ability to generate funds to finance its operations. For additional
information about these non-GAAP measures, including
reconciliations to the most directly comparable GAAP terms, see our
MD&A.
CAPITAL PERFORMANCE MEASURES
In addition to the non-GAAP measures described above, there
are also terms that have been reconciled in the Company's financial
statements to the most comparable IFRS measures. These terms do not
have any standardized meaning prescribed by IFRS and therefore may
not be comparable with the calculations of similar measures for
other entities. These terms have been referenced in the Company's
press release, MD&A and financial statements. These terms are
used by management to analyze operating performance on a comparable
basis with prior periods and to analyze the liquidity of the
Company.
This press release contains the term "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 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. Funds flow from operations is calculated as cash flow from
operating activities, excluding decommissioning costs incurred,
changes in non-cash working capital incurred, and transaction
costs. The reconciliation between cash flow from operating
activities and 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 shares for the period.
This press release also contains the terms "total net debt"
and "adjusted working capital deficiency", which also are not
recognized measures under GAAP. Therefore reference to total net
debt and adjusted working capital deficiency, may not be comparable
with the calculation of similar measures for other entities. The
Company's calculation of total net debt excludes other deferred
liabilities, deferred capital obligations, long-term risk
management contract liabilities, decommissioning liabilities, and
deferred tax liabilities. Total net debt includes the adjusted
working capital deficiency, long term loans receivable, Senior
Notes, Convertible Debentures (liability component), current Credit
Facilities and long term Credit Facilities. The adjusted working
capital deficiency is calculated as net working capital deficiency
excluding current risk management contract assets and liabilities,
current portion of other deferred liabilities, current portion of
deferred capital obligation and the current Credit Facilities.
Management believes these measures are useful supplementary
measures of the total amount of current and long-term debt.
FORWARD LOOKING STATEMENTS
Certain information contained in this press release may
contain forward looking statements within the meaning of applicable
securities laws. The use of any of the words "position",
"continue", "opportunity", "expect", "plan", "maintain",
"estimate", "assume", "target", "believe" "forecast", "intend",
"strategy", "anticipate", "enhance" and similar expressions are
intended to identify forward-looking statements. More particularly
and without limitation, this document contains forward-looking
statements concerning management's assessment of future plans, rate
of return expectations for the Spirit River formation, expectation
that the Spirit River formation will continue to attract the
majority of anticipated capital investment in 2017, anticipated
future drilling inventory, the expectation that the investment in
key strategic infrastructure and facilities provide the processing
capacity and capability to grow net Company production volumes
beyond 60,000 boe/d, with minimal future facility related capital,
the expectation that long term FT and processing agreements will
ensure market egress for current and forecast production, the
expectation that the NGTL system will experience further
curtailments of both interruptible and firm service capacity,
expected production expenditure reductions and 2017 production
expenditure guidance, intent to achieve near term growth objectives
within current capital spending guidance levels, expected timing
for completion of our 2017 capital program, the expected timing,
budget and capacity associated with the Alder Flats Plant Phase 2
expansion project, expected operating cost reductions, improved
liquids extraction and resultant improved liquids weighting,
improved revenue generation and expanded corporate profit margins
and cash flow associated with completion of Phase 2 of the Alder
Flats Plant, capital investment plans for 2017 including the
expected average and exit 2017 production, expectations of future
commodity prices and factors impacting commodity prices,
expectation that Bellatrix's active hedging program will continue
to support cash flow in the fourth quarter of 2017 and the intent
to remain focused on delivering our long term strategy and
enhancing shareholder value, 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 November 8, 2017
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, actions
taken by the Company's lenders that reduce the Company's available
credit and ability to access sufficient capital from internal and
external sources. Events or circumstances may cause actual results
to differ materially from those predicted, as a result of the risk
factors set out and other known and unknown risks, uncertainties,
and other factors, many of which are beyond the control of
Bellatrix. In addition, forward looking statements or information
are based on a number of factors and assumptions which have been
used to develop such statements and information but which may prove
to be incorrect and which have been used to develop such statements
and information in order to provide shareholders with a more
complete perspective on Bellatrix's future operations. Such
information may prove to be incorrect and readers are cautioned
that the information may not be appropriate for other purposes.
Although the Company believes that the expectations reflected in
such forward looking statements or information are reasonable,
undue reliance should not be placed on forward looking statements
because the Company can give no assurance that such expectations
will prove to be correct. In addition to other factors and
assumptions which may be identified herein, assumptions have been
made regarding, among other things: the impact of increasing
competition; the general stability of the economic and political
environment in which the Company operates; the timely receipt of
any required regulatory approvals; the ability of the Company to
obtain qualified staff, equipment and services in a timely and cost
efficient manner; drilling results; the ability of the operator of
the projects which the Company has an interest in to operate the
field in a safe, efficient and effective manner; the ability of the
Company to obtain financing on acceptable terms; field production
rates and decline rates; the ability to replace and expand oil and
natural gas reserves through acquisition, development of
exploration; the timing and costs of pipeline, storage and facility
construction and expansion and the ability of the Company to secure
adequate product transportation; future commodity prices; currency,
exchange and interest rates; the regulatory framework regarding
royalties, taxes and environmental matters in the jurisdictions in
which the Company operates; and the ability of the Company to
successfully market its oil and natural gas products. Readers are
cautioned that the foregoing list is not exhaustive of all factors
and assumptions which have been used. As a consequence, actual
results may differ materially from those anticipated in the
forward-looking statements. Additional information on these and
other factors that could affect Bellatrix's operations and
financial results are included in reports, including under the
heading "Risk Factors" in the Company's annual information form for
the year ended December 31, 2016, on
file with Canadian and United
States securities regulatory authorities and may be accessed
through the SEDAR website (www.sedar.com), through the SEC website
(www.sec.gov), and at Bellatrix's website (www.bxe.com).
Furthermore, the forward looking statements contained herein are
made as at the date hereof and Bellatrix does not undertake any
obligation to update publicly or to revise any of the included
forward looking statements, whether as a result of new information,
future events or otherwise, except as may be required by applicable
securities laws.
BARRELS OF OIL EQUIVALENT
The term barrels of oil equivalent ("boe") may be misleading,
particularly if used in isolation. A boe conversion ratio of six
thousand cubic feet of natural gas to one barrel of oil equivalent
(6 mcf/bbl) is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead. All boe conversions in this
press release are derived from converting gas to oil in the ratio
of six thousand cubic feet of gas to one barrel of oil. Given that
the value ratio based on the current price of crude oil as compared
to natural gas is significantly different from the energy
equivalency of 6:1, utilizing a conversion on a 6:1 basis may be
misleading as an indication of value.
INITIAL RATES OF PRODUCTION
References in this press release to initial production rates
associated with certain wells are useful in confirming the presence
of hydrocarbons, however such rates are not determinative of the
rates at which such wells will commence production and decline
thereafter and are not indicative of long term performance or of
ultimate recovery. While encouraging, readers are cautioned not to
place reliance on such rates in calculating the aggregate
production for the Company. The Company cautions that such
production rates should be considered to be preliminary.
SOURCE Bellatrix Exploration Ltd.