CALGARY, March 13, 2014 /CNW/ – Bellatrix Exploration Ltd. (“Bellatrix” or the “Company”) (TSX, NYSE MKT: BXE) announces its financial and operating results for the year ended December 31, 2013.
Forward-Looking Statements
This press release, including the report to shareholders, contains forward-looking statements. Please refer to our cautionary language on forward-looking statements and the other matters set forth at the beginning of the management’s discussion and analysis (the “MD&A”) attached to this press release.
| HIGHLIGHTS | |||
| Years ended December 31, | |||
| 2013 (9) | 2012 | ||
| FINANCIAL (unaudited) | |||
| (CDN$000s except share and per share amounts) | |||
| Revenue (before royalties and risk management (1)) | 291,891 | 219,314 | |
| Funds flow from operations (2) | 143,459 | 111,038 | |
| Per basic share (5) | $1.27 | $1.03 | |
| Per diluted share (5) | $1.24 | $0.96 | |
| Cash flow from operating activities | 128,458 | 109,328 | |
| Per basic share (5) | $1.14 | $1.02 | |
| Per diluted share (5) | $1.11 | $0.95 | |
| Net profit | 71,657 | 27,771 | |
| Per basic share (5) | $0.63 | $0.26 | |
| Per diluted share (5) | $0.62 | $0.25 | |
| Exploration and development | 281,009 | 164,187 | |
| Corporate | 9,270 | 195 | |
| Property acquisitions | 13,380 | 20,966 | |
| Capital expenditures – cash | 303,659 | 185,348 | |
| Property dispositions – cash | (70,936) | (6,660) | |
| Corporate acquisitions and other non-cash items | 608,078 | 25,875 | |
| Total capital expenditures – net (4) | 840,801 | 204,563 | |
| Long-term debt | 287,092 | 133,047 | |
| Convertible debentures (6) | – | 50,687 | |
| Adjusted working capital (excess) deficiency (3) | 108,390 | 5,843 | |
| Total net debt (3) | 395,482 | 189,577 | |
| Total assets | 1,555,180 | 681,421 | |
| Total shareholders’ equity | 903,874 | 381,106 | |
| OPERATING | Years ended December 31, | |||
| 2013 (9) | 2012 | |||
| Average daily sales volumes | ||||
| Crude oil, condensate and NGLs | (bbls/d) | 6,489 | 5,717 | |
| Natural gas | (mcf/d) | 92,042 | 65,812 | |
| Total oil equivalent | (boe/d) | 21,829 | 16,686 | |
| Average prices | ||||
| Light crude oil and condensate | ($/bbl) | 92.66 | 86.47 | |
| NGLs (excluding condensate) | ($/bbl) | 43.85 | 38.88 | |
| Heavy oil | ($/bbl) | 68.41 | 68.51 | |
| Crude oil, condensate and NGLs | ($/bbl) | 72.29 | 73.59 | |
| Crude oil, condensate and NGLs (including risk management (1)) | ($/bbl) | 69.82 | 72.65 | |
| Natural gas | ($/mcf) | 3.49 | 2.62 | |
| Natural gas (including risk management (1)) | ($/mcf) | 3.71 | 3.17 | |
| Total oil equivalent | ($/boe) | 36.18 | 35.56 | |
| Total oil equivalent (including risk management (1)) | ($/boe) | 36.42 | 37.40 | |
| Statistics | ||||
| Operating netback (4) | ($/boe) | 20.76 | 19.66 | |
| Operating netback (4) (including risk management (1)) | ($/boe) | 20.99 | 21.51 | |
| Transportation | ($/boe) | 0.88 | 0.82 | |
| Production expenses | ($/boe) | 8.74 | 8.73 | |
| General & administrative | ($/boe) | 2.03 | 2.34 | |
| Royalties as a % of sales after transportation | 16% | 18% | ||
| COMMON SHARES | ||||
| Common shares outstanding | 170,990,605 | 107,868,774 | ||
| Share options outstanding | 11,182,963 | 9,420,451 | ||
| Shares issuable on conversion of convertible debentures (6) | – | 9,821,429 | ||
| Fully diluted common shares outstanding | 182,173,568 | 127,110,654 | ||
| Diluted weighted average shares – net profit (5) | 115,768,436 | 109,125,094 | ||
| Diluted weighted average shares – funds flow from operations and cash flow from operating activities (2) (5) |
115,768,436 | 118,946,523 | ||
| SHARE TRADING STATISTICS | ||||
| TSX and Other (7) | ||||
| (CDN$, except volumes) based on intra-day trading | ||||
| High | 8.52 | 5.67 | ||
| Low | 4.03 | 2.45 | ||
| Close | 7.81 | 4.27 | ||
| Average daily volume | 1,336,726 | 1,127,281 | ||
| NYSE MKT (8) | ||||
| (US$, except volumes) based on intra-day trading | ||||
| High | 8.43 | 4.54 | ||
| Low | 4.10 | 3.69 | ||
| Close | 7.33 | 4.28 | ||
| Average daily volume | 99,851 | 37,924 | ||
| (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 highlights section 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 generally accepted accounting principles (“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 year. |
| (3) | Net debt and total net debt are considered additional GAAP measures. Therefore reference to the additional GAAP measures of net debt or total net debt may not be comparable with the calculation of similar measures for other entities. The Company’s 2013 calculation of total net debt excludes deferred lease inducements, long-term commodity contract liabilities, decommissioning liabilities, the long-term finance lease obligation, deferred lease inducements, and the deferred tax liability. Net debt and total net debt include the adjusted working capital deficiency (excess). The adjusted working capital deficiency (excess) is a non-GAAP measure calculated as net working capital deficiency (excess) excluding short-term commodity contract assets and liabilities, current finance lease obligation, and deferred lease inducements. For the comparative 2012 calculation, net debt also excludes the liability component of convertible debentures which were then outstanding. A reconciliation between total liabilities under GAAP and total net debt and net debt as calculated by the Company is found in the MD&A. |
| (4) | Operating netbacks and total capital expenditures – net are considered non-GAAP measures. Operating netbacks are calculated by subtracting royalties, transportation, and operating costs from revenues before other income. 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. |
| (5) | Basic weighted average shares for the year ended December 31, 2013 were 112,927,251 (2012: 107,543,811). |
| In computing weighted average diluted earnings per share for the year ended December 31, 2013, a total of 2,841,185 (2012: 1,581,283) 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 (2012: 9,821,429) common shares issuable on conversion of convertible debentures were excluded from the denominator as they were not dilutive, resulting in diluted weighted average common shares of 115,768,436 (2012: 109,125,094). | |
| In computing weighted average diluted cash flow from operating activities and funds flow from operations per share for the year ended December 31, 2013, a total of 2,841,185 (2012: 1,581,283) common shares were added to the denominator as a consequence of applying the treasury stock method to the Company’s outstanding share options and no common shares issuable (2012: 9,821,429) on conversion of convertible debentures were added to the denominator as they were dilutive, resulting in diluted weighted average common shares of 115,768,436 (2012: 118,946,523). As a consequence, no interest and accretion expense (net of income tax effect) was added to the numerator (2012: $3.2 million). | |
| (6) | During the year ended December 31, 2013, the Company announced a notice of redemption of its then outstanding $55.0 million 4.75% convertible debentures, with a redemption date set of October 21, 2013. During September and October 2013, the $55.0 million principal amount of remaining convertible debentures were converted or redeemed in exchange for an aggregate of 9,794,848 common shares of the Company. For the year ended December 31, 2012, shares issuable on conversion of convertible debentures were calculated by dividing the $55.0 million principal amount of the convertible debentures by the conversion price of $5.60 per share. |
| (7) | TSX and Other includes the trading statistics for the Toronto Stock Exchange and other Canadian trading markets. |
| (8) | The Company’s common shares commenced trading on the NYSE MKT on September 24, 2012. |
| (9) | The Company’s financial and operating results for the year ended December 31, 2013 include financial and operating results from Angle Energy Inc. for the period from December 11, 2013 to December 31, 2013. |
REPORT TO SHAREHOLDERS
Bellatrix’s corporate strategy is value creation through effective execution of a defined exploitation oriented growth plan in the Western Canadian Sedimentary Basin, complemented with synergistic acquisitions within our core fairway and strategic Joint Ventures specifically designed to accelerate monetizing the Company’s large undeveloped oil and gas resources. The Company focuses on operating with integrity and conducting operations in a safe and environmentally responsible manner while providing sustained shareholder growth in value. In 2013, the Company defined itself irrefragably as an industry leader with a unique platform comprised of concluding three strategic Joint Ventures, closing an accretive opportunistic acquisition that increased base production by 50% while adding significant drill ready opportunities to the Company’s existing inventory and posting another 100% drilling success year which resulted in offsetting corporate declines and further increasing the Company’s production base year over year by an additional 50%. Bellatrix’s ability to excel as a “drill bit driven growth” story is defined by the following:
Each and every year in the industry, companies face a multitude of challenges that either can be controlled or that are outside of our ability to influence. 2013 presented a combination of three speed bumps beyond our control including low gas pricing, an elongated breakup period followed by extended delays obtaining well licenses from the Alberta Energy Regulator. Despite these issues Bellatrix posted a record year of growth and profit punctuated by:
To accelerate the development of the aforementioned 30 year drilling inventory on the Company’s key plays while maintaining a strong balance sheet and minimizing the issuing of equity, Bellatrix entered into two strategic joint venture agreements and one long term strategic partnership detailed below. In addition, in the fourth quarter Bellatrix closed a strategic acquisition of Angle Energy facilitated by an equity placement and bought back the Company’s convertible debenture which is also detailed below.
$244 million Grafton Joint Venture
On June 27, 2013, Bellatrix closed a joint venture (the “Grafton Joint Venture”) with Grafton Energy Co I Ltd. (“Grafton”), to accelerate development on a portion of Bellatrix’s extensive undeveloped land holdings. Subsequently on September 10, 2013, the Company announced that Grafton elected to exercise an option to increase its committed capital investment by an additional $100 million on the same terms and conditions as the initial Grafton Joint Venture.
The Grafton Joint Venture is in Ferrier, Willesden Green and Brazeau areas of West-Central Alberta. Under the terms of the amended agreement, Grafton will contribute 82%, or $200 million, to the $244 million Grafton Joint Venture to participate in an expected 58 Notikewin/Falher and Cardium well program. Under the agreement, Grafton will earn 54% of Bellatrix’s working interest in each well drilled in the well program until payout (being recovery of Grafton’s capital investment plus an 8% internal rate of return) on the total program, reverting to 33% of Bellatrix’s working interest (“WI”) after payout. At any time after payout of the entire program, Grafton shall have the option to elect to convert all wells from the 33% WI to a 17.5% Gross Overriding Royalty (“GORR”) on Bellatrix’s pre-Grafton Joint Venture working interest. Grafton also has an additional one-time option within 12 months of the effective date to increase its exposure by an additional $50 million on the same terms and conditions. The effective date of the agreement is July 1, 2013 and has a term of 2 years. If the $50 million option is exercised, Bellatrix shall have until the end of the third anniversary of the effective date to spend the additional capital.
Baptiste Asset Sale and Strategic Partnership
On September 3, 2013, the Company announced the closing of an asset sale (the “Asset Sale”) and joint venture (the “Daewoo and Devonian Joint Venture”) with Canadian Subsidiaries of two Korean entities, Daewoo International Corporation (“Daewoo”) and Devonian Natural Resources Private Equity Fund (“Devonian”). Under the terms of the associated agreements, Bellatrix sold, effective July 1, 2013, to Daewoo and Devonian an aggregate 50% of the Company’s working interest share of its producing assets, an operated compressor station and gathering system and related land acreage in the Baptiste area of West Central Alberta (the “Sold Assets”) for gross consideration of $52.5 million, subject to closing adjustments. The Sold Assets were producing approximately 268 boe/d (67% gas and 33% oil and liquids) net to the Sold Assets and included 3,858 net acres of Cardium rights and 1,119 net acres of Mannville rights.
The Daewoo and Devonian Joint Venture which was effective as of July 1, 2013 encompasses a multiyear commitment to jointly develop the aforementioned acreage in Ferrier and Willesden Green of West Central Alberta encompassing 70 gross wells with anticipated total capital expenditures to the Daewoo and Devonian Joint Venture of approximately $200 million.
Redemption of Convertible Debentures
On September 4, 2013, the Company announced the issuance of a notice of redemption to holders of its then outstanding $55.0 million 4.75% convertible unsecured subordinated debentures (the “convertible debentures”), with the redemption date set as October 21, 2013. During September and October 2013, the $55.0 million principal amount of convertible debentures was converted or redeemed for an aggregate of 9,794,848 common shares of the Company. A reduction to the deficit as contained in shareholder’s equity of $1.3 million was recognized in connection with the settlement of the convertible debentures during the year ended December 31, 2013.
Bought Deal Financing
On November 5, 2013, Bellatrix closed a bought deal financing of 21,875,000 Bellatrix common shares at a price of $8.00 per Bellatrix Share for aggregate gross proceeds of $175.0 million (net proceeds of $165.7 million after transaction costs) through a syndicate of underwriters.
The net proceeds from this financing were used to temporarily repay a portion of the indebtedness of Bellatrix under its credit facilities; subsequently utilized to fund the cash portion of the acquisition of Angle, the acquisition of the Angle Debentures, and a portion of Bellatrix’s obligations under the Troika Joint Venture described below.
Troika Joint Venture
On November 11, 2013, the Company announced that it had successfully closed the previously announced $240 million joint venture partnership (the “Troika Joint Venture”) with TCA Energy Ltd. (“TCA”). TCA is a Canadian incorporated special purpose vehicle for Troika Resources Private Equity Fund which is based in Seoul, Korea and managed by KDB Bank, SK Energy and Samchully AMC.
Pursuant to the agreement forming the Troika Joint Venture, Bellatrix and TCA will drill and develop lands in the Ferrier Cardium area of West Central Alberta, with the program to be completed by December 31, 2014. TCA will contribute $120 million, representing a 50% share, towards the capital program for the drilling of an expected 63 gross wells, and in exchange, will receive 35% of Bellatrix’s working interest until payout (being recovery of TCA’s capital investment plus a 15% internal rate of return) on the total program, and thereafter reverting to 25% of Bellatrix’s working interest. As part of this agreement, TCA participated in 14 gross wells (as included in the total expected 63 gross well program) for wells that have been drilled since January 1, 2013, resulting in net proceeds of $16.7 million that was received by Bellatrix at closing.
The net proceeds from the disposition were initially used to reduce the Company’s indebtedness, and ultimately will be directed towards the continued development of its Cardium and Mannville asset base.
Angle Acquisition
On December 11, 2014, Bellatrix acquired all of the issued and outstanding common shares of Angle Energy Inc. (“Angle”) for consideration consisting of $69.7 million in cash and approximately 30.2 million Bellatrix common shares. The announced $576 million aggregate transaction value included the assumption of net Angle debt of approximately $261 million after taking into account $16 million in transaction costs and severance costs, terminated options and RSU’s and a premium paid to the Angle debenture holders.
Through the strategic combination of Bellatrix’s top-tier asset base with Angle’s high quality, low-cost, high working interest asset base the Company has created one of the largest, intermediate producers in the West Central Alberta fairway with a dominant and highly focused position in the Cardium and Mannville intervals. The strategic combination was highly complementary and accretive to Bellatrix on current production, cash flow, reserves and net asset value per share. The combination creates a high growth intermediate company with a sizeable, strategic and opportunity rich asset base with a drillable inventory of over 2,000 locations ($10 billion capital investment at today’s cost per well) and with 416,631 net undeveloped acres.
Property Acquisition
During the fourth quarter of 2013, the Company increased its current working interest in certain Cardium and Notikewin/Falher lands and production in the Willesden Green (Baptiste) area of Alberta through the acquisition of additional working interests from several companies for a total combined net purchase price of $10 million.
Operational highlights for the three months and year ended December 31, 2013 include:
Financial highlights for the three months and year ended December 31, 2013 include:
OUTLOOK
With the consummation of two innovative joint ventures, one strategic partnership, and the accretive acquisition of Angle Energy Ltd, Bellatrix’s 2014 gross capital expenditure program of $610 million is comprised of $370 million net Bellatrix capital and $240 million joint venture/partner capital. Based on the timing of proposed expenditures, downtime for scheduled and unscheduled plant turnarounds, completion of required infrastructure, and normal production declines, execution of the 2014 capital expenditure plan is expected to provide average daily production of approximately 42,500 boe/d to 43,500 boe/d, and an exit rate of approximately 47,000 boe/d.
Currently, the Company is concentrating on further development of its core resource plays, the Cardium Light Oil and the multi-zone Mannville Liquids Rich Gas intervals in Western Canada. The multi-zone Mannville in Alberta’s deep basin boasts abundant, liquids-rich natural gas with high deliverability gas wells delivering substantial economics. The Cardium is a massive light oil resource play that has added substantial reserves, production and long term economic value for our shareholders. Both plays have thick resource rich reservoirs with exceptional subsurface control which have proven to be predictable and repeatable with the application of modern drilling and completion techniques. The company anticipates drilling approximately 146 gross wells in 2014; of which 115 gross wells are estimated to be in the Cardium Oil zone and 31 are estimated to be in the liquids-rich Mannville gas zones.
The key operational strategy Bellatrix employs is to focus on full cycle profitability, indifferent to product type, with every investment decision. Bellatrix’s ability to reinvent ourselves and continuously apply new technology is one of the keys to being successful and a market leader. Our ability to be informed of these new technologies, understand their application, and then try them in new ways allows us to increase deliverability and ultimate resource recovery.
We focus for long term success on our ability to manage, enhance and exploit our current assets while simultaneously developing new and potentially exciting plays in the Deep Basin for the future. Thus continuing our overall priority of bringing together the technical, operational and financial talent required to create long term value growth for our shareholders.
Raymond G. Smith, P. Eng.
President and CEO
March 12, 2014
Note:
A conference call to discuss Bellatrix’s annual financial and reserves results will be held on March 13, 2014 at 9:00 am MDT/11:00 am EDT. To participate, please call toll-free 1-888-231-8191 or 647-427-7450. The conference call will also be recorded and available by calling 1-855-859-2056 or 403-451-9481 and entering passcode 33160756 followed by the pound sign.
Bellatrix’s annual meeting is scheduled for 3:00 pm on May 21, 2014 in the Devonian Room at the Calgary Petroleum Club.
The Company’s current corporate presentation is available at www.bellatrixexploration.com.