CALGARY, Aug. 6, 2014 /CNW/ – Bellatrix Exploration Ltd. (“Bellatrix” or the “Company”) (TSX, NYSE MKT: BXE) announces its financial and operating results for the three and six months ended June 30, 2014.
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
| Three months ended June 30, | Six months ended June 30, | |||||
| 2014 | 2013 | 2014 | 2013 | |||
| FINANCIAL (unaudited) | ||||||
| (CDN$000s except share and per share amounts) | ||||||
| Revenue (before royalties and risk management (1)) | 152,311 | 74,564 | 315,896 | 140,107 | ||
| Funds flow from operations (2) | 71,014 | 36,563 | 148,656 | 74,108 | ||
| Per basic share (5) | $0.40 | $0.34 | $0.85 | $0.69 | ||
| Per diluted share (5) | $0.39 | $0.31 | $0.84 | $0.63 | ||
| Cash flow from operating activities | 60,063 | 29,611 | 144,363 | 65,138 | ||
| Per basic share (5) | $0.34 | $0.27 | $0.83 | $0.60 | ||
| Per diluted share (5) | $0.33 | $0.25 | $0.81 | $0.55 | ||
| Net profit | 38,252 | 15,466 | 63,419 | 20,027 | ||
| Per basic share (5) | $0.22 | $0.14 | $0.36 | $0.19 | ||
| Per diluted share (5) | $0.21 | $0.13 | $0.36 | $0.18 | ||
| Exploration and development | 131,362 | 46,172 | 284,049 | 137,632 | ||
| Corporate | 3,206 | 543 | 6,161 | 682 | ||
| Capital expenditures – cash | 134,568 | 46,715 | 290,210 | 138,314 | ||
| Property dispositions – cash | (8,613) | (16) | (8,392) | (1) | ||
| Total net capital expenditures – cash | 125,955 | 46,699 | 281,818 | 138,313 | ||
| Other non-cash items | 3,602 | (1,308) | 8,592 | (521) | ||
| Total capital expenditures – net (4) | 129,557 | 45,391 | 290,410 | 137,792 | ||
| Long-term debt | 323,007 | 194,002 | 323,007 | 194,002 | ||
| Convertible debentures (6) | – | 51,536 | – | 51,536 | ||
| Adjusted working capital deficiency (3) | 40,426 | 10,927 | 40,426 | 10,927 | ||
| Total net debt (3) | 363,433 | 256,465 | 363,433 | 256,465 | ||
| Total assets | 1,837,242 | 779,648 | 1,837,242 | 779,648 | ||
| Total shareholders’ equity | 1,141,830 | 402,904 | 1,141,830 | 402,904 | ||
| OPERATING | Three months ended June 30, | Six months ended June 30, | ||||
| 2014 | 2013 | 2014 | 2013 | |||
| Average daily sales volumes | ||||||
| Crude oil, condensate and NGLs | (bbls/d) | 12,640 | 6,206 | 12,524 | 6,095 | |
| Natural gas | (mcf/d) | 142,214 | 95,376 | 139,051 | 87,812 | |
| Total oil equivalent | (boe/d) | 36,342 | 22,102 | 35,699 | 20,730 | |
| Average prices | ||||||
| Crude oil and condensate | ($/bbl) | 103.25 | 93.48 | 100.72 | 91.83 | |
| NGLs (excluding condensate) | ($/bbl) | 42.70 | 36.20 | 49.72 | 39.05 | |
| Crude oil, condensate and NGLs | ($/bbl) | 74.73 | 71.84 | 77.53 | 72.70 | |
| Crude oil, condensate and NGLs (including risk management (1)) | ($/bbl) | 67.71 | 73.10 | 71.14 | 73.26 | |
| Natural gas | ($/mcf) | 5.04 | 3.85 | 5.45 | 3.69 | |
| Natural gas (including risk management (1)) | ($/mcf) | 4.40 | 3.68 | 4.64 | 4.01 | |
| Total oil equivalent | ($/boe) | 45.72 | 36.78 | 48.43 | 37.01 | |
| Total oil equivalent (including risk management (1)) | ($/boe) | 40.78 | 36.39 | 43.01 | 38.54 | |
| Statistics | ||||||
| Operating netback (4) | ($/boe) | 28.93 | 21.06 | 30.85 | 21.04 | |
| Operating netback (4) (including risk management (1)) | ($/boe) | 23.98 | 20.68 | 25.43 | 22.58 | |
| Transportation | ($/boe) | 0.82 | 0.83 | 1.20 | 0.83 | |
| Production expenses | ($/boe) | 7.80 | 8.64 | 7.96 | 8.65 | |
| General & administrative | ($/boe) | 1.37 | 1.24 | 1.56 | 1.62 | |
| Royalties as a % of sales after transportation |
18% | 17% | 17% | 18% | ||
| COMMON SHARES | ||||||
| Common shares outstanding | 191,091,741 | 107,919,329 | 191,091,741 | 107,919,329 | ||
| Share options outstanding | 11,576,839 | 9,173,560 | 11,576,839 | 9,173,560 | ||
| Shares issuable on conversion of convertible debentures (6) | – | 9,821,429 | – | 9,821,429 | ||
| Fully diluted common shares outstanding | 202,668,580 | 126,914,318 | 202,668,580 | 126,914,318 | ||
| Diluted weighted average shares – net profit (5) | 180,975,410 | 121,265,334 | 177,408,647 | 121,038,666 | ||
| Diluted weighted average shares – funds flow from operations and cash flow from operating activities (2) (5) |
180,975,410 | 121,265,334 | 177,408,647 | 121,038,666 | ||
| SHARE TRADING STATISTICS | ||||||
| TSX and Other (7) | ||||||
| (CDN$, except volumes) based on intra-day trading | ||||||
| High | 11.65 | 6.94 | 11.65 | 6.94 | ||
| Low | 8.88 | 4.70 | 7.64 | 4.03 | ||
| Close | 9.26 | 6.45 | 9.26 | 6.45 | ||
| Average daily volume | 3,266,310 | 1,005,989 | 2,563,117 | 844,333 | ||
| NYSE MKT | ||||||
| (US$, except volumes) based on intra-day trading | ||||||
| High | 10.70 | 6.85 | 10.70 | 6.85 | ||
| Low | 8.15 | 4.55 | 6.93 | 4.03 | ||
| Close | 8.71 | 6.08 | 8.71 | 6.08 | ||
| Average daily volume | 371,163 | 67,541 | 265,351 | 70,189 | ||
| (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 non-GAAP measures of funds flow from operations, or funds flow from operations per share may not be comparable with the calculation of similar measures for other entities. Management uses funds flow from operations to analyze operating performance and leverage and considers funds flow from operations to be a key measure as it demonstrates the Company’s ability to generate the cash necessary to fund future capital investments and to repay debt. The reconciliation between cash flow from operating activities and funds flow from operations can be found in the MD&A. Funds flow from operations per share is calculated using the weighted average number of common shares for the period. |
| (3) | Net debt and total net debt are considered non-GAAP measures. Therefore reference to the non-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 2014 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 2013 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. The detailed calculations of operating netbacks are found in the MD&A. |
| (5) | Basic weighted average shares for the three and six months ended June 30, 2014 were 177,847,190 (2013: 107,919,329), and 174,754,132 (2013: 107,900,781), respectively. |
| In computing weighted average diluted earnings per share and weighted average diluted cash flow from operating activities and funds flow from operations per share for the three and six months ended June 30, 2014, a total of 3,128,220 (2013: 3,524,576), and 2,654,515 (2013: 3,316,456) 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 (three and six months ended June 30, 2013: 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 180,975,410 (2013: 121,265,334), and 177,408,647 (2013: 121,038,666), respectively. As a consequence, a total of nil (2013: $0.8 million) and nil (2013: $1.6 million) for interest and accretion expense (net of income tax effect) was added to the numerator for the three and six month calculations, respectively | |
| (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 three and six months ended June 30, 2013, 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. |
REPORT TO SHAREHOLDERS
In spite of the significant production processing wantage experienced in the first half of 2014 the Company continues to demonstrate accelerated growth posting record earnings, revenue, cash flow and production while continuing to drive down operating expenses. The wells drilled in the first half of 2014 are in line with our published type curves, facilitating the Company’s ability to meet its published guidance of 2014 average daily production of +/-41,000 boe/d and an exit rate of approximately +/-48,000 boe/d, assuming no future unscheduled production constraints occur. Bellatrix’s technical staff were habile in redirecting gas production from plant to plant thereby maximizing throughput in an active plant turnaround season.
Operational highlights for the three and six months ended June 30, 2014 include:
To view Bellatrix’s Gas Processing Infrastructure please click here.
Currently when all of the eleven third party plants are in full operation Bellatrix has access to 213 mmcf/d of firm processing capacity to process both the Company’s and our joint operator (partner) gas. There is a further 179 mmcf/d of interruptible processing capacity available on a first come first serve basis. This interruptible capacity has recently become congested due to both system constraints and the influx of new reserves and production in the area due to significant drilling with the application of new horizontal drilling and muti-stage fracing technology by all of the area operators. The area plant throughputs are further impacted by fluctuations in the TransCanada system pressures which are forecasted to be high through the summer to accommodate their maintenance programs.
In the second quarter of 2014, Bellatrix processed an average of 142.2 mmcf/d along with approximately 95 mmcf/d of partner gas. In the third quarter following completion of the various plant turnarounds, the Company is forecasting net production of approximately 175 mmcf/d given the area plants have the capacity to process these volumes.
The system tightness is expected to continue until the Bellatrix Plant Phase 1 comes online. All major gas plant equipment has been ordered and is undergoing fabrication. The surface lease has been built to meet the required specifications. Process packages are on schedule for Q3 and Q4 2014 delivery. To date the construction of the gas plant is on budget and on schedule for plant start-up on or before July 1, 2015.
$750.0 Million Short Form Base Shelf Prospectus and $172.6 Million Bought Deal Financing
In May 2014, Bellatrix filed a short form base shelf prospectus (the “$750 million Shelf Prospectus”) of up to $750.0 million, with the securities regulatory authorities in each of the provinces of Canada (other than Quebec) and a Registration Statement filed with the United States Securities and Exchange Commission. The $750 million Shelf Prospectus allows Bellatrix to offer and issue common shares, subscription receipts, warrants and units (comprising any combination of the foregoing securities), by way of one or more prospectus supplements at any time during the 25-month period that the $750 million Shelf Prospectus remains in place.
Pursuant to a prospectus supplement to the $750 million Shelf Prospectus, on June 5, 2014, Bellatrix closed a bought deal offering of 18,170,000 common shares of the Company (the “Common Shares”) at a price of $9.50 per Common Share for aggregate gross proceeds of $172.6 million (the “Offering”), through a syndicate of underwriters. Net proceeds of $165.5 million received from the Offering were utilized to temporarily reduce outstanding indebtedness under the Company’s credit facilities, thereby freeing up borrowing capacity that may be redrawn, from time to time, to fund the Company’s ongoing capital expenditure program and for general corporate purposes.
As at June 30, 2014, there was $577.4 million available on the $750 million Shelf Prospectus.
Credit Facility Increased 25% to $625 million
Based upon the Company’s semi-annual borrowing base review for May 31, 2014, Bellatrix increased its borrowing base and credit facilities to $625 million from $500 million. This 25% increase of $125 million was the result of Bellatrix’s strong 2013 drilling results continuing into the first quarter of 2014, combined with benefits derived from the acquisition of Angle Energy Inc. (“Angle”) in the fourth quarter of 2013, cumulatively delivering significant reserves and production growth. The increased credit facilities will be available to finance Bellatrix’s ongoing capital expenditures, working capital requirements and for general corporate purposes.
The bank syndicate lenders approved the Company’s request to change the term of the credit facilities to a 3 year facility, fully revolving until maturity, and extendible annually at the Company’s option (subject to lender approval), provided that the term after any extension would not be more than 3 years. Concurrently with such changes, the credit facilities were also amended to include certain ongoing financial covenants that will require quarterly compliance.
Grafton Joint Venture Capital Investment Increase
On April 10, 2014, Bellatrix announced that Grafton elected to exercise an option to increase committed capital investment to the Grafton Joint Venture established during 2013 by an additional $50 million, for a total commitment of $250 million, on the same terms and conditions as the previously announced Grafton Joint Venture. Grafton’s increased capital investment will continue to support the accelerated development of a portion of Bellatrix’s extensive undeveloped land holdings.
The Grafton Joint Venture properties are located in the Willesden Green and Brazeau areas of West-Central Alberta. After giving effect to the exercise by Grafton of its option, Grafton was committed to contributing 82%, or $250 million, to the $305 million Joint Venture to participate in a Notikewin/Falher and Cardium well program. Under the agreement, Grafton will earn 54% of Bellatrix’s working interest (“WI”) in each well drilled in the development program until payout (being recovery of Grafton’s capital investment plus an 8% return) on the total program, reverting to 33% of Bellatrix’s 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 on Bellatrix’s pre-Joint Venture WI. The effective date of the initial agreement for the Joint Venture is July 1, 2013 and had an initial term of 2 years. With the exercise of the $50 million option, Bellatrix shall have until the end of the third anniversary of the effective date to spend the additional capital.
Financial highlights for the three and six months ended June 30, 2014 include:
Commodity Price Risk Management
As of August 5, 2014, the Company has entered into the following commodity price risk management arrangements:
| Type | Period | Volume | Price Floor | Price Ceiling | Index | ||||||||||||
| Crude oil fixed | January 1, 2014 to Dec. 31, 2014 | 500 bbl/d | $ | 93.30 US | $ | 93.30 US | WTI | ||||||||||
| Crude oil fixed | January 1, 2014 to Dec. 31, 2014 | 1,500 bbl/d | $ | 94.00 CDN | $ | 94.00 CDN | WTI | ||||||||||
| Crude oil fixed | January 1, 2014 to Dec. 31, 2014 | 500 bbl/d | $ | 95.00 US | $ | 95.00 US | WTI | ||||||||||
| Crude oil fixed | January 1, 2014 to Dec. 31, 2014 | 1,500 bbl/d | $ | 95.22 CDN | $ | 95.22 CDN | WTI | ||||||||||
| Crude oil fixed | January 1, 2014 to Dec. 31, 2014 | 500 bbl/d | $ | 98.30 CDN | $ | 98.30 CDN | WTI | ||||||||||
| Crude oil fixed | January 1, 2014 to Dec. 31, 2014 | 1,000 bbl/d | $ | 99.50 CDN | $ | 99.50 CDN | WTI | ||||||||||
| Crude oil fixed | January 1, 2014 to Dec. 31, 2014 | 500 bbl/d | $ | 99.60 CDN | $ | 99.60 CDN | WTI | ||||||||||
| Natural gas fixed | January 1, 2014 to Dec. 31, 2014 | 20,000 GJ/d | $ | 3.30 CDN | $ | 3.30 CDN | AECO | ||||||||||
| Natural gas fixed | January 1, 2014 to Dec. 31, 2014 | 20,000 GJ/d | $ | 3.60 CDN | $ | 3.60 CDN | AECO | ||||||||||
| Natural gas fixed | July 1, 2014 to Dec. 31, 2014 | 15,000 GJ/d | $ | 3.71 CDN | $ | 3.71 CDN | AECO | ||||||||||
| Natural gas fixed | February 1, 2014 to Dec. 31, 2014 | 10,000 GJ/d | $ | 3.79 CDN | $ | 3.79 CDN | AECO | ||||||||||
| Natural gas fixed | February 1, 2014 to Dec. 31, 2014 | 10,000 GJ/d | $ | 3.80 CDN | $ | 3.80 CDN | AECO | ||||||||||
| Natural gas fixed | February 1, 2014 to Dec. 31, 2014 | 15,000 GJ/d | $ | 3.85 CDN | $ | 3.85 CDN | AECO | ||||||||||
| Natural gas fixed | February 1, 2014 to Dec. 31, 2014 | 10,000 GJ/d | $ | 3.84 CDN | $ | 3.84 CDN | AECO | ||||||||||
| Natural gas fixed | March 1, 2014 to Dec. 31, 2014 | 10,000 GJ/d | $ | 4.14 CDN | $ | 4.14 CDN | AECO |
Outlook
Bellatrix continues to develop its core assets and conduct exploration programs utilizing its large inventory of geological prospects.
2014 cash flow forecasts for the year have been updated to reflect the recent softening natural gas prices due to the current cooler summer weather conditions. 2014 funds flow from operations expectations have been lowered to approximately $350 million or $1.90 per basic share. This represents a 144% increase over 2013 funds flow from operations of $143.5 million or $1.27 per basic share.
Based on an assumed 2014 average Edmonton Light oil price of $96.85/bbl and AECO $4.34/GJ, average 2014 royalty rates of 18% and estimated 2014 operating costs of $116.5 million or $7.75 boe/d, the Company expects to exit 2014 with total net debt of approximately $390 million or approximately 1.0 times total net debt to annualized estimated fourth quarter 2014 funds flow from operations.
For the remainder of 2014, Bellatrix will be active in drilling with 10 to 12 rigs operating in its two core resource plays, the Cardium light oil play (Bellatrix is the second largest land holder with 338 net sections in the Cardium) and Mannville condensate rich gas play, utilizing horizontal drilling multi-fracturing technology. A revised net capital budget of $515 million has been set for fiscal 2014. Based on the timing of proposed expenditures, downtime for anticipated plant turnarounds and normal production declines, execution of the 2014 budget is anticipated to provide 2014 average daily production of approximately 41,000 boe/d and an exit rate of approximately 48,000 boe/d.
Value is constantly created as we expand with a dominating control of our core area and infrastructure thereby managing our destiny and future growth.
Raymond G. Smith, P. Eng.
President and CEO
August 5, 2014
Note:
A conference call to discuss Bellatrix’s 2014 second quarter financial and operating results and address investor questions will be held on August 6, 2014 at 9:00 am MDT/11:00 am EDT. To participate, please call toll-free 1-888-390-0546 or 416-764-8688. The conference call will also be recorded and available until August 13, 2014 by calling 1-888-390-0541 or 416-764-8677 and entering passcode 631737 followed by the pound sign.
The Company’s current corporate presentation is available at www.bellatrixexploration.com.