TSX, NYSE: BXE
CALGARY, Nov. 4, 2014 /CNW/ – Bellatrix Exploration Ltd. (“Bellatrix” or the “Company”) (TSX, NYSE: BXE) reports record year-to-date production, funds flow from operations, net profit and third quarter 2014 financial results.
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.
|Three months ended
| Nine months ended
|SELECTED FINANCIAL RESULTS (unaudited)|
|(CDN$000s except share and per share amounts)|
|Revenue (before royalties and risk management (1))||137,411||68,329||453,307||208,436|
|Funds flow from operations (2)||60,341||30,002||208,996||104,110|
|Per basic share (5)||$0.32||$0.28||$1.16||$0.96|
|Per diluted share (5)||$0.31||$0.25||$1.14||$0.89|
|Cash flow from operating activities||60,006||25,295||204,369||90,433|
|Per basic share (5)||$0.31||$0.23||$1.13||$0.84|
|Per diluted share (5)||$0.31||$0.22||$1.12||$0.77|
|Per basic share (5)||$0.23||$0.27||$0.60||$0.46|
|Per diluted share (5)||$0.23||$0.25||$0.59||$0.43|
|Capital – exploration and development||138,545||42,146||422,594||179,778|
|Capital – corporate assets||1,656||4,306||7,817||4,988|
|Capital expenditures – cash||167,790||49,452||457,982||187,766|
|Property dispositions – cash||–||(54,242)||(8,374)||(54,242)|
|Total net capital expenditures – cash||167,790||(4,790)||449,608||133,542|
|Other non-cash items||3,642||845||12,233||324|
|Total capital expenditures – net (4)||171,432||(3,945)||461,841||133,848|
|Convertible debentures (6)||–||47,335||–||47,335|
|Adjusted working capital deficiency (3)||67,462||31,577||67,462||31,577|
|Total net debt (3)||470,117||218,207||470,117||218,207|
|Total shareholders’ equity||1,190,258||439,570||1,190,258||439,570|
|SELECTED OPERATING RESULTS||Three months ended
|Nine months ended
|Average daily sales volumes|
|Crude oil, condensate and NGLs||(bbls/d)||11,631||6,188||12,222||6,126|
|Total oil equivalent||(boe/d)||37,838||21,852||36,420||21,108|
|Crude oil and condensate||($/bbl)||90.39||101.78||97.70||94.92|
|NGLs (excluding condensate)||($/bbl)||43.20||48.65||47.43||42.76|
|Crude oil, condensate and NGLs||($/bbl)||65.78||78.27||73.77||74.60|
|Crude oil, condensate and NGLs (including risk management (1))||($/bbl)||61.46||69.86||68.04||72.11|
|Natural gas (including risk management (1))||($/mcf)||4.30||2.90||4.51||3.62|
|Total oil equivalent||($/boe)||38.67||33.68||45.01||35.85|
|Total oil equivalent (including risk management (1))||($/boe)||36.77||32.27||40.83||36.35|
|Net wells drilled||17.5||8.6||52.0||30.7|
|Selected Key Operating Statistics|
|Operating netback (4)||($/boe)||21.57||19.85||27.60||20.64|
|Operating netback (4) (including risk management (1))||($/boe)||19.67||18.43||23.41||21.13|
|General & administrative||($/boe)||1.75||2.26||1.63||1.85|
|Royalties as a % of sales (after
|Common shares outstanding||191,488,243||109,524,598||191,488,243||109,524,598|
|Share options outstanding||11,217,837||9,211,229||11,217,837||9,211,229|
|Shares issuable on conversion of convertible debentures (6)||–||8,924,824||–||8,924,824|
|Fully diluted common shares outstanding||202,706,080||127,660,651||202,706,080||127,660,651|
|Weighted average shares (5)||191,351,567||108,252,748||180,347,407||108,019,795|
|SHARE TRADING STATISTICS|
|TSX and Other (7)|
|(CDN$, except volumes) based on intra-day trading|
|Average daily volume||2,439,662||972,170||2,521,746||887,172|
|NYSE MKT (8)|
|(US$, except volumes) based on intra-day trading|
|Average daily volume||446,638||90,869||327,729||75,288|
|(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 nine months ended September 30, 2014 were 191,351,567 (2013: 108,252,748), and 180,347,407 (2013: 108,019,795), 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 nine months ended September 30, 2014, a total of 1,685,048 (2013: 3,978,815), and 2,331,052 (2013: 3,285,731) 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 nine months ended September 30, 2013: 8,924,824) on conversion of convertible debentures were added to the denominator as they were dilutive, resulting in diluted weighted average common shares of 193,036,615 (2013: 121,156,387), and 182,678,459 (2013: 120,230,350), respectively. As a consequence, a total of nil (2013: $0.8 million) and nil (2013: $2.4 million) for interest and accretion expense (net of income tax effect) was added to the numerator for the three and nine 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 of October 21, 2013. During September 2013, $5.0 million principal amount of convertible debentures were converted into an aggregate of 895,605 common shares of the Company. Subsequent to September 30, 2013, the remaining $50.0 million principal amount of remaining convertible debentures were converted or redeemed in exchange for an aggregate of 8,898,243 common shares of the Company. For the three and nine months ended September 30, 2013, shares issuable on conversion of convertible debentures were calculated by dividing the outstanding 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)||Effective October 6, 2014, Bellatrix transferred the listing of its common shares from NYSE MKT to the New York Stock Exchange (“NYSE”). The common shares trade on the NYSE under the same ticker symbol, “BXE”, as was used on the NYSE MKT listing and is currently used on the TSX listing.|
REPORT TO SHAREHOLDERS
Bellatrix continues to focus and execute on long term operational excellence, portfolio quality, and securing firm access to processing capacity while maintaining a strong flexible financial position.
Bellatrix is positioned to provide shareholders with another strong growth year in 2014 wherein the Company’s average annual production is anticipated to grow by approximately 75%, while the year-over-year exit rate grows by an estimated 20% in spite of the aeviternal area gas plant constraints experienced.
Bellatrix has posted record production volumes (up 73%), funds flow from operations (up 101%), revenue (up 101%), and record earnings (up 52%) in the third quarter of 2014 compared to the third quarter of 2013. In addition, Bellatrix continues to excel technically, achieving 20 consecutive quarters of 100% success in drilling and completing wells in the Company’s two key core plays, the Cardium and Spirit River. In the first 9 months of 2014 Bellatrix successfully drilled 98 gross wells utilizing horizontal drilling and multi stage completion techniques. To date in 2014, Bellatrix drilled and completed 19 gross Notikewin and/or Falher B liquids rich gas wells that tested at an average 10.0 mmcf/d of natural gas with 35 bbl/mmcf of natural gas liquids at an average flowing pressure of 1,988 psi. The Company drilled 4 Falher A wells (new play in the Spirit River Interval) that tested at 6.5 mmcf/d with 35 bbl/mmcf natural gas liquids at an average flowing pressure of 937 psi and one well in the Wilrich that tested at 4.0 mmcf/d with 35 bbl/mmcf natural gas liquids at a flowing pressure of 1,508 psi. The remaining Spirit River wells drilled to date are waiting on completion.
The aforementioned test rates were acquired during the initial cleanup period averaging 5 to 7 days. Once on production, the wells have been produced at restricted rates due to the previously disclosed area infrastructure constraints. Due to the short test period, the data should be considered to be preliminary and the test results are not necessarily indicative of long-term performance or ultimate recovery.
Operational highlights for the three and nine months ended September 30, 2014 include:
- Record sales of 37,838 boe/d (69% natural gas), up 73% from sales volumes of 21,852 boe/d registered in the third quarter of 2013.
- On a year-to-date basis, Bellatrix posted earnings of $108.3 million, up 119% over the same period in 2013 ($49.5 million).
- Earnings for the third quarter 2014 of $44.9 million were 52% higher than the $29.5 million posted in Q3 2013.
- Funds flow from operations for the nine months ending September 30, 2014 was $209.0 million, up 101% over the same period in 2013 ($104.1 million).
- During the third quarter of 2014, Bellatrix drilled and/or participated in 35 gross (17.5 net) wells, consisting of 22 gross (11.2 net) Cardium wells and 13 gross (6.3 net) Spirit River Interval liquids-rich gas wells. In the nine months ended September 30, 2014, Bellatrix posted a 100% success rate drilling and/or participating in 98 gross (52.0 net) wells, resulting in 71 gross (39.6 net) Cardium wells and 27 gross (12.4 net) Spirit River Interval liquids-rich gas wells.
- During the third quarter of 2014, Bellatrix spent $167.8 million on capital projects, compared to $49.5 million in Q3 2013. In the nine months ended September 30, 2014, Bellatrix spent $458.0 million on capital projects, compared to $187.8 million in the first nine months of 2013.
- As at September 30, 2014, Bellatrix had approximately 390,141 net undeveloped acres of land in Alberta, British Columbia and Saskatchewan.
- Continued historical year-over-year production and reserve growth
To view Bellatrix’s Historical Production and Reserves, please click here.
Bellatrix also posted a Compounded Annual Growth Rate (“CAGR”) in Cash Flow per Share of 34% for the fiscal years 2009 through to 2013. Inclusive of the forecasted 2014 Cash Flow per Share, the 5 year CAGR is 34%.
Cardium and Mannville Consolidation Efforts
During the third quarter of 2014, Bellatrix completed a tuck-in acquisition of working-interests in the Company’s core Ferrier area in West Central Alberta, extending the Company’s Cardium resource play. The acquired assets included low decline rate net production of approximately 300 boe/d (24% oil and liquids and 76% natural gas). The acquisition included 8 gross (7.0 net) sections of Cardium mineral rights and 3 gross (1.2 net) sections of Mannville prospective lands. The Company estimates the acquired acreage to contain 18 gross (16.1 net) low risk Cardium development locations, which are adjacent to Bellatrix’s core land base in the Ferrier area. Bellatrix acquired the assets for a net purchase price of $13.9 million, which was funded using the Company’s existing credit facilities.
In addition, during the third quarter of 2014 Bellatrix was active in recent Alberta land sales acquiring 2 gross (2.0 net) sections of Mannville and Cardium mineral rights in the highly prospective Alder Flats area in Central Alberta for $4.4 million. Bellatrix also acquired additional working interests in multiple existing properties for a total cost of $13.7 million after adjustments.
Subsequent to September 30, 2014, Bellatrix entered into a farmin arrangement encompassing 12 gross (9.4 net) sections of Mannville rights and 6 gross (3.5 net) sections of Cardium rights in the Ferrier area of West Central Alberta. Under the arrangement, Bellatrix has committed to drill a minimum of 6 Cardium wells and 6 Mannville wells. By drilling these wells, Bellatrix will earn the farmor’s entire working interest in either the Cardium or Mannville for each section drilled, but reserving a 15% gross overriding royalty payable on Mannville wells and a 7.5% to 12% gross overriding royalty payable on Cardium wells to the farmee. After drilling all commitment wells, Bellatrix has the right to drill additional option wells to earn the remaining sections of Cardium and Mannville rights on similar terms. Bellatrix is pleased to report that 2 Mannville and 2 Cardium commitment wells are already in progress.
Grafton $250 Million Additional Commitment
On September 30, 2014, Bellatrix announced that based upon the success of the first joint venture with Grafton, Bellatrix has entered into a new multi-year joint venture arrangement with Canadian Non-Operated Resources Corp. (“CNOR”), a non-operated oil and gas company managed by Grafton Asset Management Inc. pursuant to which CNOR has committed $250 million in capital towards future accelerated development of a portion of Bellatrix’s extensive undeveloped land holdings.
Under the terms of the agreement, CNOR will pay 50% of the drilling, completion, equipping and tie-in capital expenditures associated with development plans to be proposed by Bellatrix and approved by a management committee comprised of representatives of Bellatrix and CNOR in order to earn 33% of Bellatrix’s working interest before payout and automatically converting to a 10.67% gross overriding royalty on Bellatrix’s pre-joint venture working interest after payout (being recovery of CNOR’s capital investment plus an 8% return on investment). The joint venture funding is available immediately; however, Bellatrix expects the funds to be spent primarily from 2016 through 2018. Between Grafton and CNOR, a total of $500 million has been committed to the development of Bellatrix’s lands.
Transfer of Listing from NYSE MKT to the New York Stock Exchange
On October 1, 2014, Bellatrix announced the transfer of the listing of its common shares from NYSE MKT to the NYSE. Bellatrix’s common shares began trading on the NYSE on Monday, October 6, 2014, under its current trading symbol “BXE”. The Company’s common shares also continue to be listed for trading on the TSX, which will continue unaffected by the transfer to the NYSE.
Financial highlights for the three and nine months ended September 30, 2014 include:
- For the first nine months of 2014, Bellatrix recognized a net profit of $108.3 million, compared to a net profit of $49.5 million in the same period of 2013. Bellatrix’s net profit for Q3 2014 was $44.9 million, compared to a net profit of $29.5 million in Q3 2013.
- Revenue for the first nine months of 2014 was $453.3 million, an increase of 117% from $208.4 million in the same period in 2013. Q3 2014 revenue was $137.4 million, 101% higher than the $68.3 million recognized in Q3 2013. The increase in revenue between the periods was primarily due to higher sales volumes for all products, in conjunction with higher realized natural gas prices, partially offset by lower realized crude oil, condensate, and NGL prices in Q3 2014 compared to Q3 2013.
- Funds flow from operations for the first nine months of 2014 was $209.0 million ($1.16 per basic share), up 101% from $104.1 million ($0.96 per basic share) in the first nine months of 2013. Funds flow from operations for Q3 2014 was $60.3 million ($0.32 per basic share), up 101% from $30.0 million ($0.28 per basic share) in Q3 2013. The increase in funds flow from operations between the three months ended September 30, 2014 and the same period in 2013 was principally attributable to higher sales volumes and revenues, partially offset by increased expenses associated with the increase in sales volumes and a higher net realized loss on commodity contracts in the 2014 period.
- Crude oil, condensate and NGLs produced 52% and 55% of petroleum and natural gas sales revenue for the three and nine month periods ended September 30, 2014, respectively.
- Production expenses for the nine months ended September 30, 2014 were $8.27/boe ($82.2 million), compared to $8.76/boe ($50.5 million) for the same period in 2013. Production expenses for Q3 2014 were $8.85/boe ($30.8 million), compared to $8.98/boe ($18.1 million) for Q3 2013 and $7.80/boe ($25.8 million) for Q2 2014.
- Operating netbacks including risk management for the nine months ended September 30, 2014 were $23.41/boe, up from $21.13/boe in the first nine months of 2013. Operating netbacks excluding risk management for the nine months ended September 30, 2014 were $27.60/boe, compared with $20.64/boe in the same period in 2013. The netback increased between the periods as a result of higher commodity prices and reduced production expenses, partially offset by higher royalties and transportation expenses.
- Operating netbacks including risk management for Q3 2014 were $19.67/boe, up from $18.43/boe in Q3 2013. Operating netbacks excluding risk management for Q3 2014 were $21.57/boe, up from $19.85/boe in Q3 2013. The increase in netback before including risk management between the periods was primarily the result of higher commodity prices and reduced production expenses, partially offset by higher royalty and transportation expenses.
- G&A expenses for the nine months ended September 30, 2014 were $1.63/boe ($16.2 million), compared to $1.85/boe ($10.7 million) in the same period in 2013. G&A expenses for Q3 2014 decreased on a per boe basis to $1.75/boe ($6.1 million), compared to $2.26/boe ($4.5 million) for Q3 2013.
- As at September 30, 2014, Bellatrix had $222.3 million undrawn on its total $625 million credit facilities.
- Total net debt as of September 30, 2014 was $470.1 million.
Commodity Price Risk Management
As of November 3, 2014, the Company has entered into the following commodity price risk management arrangements:
|Type||Period||Volume||Price Floor||Price Ceiling||Index|
|Crude oil fixed||January 1, 2014 to Dec. 31, 2014||500 bbl/d||$ 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|
Business Prospects and 2014 Year Outlook
Bellatrix continues to develop its core assets and conduct exploration programs utilizing its large inventory of geological prospects. Based on the timing of proposed expenditures, normal production declines and execution of its 2014 capital budget of $530 million including tuck-in acquisitions completed in the third quarter of 2014, the Company expects 2014 average daily production guidance of approximately 38,500 boe/d and to exit the year within the range of approximately 45,000 to 47,000 boe/d. Bellatrix is in the process of installing additional compression and gas gathering infrastructure that will enable the Company to increase production to existing and access additional midstream gas processing facilities.
Preliminary 2015 Outlook
The Board of Directors has approved an initial $450 million net capital budget for 2015. Our focus in 2015 will remain on execution of strategic priorities including key infrastructure projects and construction of Phase 1 of our 110 mmcf/d deep cut gas plant at Alder Flats, which remains on schedule and on budget, with an expected in-service date of July 1, 2015. Based on timing of our forecast expenditures, and anticipated production processing availability, we anticipate achieving full year 2015 average daily production of approximately 48,000 to 49,000 boe/d; this represents approximately 26% forecast production growth using the midpoint of our initial 2015 average volume guidance compared with our current 2014 full year average outlook.
Infrastructure investments made through 2014 and into 2015 are expected to provide improved operational reliability and reduced impacts from third party facility downtime, provide increased revenue and netback contribution from higher liquids extraction of our natural gas streams, and continue to reduce our already low operating cost profile. Given its superior liquids extraction capability and reductions to operating costs, the proposed Alder Flats deep cut plant has an estimated payback period of two years. Despite this relatively quick payback, it also provides significant strategic value, and anchors long term development of our multi-billion dollar inventory of low risk development well locations.
Near term catalysts include the completion of strategic infrastructure projects expected to be on-stream in December. This includes both the addition of booster compression at our 13-5 compressor station, and the construction of the Twin Rivers pipeline. These projects in combination are expected to increase gross processing capability of approximately 30 to 40 mmcf/d; representing potential increased processing capability net to Bellatrix of approximately 3,000 to 4,000 boe/d, based on forecast working interest volumes.
Additionally, construction and tie-in of new pipelines early in the second quarter of 2015, and additional liquids handling capability at an existing third party gas plant in mid-2015 is expected to provide further gross processing capability of approximately 60 mmcf/d. Finally the two Phases of our proposed Alder Flats deep cut gas plant is anticipated to add 110 mmcf/d capacity by July 2015, expanding to 220 mmcf/d total by April 2016. In combination, these strategic endeavors provide for potential volume growth and total processing capability net to Bellatrix’ working interest of over 80,000 boe/d by mid-2016.
We remain excited about the future prospects for the Company and remain steadfast in our approach to diuturnal value creation for shareholders.
Raymond G. Smith, P. Eng.
President and CEO
November 3, 2014
A conference call to discuss Bellatrix’s 2014 third quarter financial and operating results and address investor questions will be held on November 4, 2014 at 9:00 am MT / 11:00 am ET. To participate, please call toll-free 1-888-231-8191 or 647-427-7450. The conference call will also be recorded and available until November 11, 2014 by calling 1-855-859-2056 or 416-849-0833 and entering passcode 15300817 followed by the pound sign.
The Company’s current corporate presentation is available at www.bellatrixexploration.com.