CALGARY, Dec. 1, 2014 /CNW/ – Bellatrix Exploration Ltd. (“Bellatrix” or the “Company”) (TSX, NYSE: BXE) is pleased to announce it has completed the acquisition of complementary assets within its core Alder Flats area of west central Alberta (greater Ferrier region) from a senior oil and gas producer for total cash consideration of approximately $118 million. The strategic tuck-in acquisition adds approximately 2,200 boe/d of currently unrestricted production (80% natural gas, 20% liquids), and largely represents the consolidation of working interest ownership from existing wellbores and Mannville formation rights. The transaction has an effective date of November 1, 2014.
The transaction enhances forecast cash flow per share, production per share, reserves per share, and the Company’s 2014 exit and 2015 production guidance. The acquisition is consistent with Bellatrix’s strategy to consolidate working interest ownership and acquire operatorship within the core Ferrier area at attractive metrics. Additionally, the transaction provides immediate low risk, high working interest drilling opportunities in the Notikewin and Falher B members, with additional identified upside potential in the highly prospective Falher A and Wilrich members of the Spirit River formation.
Strategic consolidation in existing joint interest lands
The transaction involves the acquisition of Mannville rights and current production from approximately 10 gross (5.7 net) sections of land at Alder Flats, representing largely joint interest lands where Bellatrix currently maintains existing working interest rights. The acquired acreage is highly contiguous with Bellatrix existing acreage, and includes operatorship over the majority of the acquired sections. Furthermore, the acquired acreage directly offsets Bellatrix operated lands, which include its most successful and prolific Mannville horizontal wells to date. This includes the Bellatrix 13-23 upper Mannville liquids rich natural gas well, which has produced an estimated 5.0 Bcf of natural gas with 166,000 barrels of liquids during its first year on-stream.
The transaction increases Bellatrix’s net working interest within the Mannville formation by 57.3% (to approximately 96.9% from 39.6% previously) over the ten gross sections. This strategic consolidation involves no material incremental operating cost impact to the Company given the increased working interest volumes and consolidated formation rights.
Bellatrix’s highly skilled technical team has identified 19 (9.5 net) low risk development drilling locations on the acquired lands within both the Notikewin and Falher B members of the Spirit River formation. Additionally, the Company has identified potential upside of approximately 16 (10.75 net) locations in the highly prospective Falher A and Wilrich members on the acquired lands, also within the Spirit River formation.
Transaction details and summary of acquisition metrics
Estimated November net production from the acquired assets is approximately 2,200 boe/d (80% natural gas, 20% liquids). Details of the transaction include:
Total net cash acquisition price |
$118 million |
Estimated production (November 2014) |
2,200 boe/d (80% natural gas, 20% liquids) |
Forecast capital expenditures (Q4/14-Q4/15) |
$16 million |
Forecast production (2015 full year average)(1) |
4,500 boe/d (80% natural gas, 20% liquids) |
Estimated acquisition metrics include:
Current production (November 2014) |
$53,600/boe/d |
Forecast 2015 production(1) |
$29,800/boe/d |
The acquisition provides significant enhanced value when considering Bellatrix forecast net capital spending on the acquired assets through 2015 of $16 million. Based on this modest level of assumed spending, net production from the acquired assets is expected to average approximately 4,500 boe/d in 2015, resulting in favorable transaction metrics of $29,800/boe/d on internal 2015 forecasts; punctuating the significant value of this tuck-in acquisition.
An independent reserve evaluation of the acquired assets was completed by Sproule Associates Limited (“Sproule”). The evaluation was prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) and with an effective date of October 31, 2014. Sproule estimated company interest(2) reserves attributed to the acquired assets of 10.75 mmboe of proved reserves and 14.2 mmboe of proved plus probable reserves.
Proved reserves |
10.75 mmboe (approximately 81% natural gas,19% liquids) |
Proved plus probable reserves |
14.2 mmboe (approximately 81% natural gas, 19% liquids) |
Estimated acquisition metrics:
Proved reserves |
$10.98/boe |
Proved plus probable reserves |
$8.31/boe |
Notes |
|
(1) |
2015 forecast metrics include Bellatrix internal forecast capital spending of $16 million post-closing (balance of 2014 and 2015) required to grow production. |
(2) |
“Company Interest” means Bellatrix’s working interest (operated or non-operated) share before deduction of royalties. Also referred to as “Gross” reserves under NI 51-101. |
2015 net capital spending prudently revised given recent commodity price changes; increased 2014 exit rate and full year 2015 average production guidance
In light of recent commodity price changes, Bellatrix has prudently revised its 2015 net capital spending guidance to $400 million (from $450 million). The Company remains flexible in its 2015 plans, and can adapt opportunistically to changing market conditions.
Bellatrix is pleased to announce an increase in its 2014 exit rate production guidance range to approximately 47,000 to 49,000 boe/d (from 45,000 to 47,000 boe/d) and an increase to the full year 2015 average production guidance range to approximately 49,000 to 50,000 boe/d (from 48,000 to 49,000 boe/d).
The recently reported increase in Bellatrix’s current borrowing base and credit facilities to $725 million, as announced on November 26, 2014, did not include a review or inclusion of this announced acquisition.
Bellatrix Exploration Ltd. is a 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 in the provinces of Alberta, British Columbia and Saskatchewan. Common shares of Bellatrix trade on the Toronto Stock Exchange and on the New York Stock Exchange under the symbol BXE.
All amounts in this press release are in Canadian dollars unless otherwise identified.
Conversion: 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. 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 six to one, utilizing a conversion on a six to one basis may be misleading as an indication of value. All boe conversions herein are derived from converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil.
SOURCE Bellatrix Exploration Ltd.
For further information: Steve Toth, CFA, Vice President, Investor Relations (403) 750-1270 or Troy Winsor, Investor Relations (800) 663-8072