TSX, NYSE: BXE – CALGARY, Dec. 14, 2017 /CNW/ – Bellatrix Exploration Ltd. (“Bellatrix”, “we”, “our” or the “Company”) (TSX, NYSE: BXE) is pleased to announce a fourth quarter 2017 operational update, including completion of its 2017 capital program with production volumes exceeding guidance, and reconfirmation of its bank credit facility borrowing base. In addition, Bellatrix is pleased to announce that its Board of Directors has approved a 2018 capital budget designed to deliver sustained total corporate production volumes supported by strong risk management protection over approximately 50% of forecast production and market diversification initiatives.
2017 Production Volumes Exceed Both Full Year Average and Exit Rate Guidance
Bellatrix completed its drilling program in mid-November with 2 gross (1.5 net) Spirit River liquids rich natural gas wells spud during the fourth quarter. Completion and tie-in operations during the fourth quarter included 6 gross (4.3 net) Spirit River wells and 1 gross (1.0 net) Cardium well.
Based on field estimates current production is approximately 36,600 boe/d, ahead of the Company’s previously announced exit rate guidance. Fourth quarter production volumes are expected to average approximately 36,500 boe/d, contributing to anticipated full year 2017 average production of approximately 36,750 boe/d.
Estimated |
2017 Annual Guidance |
Estimated Results |
||
Average daily production (boe/d) |
36,750 |
36,000 |
2% |
|
Average product mix |
||||
Natural gas (%) |
75 |
76 |
(1)% |
|
Crude oil, condensate and NGLs (%) |
25 |
24 |
1% |
Credit Facilities Reconfirmed at $120 million
Bellatrix recently completed the semi-annual borrowing base redetermination under the Company’s $120 million syndicated revolving credit facilities (“Credit Facilities”), and is pleased to confirm that the borrowing base has been reconfirmed at $120 million, comprised of a $25 million operating facility and a $95 million syndicated facility. The next semi-annual redetermination is scheduled for May 2018, following completion of the Company’s year-end independent reserves evaluation. Other than approximately $50 million outstanding under the Credit Facilities as at November 30, 2017, the Company has no debt maturities until 2020, providing the Company with approximately $70 million of available liquidity, before deducting outstanding letters of credit.
2018 Capital Budget Maintains Flexibility While Delivering Sustained Production Volumes
Bellatrix is also pleased to announce that its Board of Directors has approved a 2018 capital budget of between $65 to $80 million, designed to achieve average production volumes of between 35,000 to 37,000 boe/d. The 2018 capital budget incorporates forward pricing expectations of approximately US$56.50/bbl WTI and $1.70/GJ AECO, underpinned by strong commodity price risk management protection.
The 2018 capital budget will remain flexible throughout the year, and will concentrate on profitable development of Bellatrix’s high rate of return investment opportunities and achievement of the following strategic objectives:
- Completing construction of Phase 2 of the Bellatrix Alder Flats deep cut gas plant with commissioning planned to commence early in the second quarter of 2018.
- Optimizing forecast return on invested capital through a flexible drilling program focused on Spirit River liquids rich natural gas investment opportunities and higher liquids weighted opportunities in the Cardium play.
- Maintaining a flexible approach to capital investment with the potential to accelerate or decelerate capital expenditures throughout the year.
- Enhancing funds flow from operations through optimal delivery of production volumes during periods of stronger commodity prices by leveraging Bellatrix’s controlled infrastructure and firm service delivery capacity.
- Preserving liquidity and balance sheet strength.
- Continuing to work on cost suppression activities through ongoing technological and operationally focused initiatives.
Managing a flexible capital program provides the opportunity to effectively utilize Bellatrix’s infrastructure, takeaway capacity and market egress. These competitive strengths allow the Company to proactively manage production volumes during periods of commodity price volatility in order to optimize funds flow. To that end, Bellatrix plans to deliver higher production volumes during the first quarter with lower production volumes anticipated in the second quarter given a 25% higher first quarter 2018 AECO forward strip price compared with the second quarter of 2018. With excess firm transportation capacity and infrastructure control, Bellatrix remains well positioned to manage volumes proactively during periods of market volatility.
Bellatrix’s management believes that maintaining production at current throughput levels is appropriate given current forward strip commodity prices, thereby preserving the significant value of the Company’s undeveloped asset base. Bellatrix plans to fund the 2018 capital budget through a combination of funds flow from operations, funding transactions including potential non-core asset dispositions, and bank line utilization if necessary, while maintaining adequate liquidity and managing total net debt levels year over year.
2018 Guidance |
||
Production (boe/d) |
||
2018 Average daily production |
35,000 – 37,000 |
|
Production Mix (%) |
||
Natural gas |
74 |
|
Crude oil, condensate and NGLs |
26 |
|
Net Capital Expenditures ($000)(1) |
||
Total net capital expenditures |
65,000 – 80,000 |
|
Expenses |
||
Production expense ($/boe)(2) |
7.50 – 7.90 |
(1) Net capital spending includes exploration and development capital projects and corporate assets, and excludes property acquisitions and dispositions. Net capital spending also excludes the previously received prepayment portion of Bellatrix’s partner’s 35% share of the cost of construction of Phase 2 of the Alder Flats Plant during calendar 2018. |
(2) Production expenses before net processing revenue/fees. |
2018 Capital Budget Underpinned by Strong Commodity Price Risk Management Protection and Market Diversification Initiatives
During the fourth quarter of 2017, Bellatrix added to its commodity price risk management protection for calendar 2018 in order to further reduce the impacts of price volatility on our business. Bellatrix has 66.1 MMcf/d of 2018 natural gas volumes hedged at an average fixed price of approximately $3.06/mcf, representing approximately 40% of forecast 2018 natural gas volumes. Bellatrix has also recently diversified its natural gas price exposure through physical sales contracts that give the Company access to the Dawn, Chicago, and Malin natural gas pricing hubs. The contracts run from February 2018 through October 2020 and cover approximately 45 MMcf/d. This long-term diversification strategy reduces Bellatrix’s exposure to AECO pricing on approximately 26% of the Company’s forecast 2018 natural gas volumes. In combination, the market diversification sales and fixed price hedges cover approximately 2/3 of natural gas volumes in 2018.
In aggregate, Bellatrix’s hedging program is part of its overall risk management strategy providing reduced commodity price volatility and greater assurance over future revenue and operating funds flow which help drive the capital and reinvestment decisions within our business. Bellatrix’s 2017 and 2018 commodity price risk management contracts as at December 13, 2017 include:
Product |
Financial Contract |
Period |
Volume |
Average Price (1) |
Natural gas |
Fixed price swap |
October 1, 2017 to December 31, 2017 |
111.1 MMcf/d |
$3.13/mcf |
Natural gas |
Fixed price swap |
January 1, 2018 to December 31, 2018 |
66.1 MMcf/d |
$3.06/mcf |
Natural gas |
AECO basis swap |
April 1, 2018 to October 31, 2018 |
10,000 MMBtu/d |
US$1.24/MMBtu |
Crude oil |
Fixed price swap |
January 1, 2018 to December 31, 2018 |
500 bbl/d |
$69.28/bbl |
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 |
(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. |
Corporate Responsibility Report Released
Bellatrix is dedicated to achieving industry leading economic results in an environmentally responsible, compliant and safe manner. Bellatrix has released its second annual Corporate Responsibility Report which has been posted to our website at www.bxe.com. The report content is designed to provide context around our corporate responsibility initiatives and represents an extension of our ongoing commitment to providing enhanced disclosure and stakeholder engagement.