CALGARY, Alberta, Aug. 02, 2018 (GLOBE NEWSWIRE) — Bellatrix Exploration Ltd. (“Bellatrix”, “we”, “us”, “our” or the “Company”) (TSX, NYSE: BXE) announces its financial and operating results for the three and six months ended June 30, 2018. This press release contains forward-looking statements. Please refer to our cautionary language on forward-looking statements and the other matters set forth at the end of this press release and the beginning of the Management’s Discussion and Analysis (the “MD&A”) for the three and six months ended June 30, 2018 and 2017. Bellatrix’s unaudited interim condensed financial statements and notes, and the MD&A for the three and six months ended June 30, 2018 and 2017 are available on our website at www.bxe.com, and are filed on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar.
Three months ended June 30, | Six months ended June 30, | |||||||
2018 | 2017 | 2018 | 2017 | |||||
SELECTED FINANCIAL RESULTS | ||||||||
(CDN$000s except share and per share amounts) | ||||||||
Cash flow from operating activities | 12,004 | 10,495 | 26,619 | 18,754 | ||||
Per diluted share (1) | $0.22 | $0.21 | $0.51 | $0.38 | ||||
Adjusted funds flow (2) | 10,142 | 19,347 | 24,812 | 34,240 | ||||
Per diluted share (1) | $0.18 | $0.39 | $0.47 | $0.69 | ||||
Net profit (loss) | (34,768) | (69,236) | (47,669) | (56,186) | ||||
Per diluted share (1) | $(0.63) | $(1.40) | $(0.91) | $(1.14) | ||||
Capital – exploration and development | 5,402 | 11,235 | 29,634 | 55,213 | ||||
Total capital expenditures – net (3) | 6,641 | (30,768) | 28,715 | 20,452 | ||||
Credit Facilities | 71,432 | 13,100 | 71,432 | 13,100 | ||||
Senior Notes | 301,435 | 315,308 | 301,435 | 315,308 | ||||
Convertible Debentures (liability component) | 40,530 | 38,380 | 40,530 | 38,380 | ||||
Adjusted working capital deficiency (2) | 16,829 | 15,773 | 16,829 | 15,773 | ||||
Total net debt (2) | 430,226 | 382,561 | 430,226 | 382,561 | ||||
SELECTED OPERATING RESULTS | ||||||||
Total revenue (3) | 54,022 | 74,325 | 120,237 | 140,349 | ||||
Average daily sales volumes | ||||||||
Crude oil, condensate and NGLs | (bbl/d) | 10,467 | 9,182 | 9,975 | 8,908 | |||
Natural gas | (mcf/d) | 161,052 | 172,402 | 162,309 | 164,602 | |||
Total oil equivalent (4) | (boe/d) | 37,309 | 37,916 | 37,027 | 36,342 | |||
Average realized prices | ||||||||
Crude oil and condensate | ($/bbl) | 83.93 | 59.49 | 80.31 | 63.28 | |||
NGLs (excluding condensate) | ($/bbl) | 24.70 | 20.57 | 25.49 | 19.42 | |||
Natural gas | ($/mcf) | 1.30 | 2.94 | 1.73 | 2.91 | |||
Total oil equivalent | ($/boe) | 15.71 | 20.94 | 17.58 | 20.88 | |||
Total oil equivalent (including risk management (5)) | ($/boe) | 18.77 | 21.83 | 19.71 | 21.82 | |||
Selected Key Operating Statistics | ||||||||
Commodity sales | ($/boe) | 15.71 | 20.94 | 17.58 | 20.88 | |||
Other income | ($/boe) | 0.20 | 0.61 | 0.36 | 0.45 | |||
Royalties | ($/boe) | (1.80) | (1.92) | (1.90) | (2.13) | |||
Production expenses | ($/boe) | (7.55) | (8.30) | (7.84) | (8.81) | |||
Transportation | ($/boe) | (2.03) | (1.98) | (2.01) | (1.53) | |||
Operating netback (3) | ($/boe) | 4.53 | 9.35 | 6.19 | 8.86 | |||
Realized gain (loss) on risk management contracts | ($/boe) | 3.05 | 0.89 | 2.13 | 0.94 | |||
Operating netback (3) (including risk management (5)) | ($/boe) | 7.58 | 10.24 | 8.32 | 9.80 |
Three months ended June 30, | Six months ended June 30, | |||||||
SHARE STATISTICS | 2018 | 2017 | 2018 | 2017 | ||||
COMMON SHARES | ||||||||
Common shares outstanding (6) | 61,762,974 | 49,378,026 | 61,762,974 | 49,378,026 | ||||
Weighted average shares (1) | 55,086,338 | 49,333,217 | 52,247,951 | 49,325,235 | ||||
SHARE TRADING STATISTICS | ||||||||
TSX and Other (7) | ||||||||
(CDN$, except volumes) based on intra-day trading | ||||||||
High | 2.17 | 5.65 | 2.22 | 6.83 | ||||
Low | 1.28 | 3.55 | 1.24 | 3.55 | ||||
Close | 1.32 | 3.70 | 1.32 | 3.70 | ||||
Average daily volume | 879,361 | 175,847 | 703,721 | 184,317 | ||||
NYSE | ||||||||
(US$, except volumes) based on intra-day trading | ||||||||
High | 1.69 | 4.25 | 1.78 | 5.15 | ||||
Low | 0.96 | 2.72 | 0.96 | 2.72 | ||||
Close | 0.99 | 2.90 | 0.99 | 2.90 | ||||
Average daily volume | 149,075 | 81,132 | 143,704 | 90,987 |
(1) Basic weighted average shares for the six months ended June 30, 2018 were 55,086,338 (2017: 49,333,217) and 52,247,951 (2017: 49,325,235), respectively. In computing weighted average diluted profit (loss) per share, weighted average diluted cash flow from operating activities per share, and weighted average diluted adjusted funds flow per share for the three and six months ended June 30, 2018, a total of nil (2017: nil) 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 (2017: nil) common shares issuable on conversion of the Convertible Debentures (as defined below) were added to the denominator for the three and six month periods resulting in diluted weighted average common shares outstanding of 55,086,338 (2017: 49,333,217) and 52,247,951 (2017: 49,325,235), respectively.
(2) The terms “adjusted funds flow”, “adjusted funds flow per share”, “total net debt”, and “adjusted working capital deficiency”, do not have standard meanings under generally accepted accounting principles (“GAAP”). Refer to “Capital performance measures” disclosed at the end of this Press Release.
(3) The terms “operating netbacks”, “total capital expenditures – net”, and “total revenue” do not have standard meanings under GAAP. Refer to “Non-GAAP measures” disclosed at the end of this Press Release.
(4) A boe conversion ratio of 6 mcf:1 bbl has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of the conversion ratio, utilizing the 6:1 conversion ratio may be misleading as an indication of value.
(5) 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.
(6) Fully diluted common shares outstanding for the three and six months ended June 30, 2018 were 69,569,546 (2017: 57,360,955) and 69,569,546 (2017: 57,360,955), respectively. This includes 1,633,732 (2017: 1,810,089) and 1,633,732 (2017: 1,810,089) respectively,of share options outstanding and 6,172,840 (2017: 6,172,840) and 6,172,840 (2017: 6,172,840), respectively of shares issuable on conversion of the Convertible Debentures. Shares issuable on conversion of the Convertible Debentures are calculated by dividing the $50 million principal amount of the Convertible Debentures by the conversion price of $8.10 per share.
(7) TSX and Other includes the trading statistics for the Toronto Stock Exchange (“TSX”) and other Canadian trading markets.
FINANCIAL & OPERATIONAL HIGHLIGHTS
Bellatrix’s strong operational performance continued through the second quarter of 2018, delivering average well performance and corporate production volumes that exceeded budget expectations and guidance. Bellatrix’s first half 2018 production volumes exceeded full year average production guidance by approximately 7% despite the proactive curtailment of approximately 12 MMcfe/d to 24 MMcfe/d (2,000 to 4,000 boe/d) of natural gas volumes during periods of weak daily AECO natural gas prices during the second quarter. In addition, the Company delivered material reductions in both operating and capital costs, both of which are expected to contribute to improved long term corporate results.
Second quarter 2018 performance included the following operational and financial achievements:
- Production volumes in the second quarter of 2018 averaged 37,309 boe/d (72% natural gas weighted), roughly 2% higher than first quarter 2018 volumes. First half 2018 average production volumes of 37,027 boe/d represent 7% outperformance compared with the mid-point of Bellatrix’s full year average production guidance range (34,000 to 35,500 boe/d).
- Production expenses in the second quarter of 2018 averaged $7.55/boe, down 7% compared with first quarter 2018 production expenses. Completion of Phase 2 of the Bellatrix O’Chiese Nees-Ohpawganu’ck deep-cut gas plant at Alder Flats (the “Alder Flats Plant”) and the redirection of volumes from higher cost third party plants has contributed to the decrease in expenditures quarter over quarter.
- Bellatrix continues to improve drilling efficiency and reduce costs. In 2018, Bellatrix’s Spirit River development program averaged approximately 10 days from spud to rig release, with all-in Spirit River well costs reduced to approximately $3.4 million.
- Bellatrix previously announced the renewal and extension of its syndicated revolving credit facilities (“Credit Facilities”) and the semi-annual redetermination of the borrowing base thereunder. Bellatrix’s borrowings under its Credit Facilities were $71.4 million at June 30, 2018 providing $28.6 million of undrawn capacity (before deducting outstanding letters of credit of $11.6 million). Other than amounts outstanding under our Credit Facilities, Bellatrix has no debt maturities until 2020 and 2021.
Bellatrix delivered strong operational performance in the first half of 2018 relative to guidance expectations as summarized below:
First Half 2018 Results | 2018 Annual Guidance (1) | Actual Results Versus Guidance |
||||
Average daily production (boe/d) | 37,027 | 34,750 | 7 | % | ||
Average product mix | ||||||
Natural gas (%) | 73 | 74 | (1 | )% | ||
Crude oil, condensate and NGLs (%) | 27 | 26 | 4 | % | ||
Capital Expenditures ($000’s) | ||||||
Total net capital expenditures(2) | 30,299 | 60,000 | n/a | |||
Production expense ($/boe) | 7.55 | 7.83 | (4 | )% |
(1) 2018 Annual Guidance metrics represent the mid-point of the previously set guidance range (April 3, 2018) where applicable.
(2) Capital spending includes exploration and development capital projects and corporate assets, and excludes property acquisitions, property dispositions and facilities.
STRUCTURAL REDUCTIONS IN BOTH OPERATING AND CAPITAL COSTS
Upon completion of Phase 2 of the Alder Flats Plant in March 2018, Bellatrix has redirected approximately 65 MMcf/d of gross natural gas volumes from third party processing plants to the Alder Flats Plant to optimally process under its ownership and processing volume commitments. Operating costs for natural gas processed through Bellatrix’s ownership interest in the Alder Flats Plant are approximately $0.16/mcf, providing significant cost benefits for the Company. Corporate operating costs in the second quarter of 2018 were $7.55/boe, down approximately 7% from first quarter 2018 operating cost levels of $8.13/boe. The redirection of natural gas volumes from more expensive third-party plants are anticipated to drive long term sustained operating cost reductions for the Company.
A series of incremental improvements and operational measures have delivered a step change reduction for all-in average Spirit River well costs (drill, complete, equip and tie-in) to approximately $3.4 million in 2018 (from $3.8 million in 2017). An enhanced focus on pad drilling to reduce surface disturbance (reduced need for pipeline infrastructure and improved efficiency for operating wells), increased monobore style drilling, other proprietary drilling techniques, and reduced nitrogen use are examples of cost reduction efforts achieved. In addition, drilling efficiency gains have continued in 2018, averaging approximately 10 days from spud to rig release for the Spirit River program down from a full program average of 13.5 days in 2017. In addition to the cost savings, Bellatrix delivered productivity improvements with average well performance from the Company’s 2018 Spirit River well program outperforming expected results by approximately 38% on an IP90 basis. The combination of lower capital costs and improved well performance are expected to provide enhanced corporate competitiveness against weak natural gas prices.
COMMODITY PRICE RISK MANAGEMENT PROTECTION AND MARKET DIVERSIFICATION INITIATIVES
Bellatrix maintains strong commodity price risk management and market diversification coverage in 2018 through 2020 which is expected to reduce the impact of commodity price volatility on our business. Bellatrix has approximately 72 MMcf/d of natural gas volumes hedged from July through December 2018, at an average fixed price of approximately $2.94/mcf, representing slightly less than 50% of 2018 daily average natural gas volumes (based on the mid-point of 2018 average production guidance). Bellatrix has also diversified its natural gas price exposure through physical sales contracts that give the Company exposure to the Dawn, Chicago, and Malin natural gas pricing hubs. This long-term diversification strategy reduces Bellatrix’s exposure to AECO pricing on approximately 35% of the Company’s forecast July through December 2018 natural gas volumes.
In combination, the market diversification sales and fixed price hedges cover approximately 80% of natural gas volumes for the remainder of 2018, and approximately 50% in 2019 (based on the mid-point of 2018 average production guidance). A summary of Bellatrix’s 2018 through 2020 commodity price risk management contracts as at June 30, 2018 include:
Product | Financial Contract | Period | Volume | Average Price (1) |
Natural gas | Fixed price swap | July 1, 2018 to December 31, 2018 | 67 MMcf/d | $3.03/mcf |
Natural gas | Fixed price swap | July 1, 2018 to October 31, 2018 | 8 MMcf/d | $1.72/mcf |
Natural gas | Fixed price swap | April 1, 2019 to October 31, 2019 | 18 MMcf/d | $2.01/mcf |
Natural gas | AECO/NYMEX basis swap | April 1, 2019 to October 31, 2020 | 10,000 MMBtu/d | -US$1.24/MMBtu |
Propane | Fixed price differential | July 1, 2018 to December 31, 2018 | 1,000 bbl/d | 47% of NYMEX WTI |
Crude oil | Sold C$WTI call | July 1, 2018 to December 31, 2018 | 1,500 bbl/d | $80.00/bbl |
Crude oil | Sold C$WTI call | January 1, 2019 to December 31, 2019 | 2,000 bbl/d | $80.00/bbl |
Crude oil | Fixed price swap | July 1, 2018 to December 31, 2018 | 1,000 bbl/d | $70.14/bbl |
(1) Prices for natural gas fixed price swap contracts assume a conversion of $/GJ to $/mcf based on an average corporate heat content rate of 40.0Mj/m3.
Bellatrix’s market diversification contracts as at June 30, 2018 include:
Product | Market | Start Date | End Date | Volume |
Natural gas | Chicago | February 1, 2018 | October 31, 2020 | 15,000 MMBtu/d |
Natural gas | Chicago | November 1, 2018 | October 31, 2020 | 15,000 MMBtu/d |
Natural gas | Dawn | February 1, 2018 | October 31, 2020 | 15,000 MMBtu/d |
Natural gas | Dawn | November 1, 2018 | October 31, 2020 | 15,000 MMBtu/d |
Natural gas | Malin | February 1, 2018 | October 31, 2020 | 15,000 MMBtu/d |
ALDER FLATS PHASE 2 FULLY COMMISSIONED IN MARCH CONTRIBUTING TO MATERIALLY HIGHER NGL YIELDS IN THE SECOND QUARTER
The Phase 2 expansion project of the Alder Flats Plant was fully commissioned and began selling volumes mid-March 2018 which more than doubled throughput capacity at the Alder Flats Plant to 230 MMcf/d (from 110 MMcf/d). Completion of Phase 2 adds an incremental 30 MMcf/d ownership capacity net to Bellatrix’s 25% working interest.
The turbo expander is operational on Phase 2, which was designed with a colder process, thereby enhancing natural gas liquid (“NGL”) extraction capabilities. Total NGL recoveries (including plant condensate) at the Alder Flats Plant have increased in the second quarter 2018, with NGL sales yields of approximately 70 bbl/MMcf, up approximately 15% from first quarter total sales yields of approximately 60 bbl/MMcf. The Bellatrix Alder Flats Plant deep-cut process provides enhanced NGL yields of approximately 10 to 35 bbl/MMcf over third-party plants in our core area, resulting in an average corporate liquid weighting of approximately 26% in 2018, which we expect to, in turn, drive enhanced corporate profit margins and cash flow.
The Phase 2 expansion project represented the last stage of our multi-year infrastructure build out. With our long term infrastructure build out complete, Bellatrix expects the majority of future capital investment to be utilized directly in drilling, completion and production addition activities, with minimal capital required for facilities and infrastructure projects over the near term. Management expects that its existing facilities and processing capacity will provide the capability to grow production volumes beyond 60,000 boe/d, with minimal future facility related capital.
FIRST HALF 2018 OPERATIONAL PERFORMANCE
Bellatrix completed the majority of its first half 2018 capital program during the first three months of the year, in advance of the seasonal spring break up period. No wells were drilled or completed during the second quarter of 2018. Well results for the first half 2018 program continue to exceed budget expectations; the average rate for the five operated Spirit River wells has averaged an IP90 rate of 8.6 MMcf/d, outperforming budget expectations by approximately 38%.
Exploration and development capital expenditures invested during the second quarter were $5.4 million. First half 2018 exploration and development capital expenditures were $29.6 million, resulting in expected second half 2018 capital expenditures of approximately $20 to $30 million based on the Company’s updated full year annual capital expenditure guidance budget range of $50 to $60 million.
OPERATIONAL AND FINANCIAL SUMMARY
- Production volumes in the second quarter of 2018 averaged 37,309 boe/d (72% natural gas weighted), roughly 2% higher than first quarter 2018 volumes. First half 2018 average production volumes of 37,027 boe/d represent 7% outperformance compared with the mid-point of Bellatrix’s full year average production guidance range (34,000 to 35,500 boe/d).
- Adjusted funds flow generated in the three months ended June 30, 2018 was $10.1 million ($0.18 per basic and diluted share), compared to $14.7 million ($0.30 per basic share and diluted share) in the first quarter of 2018.
- Exploration and development capital expenditures were $5.4 million in the second quarter of 2018. Total exploration and development capital expenditures for the first six months of 2018 were $29.6 million, in line with budget expectations and updated guidance for a full year 2018 capital expenditure range of $50 to $60 million. The majority of first half 2018 capital expenditures were allocated to drilling, completion and equipping activity.
- Bellatrix’s borrowings under its Credit Facilities were $71.4 million and total net debt was $430.2 million at June 30, 2018. At June 30, 2018, Bellatrix had approximately $28.6 million of undrawn capacity (approximately 17% undrawn) on its $100 million Credit Facilities after deducting outstanding letters of credit of $11.6 million that reduce the amount otherwise available to be drawn on the Credit Facilities.
- For the quarter ended June 30, 2018, Bellatrix’s Senior Debt to EBITDA (as defined in the MD&A) ratio was 1.36 times, well below the financial covenant of 3.0 times as permitted by the agreement governing the Credit Facilities.
- Total revenue was $54.0 million for the second quarter 2018, compared to $66.2 million in the first quarter of 2018, primarily attributed to a 40% decrease in average realized natural gas prices over the comparative periods.
- The corporate royalty rate in the three months ended June 30, 2018 averaged 13% of sales (after transportation), compared with 11% averaged in the first quarter of 2018.
- Production expenses in the second quarter of 2018 averaged $7.55/boe, down 9% compared with second quarter 2017 production expenses of $8.30/boe. Bellatrix has provided a full year 2018 production expenditure guidance range of $7.65/boe to $8.00/boe in 2018 given continued cost suppression activity, production volume guidance, and the contribution from lower costs attributed to Phase 2 of the Bellatrix Alder Flats Plant.
- Our corporate operating netback (including risk management) realized for the three months ended June 30, 2018 was $7.58/boe, down 16% compared with $9.07/boe realized in the first quarter 2018. This change reflects lower realized natural gas prices mitigated by lower production expenditures, and increased realized gains on risk management contracts over the comparable periods.
- Net general and administrative (“G&A”) expenses (after capitalized costs and recoveries) for the three months ended June 30, 2018 were $6.8 million ($2.01/boe), down 6% compared with $7.3 million ($2.10/boe) in the second quarter of 2017.
- Bellatrix recorded a net loss for the three months ended June 30, 2018 of $34.8 million compared to a net loss of $12.9 million for the three months ended March 31, 2018. The decrease in net profit period over period is primarily due to an increase in total loss on commodity contracts and a 19% decrease in commodity prices, offset partially by a decrease in production expenses.
- As at June 30, 2018, Bellatrix had approximately 137,893 net undeveloped acres of land principally in Alberta.
- As at June 30, 2018, Bellatrix had approximately $1.36 billion in tax pools available for deduction against future income.
- Bellatrix maintained a strong Liability Management Rating of 10.69 in Alberta versus an industry average of 4.81 as at July 7, 2018.
OUTLOOK & 2018 CORPORATE GUIDANCE
Solid operational momentum from the first half 2018 drilling program has carried forward into the third quarter as a result of strong well performance and operational execution. Bellatrix is announcing today, a decrease in its full year 2018 net capital expenditure guidance with no associated reduction in average production guidance given strong results year to date. Our Spirit River wells continue to outperform budget expectations, resulting in lower sustaining capital requirements for the remainder of 2018. As a result, Bellatrix is reducing its full year net capital expenditures to a range of $50 to $60 million, down approximately 8% from the prior guidance range of $55 to $65 million.
Revised 2018 Annual Guidance (August 2, 2018) |
Previously Set 2018 Annual Guidance (April 3, 2018) |
|
Production | ||
2018 Average daily production (boe/d) | 34,000 – 35,500 | 34,000 – 35,500 |
Average product mix | ||
Natural gas (%) | 74 | 74 |
Crude oil, condensate and NGLs (%) | 26 | 26 |
Net Capital Expenditures | ||
Total net capital expenditures ($000) (1) | 50,000 – 60,000 | 55,000 – 65,000 |
Expenses | ||
Production expense ($/boe) (2) | 7.65 – 8.00 | 7.65 – 8.00 |
(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.
Bellatrix plans to resume drilling activity in mid-August and to use one rig for its second half 2018 capital program. Bellatrix currently plans to drill five gross operated Spirit River wells and one gross operated Cardium well in the second half of 2018.
Bellatrix plans to fund its second half 2018 capital budget through adjusted funds flow while reducing the need for additional debt or bank line utilization through the end of 2018. The 2018 capital program will remain flexible and focused on optimizing forecast return on invested capital through focused development of the Spirit River liquids rich natural gas play and higher liquids weighted opportunities in the Cardium play.
CONFERENCE CALL INFORMATION
A conference call to discuss Bellatrix’s second quarter results will be held on August 2, 2018 at 3:30 pm MT / 5:30 pm ET. To participate, please call toll-free 1-800-319-4610 or 403-351-0324 or 416-915-3239. The call can also be heard live through an internet webcast accessible via the investors section of Bellatrix’s website at http://www.bxe.com/investors/presentations-events.cfm and will be archived on the website for approximately 30 days following the call.
Bellatrix Exploration Ltd. is a publicly traded 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, with highly concentrated operations in west central Alberta, principally focused on profitable development of the Spirit River liquids rich natural gas play.
Common shares of Bellatrix trade on the Toronto Stock Exchange and on the New York Stock Exchange under the symbol “BXE”.