CALGARY, Alberta, Nov. 01, 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 nine months ended September 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 nine months ended September 30, 2018 and 2017. Bellatrix’s unaudited interim condensed financial statements and notes, and the MD&A for the three and nine months ended September 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 September 30,
||Nine months ended September 30,
|SELECTED FINANCIAL RESULTS|
|(CDN$000s except share and per share amounts)|
|Cash flow from operating activities||7,617||23,031||34,236||41,785|
|Per diluted share (1)||$0.12||$0.47||$0.62||$0.85|
|Adjusted funds flow (2)||7,705||8,300||32,517||42,540|
|Per diluted share (1)||$0.12||$0.17||$0.59||$0.86|
|Net profit (loss)||(8,882||)||(22,124||)||(56,551||)||(78,310||)|
|Per diluted share (1)||($0.14||)||($0.45||)||($1.02||)||($1.59||)|
|Capital – exploration and development||7,042||39,683||36,676||94,896|
|Total capital expenditures – net (3)||2,716||18,421||31,430||38,872|
|Second Lien Notes||110,367||—||110,367||—|
|Convertible Debentures (liability component)||41,120||38,894||41,120||38,894|
|Adjusted working capital deficiency (2)||14,899||48,144||14,899||48,144|
|Total net debt (2)||418,818||399,832||418,818||399,832|
|SELECTED OPERATING RESULTS|
|Total revenue (3)||51,525||48,153||171,762||188,502|
|Average daily sales volumes|
|Crude oil, condensate and NGLs||(bbl/d)||9,275||9,342||9,739||9,054|
|Total oil equivalent (4)||(boe/d)||33,530||37,710||35,848||36,803|
|Average realized prices|
|Crude oil and condensate||($/bbl)||82.47||55.36||80.92||60.93|
|NGLs (excluding condensate)||($/bbl)||26.31||18.79||25.76||19.19|
|Total oil equivalent||($/boe)||16.17||13.56||17.14||18.35|
|Total oil equivalent (including risk management (5))||($/boe)||18.68||17.49||19.39||20.33|
|Selected Key Operating Statistics|
|Operating netback (3)||($/boe)||4.92||2.91||5.79||6.81|
|Realized gain (loss) on risk management contracts||($/boe)||2.51||3.93||2.25||1.97|
|Operating netback (3) (including risk management (5))||($/boe)||7.43||6.84||8.04||8.78|
|Three months ended September 30,
||Nine months ended September 30,
|Common shares outstanding (6)||61,764,109||49,378,026||61,764,109||49,378,026|
|Weighted average shares (1)||61,763,344||49,378,026||55,454,603||49,343,026|
|SHARE TRADING STATISTICS|
|TSX and Other (7)|
|(CDN$, except volumes) based on intra-day trading|
|Average daily volume||430,717||171,423||613,688||180,064|
|(US$, except volumes) based on intra-day trading|
|Average daily volume||81,286||80,673||122,788||87,531|
(1) Basic weighted average shares for the three and nine months ended September 30, 2018 were 61,763,344 (2017: 49,378,026) and 55,454,603 (2017: 49,343,026), 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 nine months ended September 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, a total of nil (2017: nil) common shares issuable on conversion of the Company’s outstanding 6.75% convertible unsecured subordinated debentures (the “Convertible Debentures”) were added to the denominator, and a total of nil (2017: nil) common shares issuable on exercise of the Company’s outstanding warrants were added to the denominator for the three and nine month periods resulting in diluted weighted average common shares outstanding of 61,763,344 (2017: 49,378,026) and 55,454,603 (2017: 49,343,026), 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 nine months ended September 30, 2018 were 72,577,386 (2017: 57,210,780) and 72,577,386 (2017: 57,210,780), respectively. This includes 1,552,232 (2017: 1,659,914) and 1,552,232 (2017: 1,659,914), respectively of share options outstanding, 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, and 3,088,205 (2017: nil) and 3,088,205 (2017: nil), respectively of warrants outstanding. 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 third quarter results highlight our tight focus on cost and debt reduction initiatives and continued improvement in operational performance. Production volumes for the nine months ended September 30, 2018 have exceeded full year average production guidance by approximately 3%. Given strong results experienced year to date, Bellatrix is announcing increased full year 2018 corporate guidance metrics, which includes an increase to our full year average production guidance range, and a decrease to both our full year capital expenditure and full year production expenditure guidance ranges.
Third quarter 2018 performance included the following operational and financial achievements:
- Production volumes in the third quarter of 2018 averaged 33,530 boe/d (72% natural gas weighted). Average production volumes of 35,848 boe/d over the first nine months of 2018 represent 3% outperformance compared with the mid-point of Bellatrix’s previous full year average production guidance range (34,000 to 35,500 boe/d).
- Production expenses in the third quarter of 2018 averaged $7.71/boe, down 2% compared with first half 2018 production expenses of $7.84/boe. Production expenditures in the nine months ended September 30, 2018 of $7.80/boe were in line with Bellatrix’s previous full year 2018 production expenditure guidance range of $7.65/boe to $8.00/boe. 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 have contributed to the achieved production expenditure level.
- Bellatrix continues to improve drilling efficiency and reduce costs. During the third quarter of 2018, Bellatrix drilled its 4-23 operated Cardium well (100% working interest), achieving approximately 8 days from spud to rig release, representing a 32% improvement compared with 2017 Cardium drilling results. 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 reduced total net debt by $11.4 million and increased its liquidity by $14.4 million as at September 30, 2018, compared with the previous quarter. Borrowings under our syndicated revolving credit facilities (the “Credit Facilities”) were $57.1 million and total net debt was $418.8 million at September 30, 2018. At September 30, 2018, Bellatrix had approximately $37.9 million of undrawn capacity (approximately 40% undrawn) against total commitments of $95 million under the Company’s Credit Facilities, before deducting outstanding letters of credit of $11.5 million that reduce the amount otherwise available to be drawn on the Credit Facilities.
- On September 11, 2018, Bellatrix announced that it closed a debt refinancing transaction which extended the maturity of over one-third of the Company’s unsecured senior notes due 2020 by three years and reduced outstanding debt by approximately $10.5 million.
Bellatrix delivered strong operational performance in the first nine months of 2018 relative to guidance expectations as summarized below:
|First Nine Month
|Average daily production (boe/d)||35,848||34,750||3%|
|Average product mix|
|Natural gas (%)||73||74||(1)%|
|Crude oil, condensate and NGLs (%)||27||26||4%|
|Capital Expenditures ($000’s)|
|Total net capital expenditures(2)||37,698||55,000||n/a|
|Production expense ($/boe)||7.80||7.83||—%|
(1) 2018 Annual Guidance metrics represent the mid-point of the previously set guidance range (August 2, 2018) where applicable.
(2) Capital spending includes exploration and development capital projects and corporate assets, and excludes property acquisitions, property dispositions and facilities.
REDUCED SUSTAINING CAPITAL
The combination of structurally lower capital costs and improved well performance have reduced overall sustaining capital requirements for our business. All-in average Spirit River well costs (drill, complete, equip and tie-in) have been lowered to approximately $3.4 million in 2018 (from $3.8 million in 2017). In addition to capital 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. Enhanced productivity has led to a reduction in the assumed number of Spirit River wells from 15 to 12 per year (assuming an average 6.0 Bcf performance curve versus a 5.2 Bcf performance curve) required to maintain corporate production volumes in the mid 30,000 boe/d range. Bellatrix has drilled and/or participated in only 7.2 net wells during the first nine months of 2018, while delivering average production volumes of 35,848 boe/d over the nine-month period.
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 the Company’s existing facilities and processing capacity provide the capability to grow production volumes beyond 60,000 boe/d, with minimal future facility related capital.
COMMODITY PRICE RISK MANAGEMENT PROTECTION AND MARKET DIVERSIFICATION INITIATIVES
Bellatrix maintains strong commodity price risk management and market diversification coverage through 2020 which is expected to reduce the impact of commodity price volatility on our business. Bellatrix has approximately 69 MMcf/d of natural gas volumes hedged in the fourth quarter of 2018, at an average fixed price of approximately $2.98/mcf, representing approximately 45% of 2018 daily average natural gas volumes (based on the mid-point of updated 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 with increased volume exposure beginning in November 2018. This long-term diversification strategy reduces Bellatrix’s exposure to AECO pricing on approximately 40% of the Company’s forecast fourth quarter 2018 natural gas volumes.
In combination, market diversification sales and fixed price hedges cover approximately 85% of natural gas volumes in the fourth quarter of 2018, and approximately 55% in 2019 (based on the mid-point of 2018 average production guidance). A summary of Bellatrix’s commodity price risk management contracts as at September 30, 2018 include:
|Product||Financial Contract||Period||Volume||Average Price (1)|
|Natural gas||Fixed price swap||October 1, 2018 to December 31, 2018||67 MMcf/d||$3.03/mcf|
|Natural gas||Fixed price swap||October 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$1.24/MMBtu|
|Propane||Fixed price differential||October 1, 2018 to December 31, 2018||1,000 bbl/d||47% of NYMEX WTI|
|Crude oil||Sold C$WTI call||October 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||October 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 September 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|
INCREASED CORPORATE NGL YIELD ACHIEVED IN THE SECOND AND THIRD QUARTERS
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). Total NGL recoveries (including plant condensate) at the Alder Flats Plant have increased in the second and third quarters of 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 27% in 2018.
THIRD QUARTER 2018 OPERATIONAL ACTIVITIES AND PERFORMANCE
Drilling and completion activities in the third quarter were hampered by unseasonably wet weather. During the third quarter, Bellatrix participated in four gross (2.0 net) wells, including three gross operated wells drilled (two Spirit River and one Cardium well). The three operated wells were spud late in the third quarter, with the two Spirit River wells brought on-stream during late October, and the Cardium well anticipated to be on-stream in early November.
OPERATIONAL AND FINANCIAL SUMMARY
- Production volumes in the third quarter of 2018 averaged 33,530 boe/d (72% natural gas weighted), down from second quarter 2018 volumes of 37,309 boe/d, reflecting natural volume declines and proactive volume curtailments during periods of weak natural gas pricing. Production volumes averaged 35,848 boe/d for the nine months ended September 30, 2018, above the high end of Bellatrix’s previous full year average production guidance range (34,000 to 35,500 boe/d).
- Adjusted funds flow generated in the three months ended September 30, 2018 was $7.7 million ($0.12 per basic and diluted share), compared to $10.1 million ($0.18 per basic share and diluted share) in the second quarter of 2018.
- Exploration and development capital expenditures were $7.0 million in the third quarter of 2018. Total exploration and development capital expenditures for the first nine months of 2018 were $36.7 million, in line with budget expectations. Capital expenditures year to date have primarily been allocated to drilling, completion and equipping activity.
- Bellatrix’s borrowings under its Credit Facilities were $57.1 million, and total net debt was $418.8 million at September 30, 2018. At September 30, 2018, Bellatrix had approximately $37.9 million of undrawn capacity (approximately 40% undrawn) against total commitments of $95 million within the Company’s Credit Facilities before deducting outstanding letters of credit of $11.5 million that reduce the amount otherwise available to be drawn on the Credit Facilities.
- For the quarter ended September 30, 2018, Bellatrix’s Senior Debt to EBITDA (as defined in the MD&A) ratio was 2.78 times, well below the financial covenant of 5.0 times as permitted by the agreement governing the Credit Facilities and Bellatrix’s First Lien Debt to EBITDA (as defined in the MD&A) ratio was 1.24 times, well below the financial covenant of 3.0 times as permitted by the agreement governing the Credit Facilities.
- Total revenue was $51.5 million for the third quarter of 2018, compared to $54.0 million in the second quarter of 2018, as modestly higher natural gas and liquids pricing mitigated lower production volumes over the comparative periods.
- The corporate royalty rate in the three months ended September 30, 2018 averaged 13% of sales (after transportation), comparable with the 13% average rate in the second quarter of 2018.
- Production expenses in the third quarter of 2018 averaged $7.71/boe, down 2% compared with first half 2018 production expenses of $7.84/boe. Production expenses in the nine months ended September 30, 2018 of $7.80/boe remain in line with Bellatrix’s full year 2018 production expense guidance range.
- Our corporate operating netback (including risk management) realized for the three months ended September 30, 2018 was $7.43/boe, down 2% compared with $7.58/boe realized in the second quarter 2018. This change reflects lower realized hedging gains mitigated by higher average commodity sales prices over the comparable periods.
- Net general and administrative (“G&A”) expenses (after capitalized costs and recoveries) for the three months ended September 30, 2018 were $6.4 million ($2.08/boe), down $0.4 million from $6.8 million ($2.01/boe) in the second quarter of 2018.
- Bellatrix recorded a net loss for the three months ended September 30, 2018 of $8.9 million compared to a net loss of $34.8 million for the three months ended June 30, 2018. The decrease in net loss period over period is primarily due to a decrease in unrealized loss on commodity contracts, an increase in unrealized foreign exchange gains, an increase in gains on Senior Note settlements, and a decrease in production expenses, partially offset by a 10% decrease in total sales volumes.
- As at September 30, 2018, Bellatrix had approximately 134,206 net undeveloped acres of land principally in Alberta.
- As at September 30, 2018, Bellatrix had approximately $1.37 billion in tax pools available for deduction against future income.
- Bellatrix maintained a strong Liability Management Rating of 10.32 in Alberta versus an industry average of 4.87 as at October 6, 2018.
OUTLOOK & 2018 CORPORATE GUIDANCE
Year to date average production volumes of 35,848 boe/d continue to track near the high end of Bellatrix’s prior 2018 full year guidance range of 34,000 to 35,500 boe/d. Bellatrix is announcing today, an increase in its average production guidance range, and an associated decrease in its full year 2018 net capital expenditure guidance range, given strong results year to date. Average well performance continues to exceed expectations, resulting in lower sustaining capital requirements for Bellatrix’s business. Bellatrix has been stewarding its full year 2018 capital investment level near the low end of its previous guidance range, therefore the Company is adjusting its full year capital guidance to $50 to $55 million.
(November 1, 2018)
|Previously Set 2018
(August 2, 2018)
|Previously Set 2018
(April 3, 2018)
|2018 Average daily production (boe/d)||35,000 – 35,500||34,000 – 35,500||34,000 – 35,500|
|Average product mix|
|Natural gas (%)||73||74||74|
|Crude oil, condensate and NGLs (%)||27||26||26|
|Net capital expenditures|
|Total net capital expenditures ($000) (1)||50,000 – 55,000||50,000 – 60,000||55,000 – 65,000|
|Production expense ($/boe) (2)||7.65 – 7.90||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’s fourth quarter drilling and completion program includes plans to drill up to three gross operated wells, including a two mile Spirit River well. Capital investment in the fourth quarter will also include the completion of the 4-23 Cardium well drilled in September and tying in all three operated wells previously drilled in the third quarter.
The 2018 capital program will remain flexible and focused on optimizing forecast return on invested capital through 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 November 1, 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”.