CALGARY, Jan. 5, 2017 /CNW/ – Bellatrix Exploration Ltd. (“Bellatrix” or the “Company”) (TSX, NYSE: BXE) is pleased to announce its 2017 capital budget, highlighted by over 10% forecast production growth and key strategic infrastructure investment. Bellatrix is also pleased to outline its three year corporate development plan, which is designed to deliver compound annual growth in annual average production of over 10% through 2019. Following the strategic repositioning efforts undertaken throughout 2016, Bellatrix is poised to deliver strong growth in both production and funds flow from operations in 2017 through the continued development of its core Spirit River play.
Net Capital Budget of $105 Million in 2017 Designed to Deliver Over 10% Production Volume Growth That Doubles Yearly Funds Flow from Operations to $100 Million or $0.40 per Share
Bellatrix’s Board of Directors has approved a net capital budget of $105 million in 2017. The 2017 net capital budget is designed to achieve production growth of over 10% (exit 2016 to exit 2017) and annual average production of 33,500 boe/d. Bellatrix anticipates directing approximately $70 million of its net budget to drilling and completion activity; $13 million towards its share of the construction of Phase 2 of the Bellatrix O’Chiese Nees-Ohpawganu’ck deep-cut gas plant at Alder Flats (the “Alder Flats Plant”); $7 million in land and other minor infrastructure projects; and $15 million in other capital (capitalized general and administrative costs, capitalized interest, and other minor capital investments). In addition, Bellatrix will also fund the previously received prepayment portion of its partner’s 35% share of the cost of construction of Phase 2 of the Alder Flats Plant during calendar 2017, estimated at approximately $18 million.
Bellatrix’s 2017 net capital budget incorporates forward pricing expectations of approximately US$55.80/bbl WTI and $2.72/GJ AECO, and is backstopped by commodity price risk management contracts covering approximately 66% of 2017 forecast average gross natural gas volumes at an average fixed price of approximately $3.36/mcf. Reduced debt levels and interest expense, firmer commodity prices, strong risk management positions, and focused operational initiatives are anticipated to more than double funds flow from operations in 2017 to approximately $100 million, or $0.40 per basic share, compared with 2016 forecast funds flow from operations.
2017 Budget & Guidance Summary |
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2017 Guidance |
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Production (boe/d) |
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2017 Exit production |
35,000 |
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2017 Average daily production |
33,500 |
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Production Mix (%) |
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Natural gas |
76 |
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Crude oil, condensate and NGLs |
24 |
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Net Capital Expenditures ($000)(1) |
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Drilling, completion and equipping |
70,000 |
|
Phase 2 of Alder Flats Plant |
13,000 |
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Land and infrastructure |
7,000 |
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Other capital |
15,000 |
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Total net capital expenditures |
105,000 |
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Financial |
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Funds flow from operations ($000)(2) |
100,000 |
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Per share – basic ($) |
0.40 |
|
Production expense ($/boe)(3) |
9.00 |
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General and administrative expense ($/boe) |
1.90 |
|
(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 2017. |
(2) The term “funds flow from operations”, does not have standard meaning under generally accepted accounting principles (“GAAP”). Refer to “Non-GAAP measures” disclosed at the end of this Press Release. |
(3) Production expenses before net processing revenue/fees. |
Increased Commodity Risk Management Contracts Support the Three Year Development Plan
Underpinning Bellatrix’s strategic planning process is an active risk management program designed to mute the impact of commodity price volatility and provide greater predictability of future revenue and cash flow.
Over the past several months Bellatrix has methodically increased its risk management protection with approximately 66% of 2017 forecast gross natural gas volumes hedged at an average fixed price of approximately $3.36/mcf. Additionally, Bellatrix has added initial 2018 commodity price risk management protection with approximately 52.5 MMcf/d of 2018 gross natural gas volumes hedged at an average fixed price of approximately $3.11/mcf.
As at January 1, 2017, Bellatrix was party to a series of commodity price risk management contracts for 2017 and 2018 as summarized below:
Product |
Financial Contract |
Period |
Volume |
Average Price (1) |
Natural gas |
Fixed price swap |
January 1, 2017 to December 31, 2017 |
101.4 MMcf/d |
$3.36/mcf |
Natural gas |
Fixed price swap |
January 1, 2018 to December 31, 2018 |
52.5 MMcf/d |
$3.11/mcf |
(1) The conversion of $/GJ to $/mcf is based on an average corporate heat content rate of 40.6Mj/m3. |
Strategically Repositioned for Over 10% Compound Annualized Production Growth Through 2019
Bellatrix completed a series of strategic transactions in 2016, further simplifying the Company’s asset portfolio and materially reducing outstanding bank debt, thereby positioning the Company to return to growth in 2017. Outstanding bank debt as at December 31, 2016 is estimated at $30 million, providing the Company with approximately $70 million of available liquidity (before deducting outstanding letters of credit). Bellatrix is positioned to replace the production, cash flow, and reserves associated with the non-core asset dispositions completed in 2016 from continued development of its low cost Spirit River play, which is supported by strategic infrastructure ownership and operatorship.
With ample firm service capacity, growth in strategic infrastructure and solid commodity price risk management protection, Bellatrix maintains line of sight to organically grow corporate production volumes beyond 42,000 boe/d in late 2019, representing approximately 33% production growth through 2019 and an over 10% compound annual growth rate. In addition, strategic infrastructure investments are expected to further improve margins, netbacks, and operating funds flow due to the combination of lower unit production costs and enhanced revenues over this period.
Bellatrix maintains industry leading efficiencies, spud to on-stream times, and capital costs within the Spirit River formation which delivers superior rates of return and competes as one of the lowest cost natural gas plays in North America. The Company’s three year development plan contemplates drilling approximately 55 net Spirit River and 10 net Cardium wells representing only 14% and 4% of the Company’s 390 net future Spirit River drilling locations and 239 net Cardium drilling locations respectively.
Additionally, Bellatrix retains decades of incremental multi-zone potential in both oil and liquids rich natural gas weighted hydrocarbon charged zones including, but not limited to, the Viking, Belly River, Lower Mannville, Rock Creek, Second White Specks and Duvernay formations. The multi-zone nature of the Deep Basin provides the ability to proactively adjust capital investment to either oil or natural gas weighted projects focused on delivering the highest return and value for shareholders.
Readers are cautioned that comments regarding development plans beyond 2017 represent management estimates, as formal plans have not been approved.
Lower Production Costs, Increased Revenue, and Improved Corporate Capital Efficiencies Expected Upon Completion of Phase 2 of Alder Flats Plant
Bellatrix continues to advance the Phase 2 expansion of the Alder Flats Plant which is expected to more than double the inlet capacity of the Plant from 110 MMcf/d currently to 230 MMcf/d. The project remains on time and budget, scheduled for completion in the second quarter of 2018 and is expected to deliver three primary long term benefits. First, with an expected net increase in available throughput at the Alder Flats Plant by approximately 30 MMcf/d to 57.5 MMcf/d, and an expected increase in production volumes, corporate operating costs are expected to recognize a step change reduction in the second half of 2018 by approximately $1.00/boe (relative to 2017 corporate average production expense guidance), further enhancing the Company’s long term competitiveness. Bellatrix has also secured additional firm service sales gas transportation to coincide with the commissioning of Phase 2 of the Alder Flats Plant. Second, the Phase 2 expansion project is engineered with a colder process to provide deeper liquids extraction capability, thereby enhancing natural gas liquid revenue upon project completion. Third, corporate capital efficiencies are expected to improve as incrementally additional capital can be invested into drilling and completion projects relative to facilities spending subsequent to the first half of 2018.
Operational Update and Upcoming Conference Participation
Bellatrix completed its fourth quarter 2016 capital investment plans despite minor field level delays due to a relatively warmer weather and later start to winter. Full year 2016 production volumes are expected to average modestly below the mid-point of the previously announced guidance range of 35,500 to 36,500 boe/d as minor delays in fourth quarter activity had a relatively immaterial impact to full year average volumes.
As previously announced on December 21, 2016, Bellatrix completed the sale of certain non-core assets in the greater Harmattan area of Alberta for $80 million. Bellatrix’s corporate production volumes are approximately 31,500 boe/d in December after incorporating the disposition of the Harmattan assets, with one 100% working interest Spirit River well drilled and awaiting completion and tie-in for January 2017.
Bellatrix plans to participate at the TD Securities London Energy Conference in London, England on Monday, January 9, 2017. A copy of Bellatrix’s updated corporate presentation will be available at www.bellatrixexploration.com.
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.