Bellatrix Exploration Ltd. Announces First Quarter 2014 Financial Results
TSX, NYSE MKT: BXE
CALGARY, May 6, 2014 /PRNewswire/ - Bellatrix Exploration Ltd. ("Bellatrix" or
the "Company") (TSX, NYSE MKT: BXE) announces its financial and
operating results for the three months ended March 31, 2014.
Forward-Looking Statements
This press release, including the report to shareholders, contains
forward-looking statements. Please refer to our cautionary language on
forward-looking statements and the other matters set forth at the
beginning of the management's discussion and analysis (the "MD&A")
attached to this press release.
HIGHLIGHTS
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Three months ended March 31,
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2014
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2013
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FINANCIAL (unaudited)
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(CDN$000s except share and per share amounts)
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Revenue (before royalties and risk management (1))
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163,585
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65,543
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Funds flow from operations (2)
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77,642
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37,545
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Per basic share (5)
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$0.45
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$0.35
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Per diluted share (5)
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$0.45
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$0.32
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Cash flow from operating activities
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84,300
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35,527
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Per basic share (5)
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$0.49
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$0.33
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Per diluted share (5)
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$0.48
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$0.30
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Net profit
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25,167
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4,561
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Per basic share (5)
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$0.15
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$0.04
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Per diluted share (5)
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$0.14
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$0.04
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Exploration and development
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152,686
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91,459
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Corporate
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2,956
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140
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Property acquisitions
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260
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10
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Capital expenditures - cash
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155,902
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91,609
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Property dispositions - cash
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(39)
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5
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Corporate acquisitions and other non-cash items
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-
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787
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Total capital expenditures - net (4)
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155,863
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92,401
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Long-term debt
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335,118
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150,827
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Convertible debentures (6)
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-
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51,105
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Adjusted working capital (excess) deficiency (3)
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137,970
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43,488
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Total net debt (3)
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473,088
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245,420
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Total assets
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1,707,929
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759,775
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Total shareholders' equity
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933,670
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386,750
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OPERATING
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Three months ended March 31,
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2014
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2013
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Average daily sales volumes
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Crude oil, condensate and NGLs
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(bbls/d)
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12,405
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5,983
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Natural gas
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(mcf/d)
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135,865
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80,158
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Total oil equivalent
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(boe/d)
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35,049
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19,343
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Average prices
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Light crude oil and condensate
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($/bbl)
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98.65
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92.11
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NGLs (excluding condensate)
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($/bbl)
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57.50
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42.30
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Heavy oil
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($/bbl)
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62.77
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53.69
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Crude oil, condensate and NGLs
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($/bbl)
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80.41
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73.60
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Crude oil, condensate and NGLs (including risk management (1))
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($/bbl)
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74.67
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73.44
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Natural gas
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($/mcf)
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5.88
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3.50
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Natural gas (including risk management (1))
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($/mcf)
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4.88
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4.42
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Total oil equivalent
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($/boe)
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51.27
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37.28
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Total oil equivalent (including risk management (1))
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($/boe)
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45.36
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41.02
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Statistics
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Operating netback (4)
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($/boe)
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32.86
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21.03
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Operating netback (4) (including risk management (1))
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($/boe)
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26.95
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24.77
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Transportation
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($/boe)
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1.61
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0.83
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Production expenses
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($/boe)
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8.12
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8.65
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General & administrative
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($/boe)
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1.75
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2.06
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Royalties as a % of sales after transportation
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17%
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19%
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COMMON SHARES
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Common shares outstanding
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172,761,228
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107,919,329
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Share options outstanding
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9,472,505
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9,293,228
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Shares issuable on conversion of convertible debentures (6)
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-
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9,821,429
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Fully diluted common shares outstanding
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182,233,733
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127,033,986
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Diluted weighted average shares - net profit (5)
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174,321,930
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110,725,084
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Diluted weighted average shares - funds flow from operations and cash
flow from operating activities (2) (5)
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174,321,930
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120,546,513
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SHARE TRADING STATISTICS
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TSX and Other (7)
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(CDN$, except volumes) based on intra-day trading
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High
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9.44
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6.70
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Low
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7.64
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4.03
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Close
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9.35
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6.54
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Average daily volume
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1,848,581
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674,726
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NYSE MKT
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(US$, except volumes) based on intra-day trading
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High
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8.55
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6.60
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Low
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6.93
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4.10
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Close
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8.43
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6.43
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Average daily volume
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156,011
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67,190
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(1)
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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.
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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.
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(2)
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The highlights section contains the term "funds flow from operations"
which should not be considered an alternative to, or more meaningful
than cash flow from operating activities as determined in accordance
with generally accepted accounting principles ("GAAP") as an indicator
of the Company's performance. Therefore reference to the non-GAAP
measures of funds flow from operations, or funds flow from operations
per share may not be comparable with the calculation of similar
measures for other entities. Management uses funds flow from operations
to analyze operating performance and leverage and considers funds flow
from operations to be a key measure as it demonstrates the Company's
ability to generate the cash necessary to fund future capital
investments and to repay debt. The reconciliation between cash flow
from operating activities and funds flow from operations can be found
in the MD&A. Funds flow from operations per share is calculated using
the weighted average number of common shares for the year.
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(3)
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Net debt and total net debt are considered non-GAAP measures. Therefore
reference to the non-GAAP measures of net debt or total net debt may
not be comparable with the calculation of similar measures for other
entities. The Company's 2014 calculation of total net debt excludes
deferred lease inducements, long-term commodity contract liabilities,
decommissioning liabilities, the long-term finance lease obligation,
deferred lease inducements, and the deferred tax liability. Net debt
and total net debt include the adjusted working capital deficiency
(excess). The adjusted working capital deficiency (excess) is a
non-GAAP measure calculated as net working capital deficiency (excess)
excluding short-term commodity contract assets and liabilities, current
finance lease obligation, and deferred lease inducements. For the
comparative 2013 calculation, net debt also excludes the liability
component of convertible debentures which were then outstanding. A
reconciliation between total liabilities under GAAP and total net debt
and net debt as calculated by the Company is found in the MD&A.
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(4)
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Operating netbacks and total capital expenditures - net are considered
non-GAAP measures. Operating netbacks are calculated by subtracting
royalties, transportation, and operating costs from revenues before
other income. Total capital expenditures - net includes the cash
impact of capital expenditures and property dispositions, as well as
the non-cash capital impacts of corporate acquisitions, adjustments to
the Company's decommissioning liabilities, and share based
compensation.
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(5)
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Basic weighted average shares for the three months ended March 31, 2014
were 171,626,707 (2013: 107,882,027).
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In computing weighted average diluted earnings per share for the three
months ended March 31, 2014, a total of 2,695,223 (2013: 2,843,057)
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 (2013: 9,821,429) common shares issuable on
conversion of convertible debentures were added to the denominator as
they were dilutive, resulting in diluted weighted average common shares
of 174,321,930 (2013: 110,725,084).
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In computing weighted average diluted cash flow from operating
activities and funds flow from operations per share for the three
months ended March 31, 2014, a total of 2,695,223 (2013: 2,843,057)
common shares were added to the denominator as a consequence of
applying the treasury stock method to the Company's outstanding share
options and no common shares issuable (2013: 9,821,429) on conversion
of convertible debentures were added to the denominator as they were
dilutive, resulting in diluted weighted average common shares of
174,321,930 (2013: 120,546,513). As a consequence, no interest and
accretion expense (net of income tax effect) was added to the numerator
(2013: $0.8 million).
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(6)
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During the year ended December 31, 2013, the Company announced a notice
of redemption of its then outstanding $55.0 million 4.75% convertible
debentures, with a redemption date set of October 21, 2013. During
September and October 2013, the $55.0 million principal amount of
remaining convertible debentures were converted or redeemed in exchange
for an aggregate of 9,794,848 common shares of the Company. For the
three months ended March 31, 2013, shares issuable on conversion of
convertible debentures were calculated by dividing the $55.0 million
principal amount of the convertible debentures by the conversion price
of $5.60 per share.
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(7)
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TSX and Other includes the trading statistics for the Toronto Stock
Exchange and other Canadian trading markets.
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REPORT TO SHAREHOLDERS
Bellatrix posted a record quarter highlighted by:
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Q1 2014 earnings of $25 million ($0.15 per basic share) up 452% over Q1
2013
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Q1 2014 funds flow from operations of $78 million ($0.45 per basic
share) up 107% over Q1 2013
-
Q1 2014 production of 35,049 boe/d (35% Oil & NGL's) up 81% over Q1 2013
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Revenues of $164 million up 150% over Q1 2013
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Capital expenditures of $156 million
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100% success in drilling and/or participating in 44 gross / 25.6 net
wells
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Q1 2014 operating costs of $7.53/boe after deducting processing and
third party income
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General and administration ("G&A") expenses reduced to $1.75/boe
compared to $2.06/boe in Q1 2013
During the first quarter of 2014 Bellatrix faced significant production
constraints at third party midstream gas processing facilities. In the
Strachan, Ferrier, Brazeau and Pembina areas of West Central Alberta
the existing gas processing capacity has been overwhelmed by industry's
accelerated development of resources, primarily in the Cardium and
Mannville formations, effectuated by the successful adaptation of
horizontal drilling techniques coupled with innovative application of
slick water fracturing technology.
In an effort to alleviate the impacted midstream gas processing issues,
Bellatrix has been very proactive. Early in 2013, the Company
completed a front end engineering design, an environmental assessment
and obtained the necessary regulatory approvals to construct a new
Bellatrix deep cut gas plant in the Alder Flats area of West Central
Alberta. Phase One of the facility will process 110 mmcf/d of raw gas
and is designed to extract 99% of the propane, and 100% of the butane
and condensate from the inlet raw gas stream. Construction is underway
with an anticipated commissioning date of July 1, 2015. Phase Two is
expected to be commissioned by April 1, 2016 doubling the inlet raw gas
processing capacity to 220 mmcf/d. The facility will significantly
reduce operating costs while doubling current liquid recovery from the
gas stream. An additional $70 million of capital, relating to the deep
cut plants, will be spent in the second half of 2014 for a revised net
capital budget of $440 million for fiscal 2014. Bellatrix plans to
utilize funds from operations and existing credit facilities to fund
ongoing capital spending and operating requirements.
In addition, the Company has negotiated a firm service agreement to
process 100 mmcf/d at the Blaze Gas Plant located in West Pembina
(4-31-48-12W5M) yielding a significant reduction in processing fees.
The reduced operating costs coupled with increased liquid recoveries
provided by the Blaze Facility further insulates the Company against
commodity price fluctuations while improving long term profitability.
On April 2, 2014, Bellatrix announced the completion of a 1.6 km river
bore and a 7 km pipeline in conjunction with Blaze Energy Ltd.
("Blaze"), completing a 55 km pipeline to tie-in Bellatrix natural gas
for processing in the Blaze gas plant. The pipeline was commissioned
on April 1, 2014 at 11:00 am reaching 35 mmcf/d in the first day of
operation. During the month of April, Blaze incrementally increased
Bellatrix's gas volumes as they recommissioned the facility to handle
processing the higher volumes delivered by Bellatrix. As of May 1,
2014 the plant was accepting up to 90 mmcf/d at the inlet of the
facility.
In the fourth quarter of 2013 and in the first quarter of 2014,
Bellatrix installed a total of 8 field booster compressors located at
13-5-45-9W5 (tie-in point to the Blaze pipeline) with capacity of 97
mmcf/d. As the pipeline ramped up to full capacity and current
constraints are removed, Bellatrix expects that the previously
announced production restrictions in West Central Alberta will be
alleviated. Current production levels the first week of May are +/-
40,000 boe/d.
Also during the Q1 2014 the Company invested in the following
facilities:
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Installed 75 km of 3" to 6" gathering lines
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Commenced construction of phase two of the Ferrier 9-3 compressor
station increasing compression from 6,700 HP to 13,400 HP
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Commenced construction of North Brazeau 5-5 Oil Battery
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Completed an 8 inch lateral line from South Brazeau to the Ferrier 13-5
compressor facility
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Initiated build out of a high capacity Baptiste gathering system
designed for 50 mmcf/d
Grafton Joint Venture Capital Investment Increase
On April 10, 2014, Bellatrix announced that Grafton Energy Co. I Ltd.
("Grafton") elected to exercise an option to increase committed capital
investment to the Grafton Joint Venture established during 2013 by an
additional $50 million, for a total commitment of $250 million, on the
same terms and conditions as the previously announced Grafton Joint
Venture. Grafton's increased capital investment will continue to
support the accelerated development of a portion of Bellatrix's
extensive undeveloped land holdings.
The Grafton Joint Venture is located in the Willesden Green and Brazeau
areas of West-Central Alberta. Under the terms of the amended agreement
prior to the exercise of this option, Grafton was committed to
contributing 82%, or $200 million, to the $244 million Joint Venture to
participate in an expected 58 net Notikewin/Falher and Cardium well
program. Under the agreement, Grafton will earn 54% of Bellatrix's
working interest ("WI") in each well drilled in the development program
until payout (being recovery of Grafton's capital investment plus an 8%
return) on the total program, reverting to 33% of Bellatrix's WI after
payout. At any time after payout of the entire program, Grafton shall
have the option to elect to convert all wells from the 33% WI to a
17.5% Gross Overriding Royalty on Bellatrix's pre-Joint Venture WI. The
effective date of the initial agreement for the Joint Venture is July
1, 2013 and had an initial term of 2 years. With the exercise of the
$50 million option, Bellatrix shall have until the end of the third
anniversary of the effective date to spend the additional capital.
Operational highlights for the three months ended March 31, 2014
include:
-
Bellatrix posted a 100% success rate during the first quarter of 2014,
drilling and/or participating in 44 gross (25.56 net) wells, resulting
in 36 gross (21.87 net) Cardium oil wells, 7 gross (3.04 net)
Notikewin/Falher liquids-rich gas wells, and one gross (0.65 net)
Cardium gas well.
-
Q1 2014 sales volumes averaged 35,049 boe/d (weighted 35% to oil,
condensate, and NGLs, and 65% to natural gas). This represents an 81%
increase over average sales volumes in the first quarter of 2013 of
19,343 boe/d and a 61% increase over average sales in the fourth
quarter of 2013 of 21,829 boe/d.
-
During the first quarter of 2014, the Company spent $155.9 million on
capital projects, compared to $91.6 million in Q1 2013.
-
As at March 31, 2014, Bellatrix had approximately 409,074 net
undeveloped acres of land in Alberta, British Columbia and
Saskatchewan.
Financial highlights for the three months ended March 31, 2014 include:
-
The net profit for Q1 2014 was $25.2 million ($0.15 per basic share),
compared to $4.6 million in Q1 2013.
-
Q1 2014 revenue before royalties and risk management contracts was
$163.6 million, 150% higher than the $65.5 million recorded in Q1
2013. The increase in revenues in the first quarter of 2014 was
primarily due to significantly increased light oil and condensate, NGL,
and natural gas sales volumes in conjunction with higher realized
prices for all commodities, partially offset by reduced heavy oil sales
volumes compared to Q1 2013.
-
Funds flow from operations for the first quarter of 2014 was $77.6
million ($0.45 per basic share), an increase of 107% from $37.5 million
($0.35 per basic share) in Q1 2013. The increase in funds flow from
operations between the 2014 and 2013 periods was principally due to
increased overall production volumes and higher realized prices for all
commodities, partially offset by a higher net realized loss on
commodity contracts, increased general and administrative expenses,
operating, transportation, and royalties expenses.
-
Crude oil, condensate and NGLs produced 56% of petroleum and natural gas
sales revenue for the three months ended March 31, 2014.
-
Production expenses for Q1 2014 were $8.12/boe ($25.6 million), compared
to $8.65/boe ($15.1 million) in the first quarter of 2013. The
decrease in production expenses per boe was primarily due to increased
production volumes resulting from 2013 and Q1 2014 drilling in areas
with lower production expenses, as well as continued field optimization
projects. Production expenses, after deducting processing and other
third party income, for the three months ended March 31, 2014 were
$7.53/boe ($23.8 million), compared to $8.28/boe ($14.5 million) in Q1
2013.
-
Operating netbacks after including risk management for Q1 2014 were
$26.95/boe, up from $24.77/boe in Q1 2013. Operating netbacks before
risk management for Q1 2014 were $32.86/boe, up from $21.03/boe in the
first quarter of 2013. The increased netbacks including risk
management were primarily the result of higher realized prices for all
commodities and lower production expenses, partially offset by a
realized loss on commodity contracts in Q1 2014 compared to a net gain
in Q1 2013, higher transportation expenses, and increased royalty
expenses.
-
G&A expenses for Q1 2014 decreased on a per boe basis to $1.75/boe ($5.5
million), compared to $2.06/boe ($3.6 million) for Q1 2013.
-
As at March 31, 2014, Bellatrix had $164.9 million undrawn on its total
$500 million credit facility.
-
Total net debt as of March 31, 2014 was $473.1 million.
As of May 5, 2014, the Company has entered into commodity price risk
management arrangements as follows:
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Type
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Period
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Volume
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Price Floor
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Price Ceiling
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Index
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Crude oil fixed
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January 1, 2014 to Dec. 31, 2014
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500 bbl/d
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$ 93.30 US
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$ 93.30 US
|
WTI
|
Crude oil fixed
|
January 1, 2014 to Dec. 31, 2014
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1,500 bbl/d
|
$ 94.00 CDN
|
$ 94.00 CDN
|
WTI
|
Crude oil fixed
|
January 1, 2014 to Dec. 31, 2014
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500 bbl/d
|
$ 95.00 US
|
$ 95.00 US
|
WTI
|
Crude oil fixed
|
January 1, 2014 to Dec. 31, 2014
|
1,500 bbl/d
|
$ 95.22 CDN
|
$ 95.22 CDN
|
WTI
|
Crude oil fixed
|
January 1, 2014 to Dec. 31, 2014
|
500 bbl/d
|
$ 98.30 CDN
|
$ 98.30 CDN
|
WTI
|
Crude oil fixed
|
January 1, 2014 to Dec. 31, 2014
|
1,000 bbl/d
|
$ 99.50 CDN
|
$ 99.50 CDN
|
WTI
|
Crude oil fixed
|
January 1, 2014 to Dec. 31, 2014
|
500 bbl/d
|
$ 99.60 CDN
|
$ 99.60 CDN
|
WTI
|
Natural gas fixed
|
April 1, 2013 to June 30, 2014
|
15,000 GJ/d
|
$ 3.05 CDN
|
$ 3.05 CDN
|
AECO
|
Natural gas fixed
|
January 1, 2014 to Dec. 31, 2014
|
20,000 GJ/d
|
$ 3.30 CDN
|
$ 3.30 CDN
|
AECO
|
Natural gas fixed
|
January 1, 2014 to Dec. 31, 2014
|
20,000 GJ/d
|
$ 3.60 CDN
|
$ 3.60 CDN
|
AECO
|
Natural gas fixed
|
July 1, 2014 to Dec. 31, 2014
|
15,000 GJ/d
|
$ 3.71 CDN
|
$ 3.71 CDN
|
AECO
|
Natural gas fixed
|
February 1, 2014 to Dec. 31, 2014
|
10,000 GJ/d
|
$ 3.79 CDN
|
$ 3.79 CDN
|
AECO
|
Natural gas fixed
|
February 1, 2014 to Dec. 31, 2014
|
10,000 GJ/d
|
$ 3.80 CDN
|
$ 3.80 CDN
|
AECO
|
Natural gas fixed
|
February 1, 2014 to Dec. 31, 2014
|
15,000 GJ/d
|
$ 3.85 CDN
|
$ 3.85 CDN
|
AECO
|
Natural gas fixed
|
February 1, 2014 to Dec. 31, 2014
|
10,000 GJ/d
|
$ 3.84 CDN
|
$ 3.84 CDN
|
AECO
|
Natural gas fixed
|
March 1, 2014 to Dec. 31, 2014
|
10,000 GJ/d
|
$ 4.14 CDN
|
$ 4.14 CDN
|
AECO
|
OUTLOOK
With the major infrastructure constraints behind us, Bellatrix will once
again turn its full attention to growth and increasing shareholder
value.
During the second quarter the Company will utilize its existing
multi-well drilling and production pad sites to maintain at least 5
active drilling rigs targeting 20 to 22 gross (9 to 10 net) wells. As
soon as practical, when existing road restrictions are removed,
Bellatrix will be active in drilling with 10 to 12 rigs operating in
its two core resource plays, the Cardium oil (Bellatrix is the second
largest land holder with 338 net sections in the Cardium play) and
Mannville condensate rich gas, utilizing horizontal drilling
multi-fracturing technology for the remainder of 2014. A revised net
capital budget of $440 million has been set for fiscal 2014. Based on
the timing of proposed expenditures, downtime for anticipated plant
turnarounds and normal production declines, execution of the 2014
budget is anticipated to provide 2014 average daily production of
approximately 42,500 boe/d to 43,500 boe/d and an exit rate of
approximately 47,000 boe/d.
Raymond G. Smith, P. Eng.
President and CEO
May 5, 2014
Note:
Bellatrix's annual and special meeting of shareholders is scheduled for
3:00 pm on May 21, 2014 in the Devonian Room at the Calgary Petroleum
Club.
The Company's current corporate presentation is available at www.bellatrixexploration.com.
MANAGEMENT'S DISCUSSION AND ANALYSIS
May 5, 2014 - The following Management's Discussion and Analysis of
financial results ("MD&A") as provided by the management of Bellatrix
Exploration Ltd. ("Bellatrix" or the "Company") should be read in
conjunction with the unaudited interim condensed consolidated financial
statements of the Company for the three months ended March 31, 2014 and
the audited consolidated financial statements of the Company for the
years ended December 31, 2013 and 2012, and the related Management's
Discussion and Analysis of financial results as disclosure which is
unchanged from such Management's Discussion and Analysis may not be
repeated herein. This commentary is based on information available to,
and is dated as of, May 5, 2014. The financial data presented is in
Canadian dollars, except where indicated otherwise.
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 6:1, utilizing a
conversion on a 6:1 basis may be misleading as an indication of value.
All boe conversions in this report are derived from converting gas to
oil in the ratio of six thousand cubic feet of gas to one barrel of
oil.
INITIAL PRODUCTION RATES: Initial production rates disclosed herein may
not necessarily be indicative of long-term performance or ultimate
recovery.
This Management's Discussion and Analysis and the accompanying report to
shareholders and financial statements also contain the terms total net
debt and net debt. Therefore reference to the non-GAAP measures of net
debt or total net debt may not be comparable with the calculation of
similar measures for other entities. The Company's 2014 calculation of
total net debt excludes deferred lease inducements, long-term commodity
contract liabilities, decommissioning liabilities, the long-term
finance lease obligation, deferred lease inducements, and the deferred
tax liability. Net debt and total net debt include the adjusted
working capital deficiency (excess). The adjusted working capital
deficiency (excess) is a non-GAAP measure calculated as net working
capital deficiency (excess) excluding short-term commodity contract
assets and liabilities, current finance lease obligation, and deferred
lease inducements. For the comparative 2013 calculation, net debt also
excludes the liability component of convertible debentures which were
then outstanding. Management believes these measures are useful
supplementary measures of the total amount of current and long-term
debt.
NON-GAAP MEASURES: This Management's Discussion and Analysis and the
accompanying report to shareholders contains the terms of operating
netbacks and total capital expenditures - net, which are not recognized
measures under GAAP. Operating netbacks are calculated by subtracting
royalties, transportation, and operating expenses from revenues before
other income. Management believes this measure is a useful
supplemental measure of the amount of revenues received after
transportation, royalties and operating expenses. Readers are
cautioned, however, that this measure should not be construed as an
alternative to net profit or loss determined in accordance with GAAP as
a measure of performance. Bellatrix's method of calculating this
measure may differ from other entities, and accordingly, may not be
comparable to measures used by other companies. Total capital
expenditures - net includes the cash impact of capital expenditures and
property dispositions, as well as the non-cash capital impacts of
corporate acquisitions, adjustments to the Company's decommissioning
liabilities, and share based compensation.
This Management's Discussion and Analysis and the accompanying report to
shareholders and financial statements also contain the term "funds flow
from operations" which should not be considered an alternative to, or
more meaningful than "cash flow from operating activities" as
determined in accordance with generally accepted accounting principles
("GAAP") as an indicator of the Company's performance. Therefore
reference to funds flow from operations or funds flow from operations
per share may not be comparable with the calculation of similar
measures for other entities. Management uses funds flow from operations
to analyze operating performance and leverage and considers funds flow
from operations to be a key measure as it demonstrates the Company's
ability to generate the cash necessary to fund future capital
investments and to repay debt. The reconciliation between cash flow
from operating activities and funds flow from operations can be found
in this Management's Discussion and Analysis. Funds flow from
operations per share is calculated using the weighted average number of
shares for the period.
JOINT ARRANGEMENTS: Bellatrix is a partner of the following joint
arrangements, which have been classified under IFRS as joint
operations. This classification is on the basis that the arrangement
is not conducted through a separate legal entity and the partners are
legally obligated to pay their share of costs incurred and take their
share of output produced from the various production areas. For
purposes of disclosure throughout the MD&A and financial statements,
Bellatrix has referred to these arrangements by the common oil and gas
industry term of joint ventures.
|
|
GRAFTON JOINT VENTURE - Bellatrix has a joint venture (the "Grafton
Joint Venture") with Grafton Energy Co I Ltd. ("Grafton") in the
Willesden Green and Brazeau areas of West-Central Alberta, whereby
Grafton will contribute 82%, or $200 million, to the joint venture to
participate in an expected 58 Notikewin/Falher and Cardium well
program. Under the agreement, Grafton will earn 54% of Bellatrix's
working interest ("WI") in each well drilled in the well program until
payout (being recovery of Grafton's capital investment plus an 8%
internal rate of return) on the total program, reverting to 33% of
Bellatrix's WI after payout. At any time after payout of the entire
program, Grafton shall have the option to elect to convert all wells
from the 33% WI to a 17.5% Gross Overriding Royalty ("GORR") on
Bellatrix's pre-Grafton Joint Venture WI. On April 10, 2014, Bellatrix
announced that Grafton elected to exercise an option to increase
committed capital investment to the Grafton Joint Venture established
during 2013 by an additional $50 million, for a total commitment of
$250 million, on the same terms and conditions as the previously
announced Grafton Joint Venture.
|
|
|
|
|
|
DAEWOO AND DEVONIAN PARTNERSHIP - Bellatrix has a joint venture
arrangement (the "Daewoo and Devonian Partnership") with Canadian
subsidiaries of two Korean entities, Daewoo International Corporation
("Daewoo") and Devonian Natural Resources Private Equity Fund
("Devonian") in the Baptiste area of West-Central Alberta, whereby
Daewoo and Devonian own a combined 50% of Bellatrix's WI share of
producing assets, an operated compressor station and gathering system
and related land acreage.
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|
|
|
|
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TROIKA JOINT VENTURE - Bellatrix has a joint venture (the "Troika Joint
Venture") with TCA Energy Ltd. ("TCA") in the Ferrier Cardium area of
West-Central Alberta, whereby Troika will contribute 50% or $120
million towards a capital program for drilling of an expected 63 gross
wells and will receive a 35% WI until payout (being recovery of TCA's
capital investment plus a 15% internal rate of return) on the total
program, and thereafter reverting to 25% of Bellatrix's WI.
|
Additional information relating to the Company, including the
Bellatrix's Annual Information Form, is available on SEDAR at www.sedar.com.
FORWARD LOOKING STATEMENTS: Certain information contained herein and in
the accompanying report to shareholders may contain forward looking
statements including management's assessment of future plans,
operations and strategy, drilling plans and the timing thereof,
commodity price risk management strategies, 2014 capital expenditure
budget, the nature of expenditures and the method of financing thereof,
anticipated liquidity of the Company and various matters that may
impact such liquidity, expected 2014 production expenses and general
and administrative expenses, expected costs to satisfy drilling
commitments and method of funding drilling commitments, commodity
prices and expected volatility thereof, estimated amount and timing of
incurring decommissioning liabilities, the Company's drilling inventory
and capital required therefor, estimated capital expenditures and wells
to be drilled under joint venture agreements, the ability to fund the
2014 capital expenditure program utilizing various available sources of
capital, expected 2014 average daily production and exit rate, plans to
continue commodity risk management strategies, timing of
redetermination of borrowing base, plans for additional facilities and
infrastructure and timing and effects thereof and expectation that
production restrictions will be alleviated may constitute
forward-looking statements under applicable securities laws.
Forward-looking statements necessarily involve risks, including,
without limitation, risks associated with oil and gas exploration,
development, exploitation, production, marketing and transportation,
loss of markets, volatility of commodity prices, currency fluctuations,
imprecision of reserve estimates, environmental risks, competition from
other producers, inability to retain drilling rigs and other services,
incorrect assessment of the value of acquisitions, failure to realize
the anticipated benefits of acquisitions, delays resulting from or
inability to obtain required regulatory approvals and ability to access
sufficient capital from internal and external sources. Events or
circumstances may cause actual results to differ materially from those
predicted, as a result of the risk factors set out and other known and
unknown risks, uncertainties, and other factors, many of which are
beyond the control of Bellatrix. In addition, forward-looking
statements or information are based on a number of factors and
assumptions which have been used to develop such statements and
information but which may prove to be incorrect and which have been
used to develop such statements and information in order to provide
shareholders with a more complete perspective on Bellatrix's future
operations. Such information may prove to be incorrect and readers are
cautioned that the information may not be appropriate for other
purposes. Although the Company believes that the expectations
reflected in such forward-looking statements or information are
reasonable, undue reliance should not be placed on forward-looking
statements because the Company can give no assurance that such
expectations will prove to be correct. In addition to other factors
and assumptions which may be identified herein, assumptions have been
made regarding, among other things: the impact of increasing
competition; the general stability of the economic and political
environment in which the Company operates; the timely receipt of any
required regulatory approvals; the ability of the Company to obtain
qualified staff, equipment and services in a timely and cost efficient
manner; drilling results; the ability of the operator of the projects
which the Company has an interest in to operate the field in a safe,
efficient and effective manner; the ability of the Company to obtain
financing on acceptable terms; field production rates and decline
rates; the ability to replace and expand oil and natural gas reserves
through acquisition, development of exploration; the timing and costs
of pipeline, storage and facility construction and expansion and the
ability of the Company to secure adequate product transportation;
future commodity prices; currency, exchange and interest rates; the
regulatory framework regarding royalties, taxes and environmental
matters in the jurisdictions in which the Company operates; and the
ability of the Company to successfully market its oil and natural gas
products. Readers are cautioned that the foregoing list is not
exhaustive of all factors and assumptions which have been used. As a
consequence, actual results may differ materially from those
anticipated in the forward-looking statements. Additional information
on these and other factors that could effect Bellatrix's operations and
financial results are included in reports on file with Canadian and US
securities regulatory authorities and may be accessed through the SEDAR
website (www.sedar.com), through the SEC website (www.sec.gov, and at Bellatrix's website www.bellatrixexploration.com). Furthermore, the forward-looking statements contained herein are
made as at the date hereof and Bellatrix does not undertake any
obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information,
future events or otherwise, except as may be required by applicable
securities laws.
The reader is further cautioned that the preparation of financial
statements in accordance with GAAP requires management to make certain
judgments and estimates that affect the reported amounts of assets,
liabilities, revenues and expenses. Estimating reserves is also
critical to several accounting estimates and requires judgments and
decisions based upon available geological, geophysical, engineering and
economic data. These estimates may change, having either a negative or
positive effect on net earnings as further information becomes
available, and as the economic environment changes.
Overview and Description of the Business
Bellatrix Exploration Ltd. ("Bellatrix" or the "Company") 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 ("TSX")
and on the NYSE MKT under the symbol BXE.
Grafton Joint Venture Capital Investment Increase
On April 10, 2014, Bellatrix announced that Grafton elected to exercise
an option to increase committed capital investment to the Grafton Joint
Venture established during 2013 by an additional $50 million, for a
total commitment of $250 million, on the same terms and conditions as
the previously announced Grafton Joint Venture. Grafton's increased
capital investment will continue to support the accelerated development
of a portion of Bellatrix's extensive undeveloped land holdings.
The Grafton Joint Venture is located in the Willesden Green and Brazeau
areas of West-Central Alberta. Under the terms of the amended agreement
prior to the exercise of this option, Grafton was committed to
contributing 82%, or $200 million, to the $244 million Joint Venture to
participate in an expected 58 net Notikewin/Falher and Cardium well
program. Under the agreement, Grafton will earn 54% of Bellatrix's WI
in each well drilled in the development program until payout (being
recovery of Grafton's capital investment plus an 8% return) on the
total program, reverting to 33% of Bellatrix's WI after payout. At any
time after payout of the entire program, Grafton shall have the option
to elect to convert all wells from the 33% WI to a 17.5% Gross
Overriding Royalty on Bellatrix's pre-Joint Venture WI. The effective
date of the initial agreement for the Joint Venture is July 1, 2013 and
had an initial term of 2 years. With the exercise of the $50 million
option, Bellatrix shall have until the end of the third anniversary of
the effective date to spend the additional capital.
Blaze Pipeline
On April 2, 2014, Bellatrix announced the completion of a 1.6 km river
bore and a 7 km pipeline in conjunction with Blaze Energy Ltd.
("Blaze"), completing a 55 km pipeline to tie-in Bellatrix natural gas
for processing in the Blaze gas plant located at 4-31-48-12W5.
Bellatrix has secured firm processing capacity of 100 mmcf/d in the
plant. The pipeline was commissioned on April 1, 2014 at 11:00 am
reaching 35 mmcf/d in the first day of operation. In the fourth
quarter of 2013 and in the first quarter of 2014, Bellatrix installed a
total of 8 field booster compressors located at 13-5-45-9W5 (tie-in
point to the Blaze pipeline) with capacity of 97 mmcf/d. As the
pipeline is ramped up to full capacity and current constraints are
removed over the next couple of weeks Bellatrix expects that the
previously announced production restrictions in West Central Alberta
will be alleviated.
First Quarter 2014 Financial and Operational Results
Sales Volumes
Sales volumes for the three months ended March 31, 2014 averaged 35,049
boe/d compared to 19,343 boe/d in the same period of 2013, representing
an 81% increase. Total crude oil, condensate and NGLs averaged
approximately 35% of sales volumes for the 2014 first quarter, compared
to 31% in the corresponding period in 2013. The increase in total
sales was primarily a result of an increase in capital expenditures by
$64.3 million, attributable in part to the Grafton Joint Venture, the
Daewoo and Devonian Partnership, and the Troika Joint Venture entered
into after the first quarter of 2013, Bellatrix's continued drilling
success achieved in the Cardium and Notikewin resource plays, and
additional sales volumes acquired through the acquisition of Angle
Energy Inc. ("Angle") in December, 2013. Capital expenditures for the
three months ended March 31, 2014 were $155.9 million, compared to
$91.6 million during the same period of 2013.
Sales Volumes
|
|
Three months ended March 31,
|
|
|
2014
|
2013
|
Light oil and condensate
|
(bbls/d)
|
6,899
|
3,714
|
NGLs (excluding condensate)
|
(bbls/d)
|
5,432
|
2,072
|
Heavy oil
|
(bbls/d)
|
74
|
197
|
Total crude oil, condensate and NGLs
|
(bbls/d)
|
12,405
|
5,983
|
|
|
|
|
Natural gas
|
(mcf/d)
|
135,865
|
80,158
|
|
|
|
|
Total boe/d
|
(6:1)
|
35,049
|
19,343
|
In the first quarter of 2014, Bellatrix posted a 100% success rate,
drilling and/or participating in 44 gross (25.56 net) wells, resulting
in 36 gross (21.87 net) Cardium oil wells, 7 gross (3.04 net)
Notikewin/Falher liquids-rich gas wells, and one gross (0.65 net)
Cardium gas well.
By comparison, during the 2013 first quarter, Bellatrix drilled or
participated in 21 gross (17.08 net) wells, which included 18 gross
(14.98 net) Cardium light oil horizontal wells and 3 gross (2.10 net)
Notikewin/Falher liquids-rich gas horizontal wells.
For the three months ended March 31, 2014, crude oil, condensate and NGL
sales volumes increased by approximately 107%, averaging 12,405 bbls/d
compared to 5,983 bbls/d in the first quarter of 2013. The weighting
towards crude oil, condensate and NGLs for the first quarter of 2014
was 35%, compared to 31% in the first quarter of 2013.
Sales of natural gas averaged 135.9 mmcf/d during the first quarter of
2014, compared to 80.2 mmcf/d in the same period in 2013, an increase
of 69%.
For 2014, Bellatrix will continue to be active in drilling with 10 to 12
rigs operating in its two core resource plays, the Cardium oil and
Mannville condensate rich gas, utilizing horizontal drilling
multi-fracturing technology. A revised net capital budget of $440
million has been set for fiscal 2014. Based on the timing of proposed
expenditures, downtime for anticipated plant turnarounds and normal
production declines, execution of the 2014 budget is anticipated to
provide 2014 average daily production of approximately 42,500 boe/d to
43,500 boe/d and an exit rate of approximately 47,000 boe/d.
Commodity Prices
Average Commodity Prices
|
|
Three months ended March 31,
|
|
2014
|
2013
|
% Change
|
|
|
|
|
Exchange rate (US$/CDN$)
|
0.9064
|
0.9917
|
(9)
|
|
|
|
|
Crude oil:
|
|
|
|
WTI (US$/bbl)
|
98.61
|
94.36
|
5
|
Edmonton par - light oil ($/bbl)
|
100.18
|
88.65
|
13
|
Bow River - medium/heavy oil ($/bbl)
|
83.87
|
64.35
|
30
|
Hardisty Heavy - heavy oil ($/bbl)
|
76.58
|
50.18
|
53
|
Bellatrix's average prices ($/bbl)
|
|
|
|
|
Light crude oil and condensate
|
98.65
|
92.11
|
7
|
|
NGLs (excluding condensate)
|
57.50
|
42.30
|
36
|
|
Heavy crude oil
|
62.77
|
53.69
|
17
|
|
Total crude oil and NGLs
|
80.41
|
73.60
|
9
|
|
Total crude oil and NGLs (including risk management (1))
|
74.67
|
73.44
|
2
|
|
|
|
|
Natural gas:
|
|
|
|
NYMEX (US$/mmbtu)
|
4.72
|
3.48
|
36
|
AECO daily index (CDN$/mcf)
|
5.71
|
3.20
|
78
|
AECO monthly index (CDN$/mcf)
|
4.75
|
3.08
|
54
|
Bellatrix's average price ($/mcf)
|
5.88
|
3.50
|
68
|
Bellatrix's average price (including risk management (1)) ($/mcf)
|
4.88
|
4.42
|
10
|
(1)
|
Per unit metrics including risk management include realized gains or
losses on commodity contracts and exclude unrealized gains or losses on
commodity contracts.
|
For light oil and condensate, Bellatrix recorded an average price of
$98.65/bbl before commodity price risk management contracts during the
three months ended March 31, 2014, 7% higher than the average price
received in the corresponding period in 2013. In comparison, the
Edmonton par price increased by 13% over the same period. The average
WTI crude oil benchmark price increased by 5% between the 2014 and 2013
first quarters. The average US$/CDN$ foreign exchange rate was 0.9064
for the first quarter of 2014, a decrease of 9% compared to an average
rate of 0.9917 in the corresponding period in 2013.
For NGLs (excluding condensate), Bellatrix recorded an average price of
$57.50/bbl during the three months ended March 31, 2014, an increase of
36% from the $42.30/bbl received in the comparative 2013 period. The
increase in NGL pricing is largely attributable to changes in NGL
market supply conditions between the years.
For heavy crude oil, Bellatrix received an average price before
commodity risk management contracts of $62.77/bbl in the first quarter
of 2014, an increase of 17% from the $53.69/bbl realized in the same
period in 2013. In comparison, the Bow River reference price increased
by 30%, and the Hardisty Heavy reference price increased by 53% between
the 2013 and 2014 periods. The majority of Bellatrix's heavy crude oil
density ranges between 11 and 16 degrees API, consistent with the
Hardisty Heavy reference price.
Bellatrix's natural gas sales are priced with reference to the daily or
monthly AECO indices. Bellatrix's natural gas sold has a higher heat
content than the industry average, which results in slightly higher
prices per mcf than the daily AECO index. During the first three
months of 2014, the AECO daily reference price increased by 78%, and
the AECO monthly reference price increased by approximately 54%
compared to the first quarter of 2013. Bellatrix's natural gas average
sales price before commodity price risk management contracts for the
three months ended March 31, 2014 increased by 68% to $5.88/mcf
compared to $3.50/mcf in the comparative 2013 period. Bellatrix's
natural gas average price after including commodity price risk
management contracts for the first quarter of 2014 was $4.88/mcf,
compared to $4.42/mcf in the first quarter of 2013.
Revenue
Revenue before other income, royalties and commodity price risk
management contracts for the three months ended March 31, 2014 was
$161.7 million, 149% higher than the $64.9 million realized in the
first quarter of 2013. In the first quarter of 2014, Bellatrix realized
increased light oil, condensate, natural gas, and NGL sales volumes due
primarily to Bellatrix's ongoing drilling success and additional sales
volumes realized from the acquisition of Angle in December of 2013.
The higher revenue before other income between the 2014 and 2013
periods was attributable to these increases to sales volumes in
conjunction with higher realized prices for all commodities, partially
offset by reduced heavy oil sales volumes experienced in the first
quarter of 2014.
Revenue before other income, royalties and commodity price risk
management contracts for crude oil and NGLs for the three months ended
March 31, 2014 increased from the comparative 2013 period by
approximately 127%, resulting from higher light oil, condensate, and
NGL sales volumes in conjunction with increased light oil, condensate,
heavy oil, and NGL prices, partially offset by lower heavy oil sales
volumes when compared to the first quarter of 2013. In the first
quarter of 2014, total crude oil, condensate and NGL revenues
contributed 56% of total revenue (before other income) compared to 61%
in the same period in 2013. Light crude oil, condensate and NGL
revenues in the three months ended March 31, 2014 comprised
substantially all of total crude oil, condensate and NGL revenues
(before other income), compared to a 98% composition realized in the
first quarter of 2013.
Natural gas revenue before other income, royalties and commodity price
risk management contracts for the three months ended March 31, 2014
increased by approximately 185% compared to the first quarter of 2013
as a result of a 68% increase in realized gas prices before risk
management in conjunction with an approximate 69% increase in sales
volumes.
|
|
|
|
Three months ended March 31,
|
($000s)
|
2014
|
2013
|
Light crude oil and condensate
|
61,254
|
30,789
|
NGLs (excluding condensate)
|
28,111
|
7,889
|
Heavy oil
|
417
|
952
|
Crude oil and NGLs
|
89,782
|
39,630
|
Natural gas
|
71,937
|
25,278
|
Total revenue before other
|
161,719
|
64,908
|
Other income (1)
|
1,866
|
635
|
Total revenue before royalties and risk management
|
163,585
|
65,543
|
(1)
|
Other income primarily consists of processing and other third party
income.
|
Commodity Price Risk Management
The Company has a formal commodity price risk management policy which
permits management to use specified price risk management strategies
including fixed price contracts, collars and the purchase of floor
price options and other derivative financial instruments and physical
delivery sales contracts to reduce the impact of price volatility for a
maximum of eighteen months beyond the transaction date. The program is
designed to provide price protection on a portion of the Company's
future production in the event of adverse commodity price movement,
while retaining significant exposure to upside price movements. By
doing this, the Company seeks to provide a measure of stability to
funds flow from operations, as well as to ensure Bellatrix realizes
positive economic returns from its capital development and acquisition
activities. The Company plans to continue its commodity price risk
management strategies focusing on maintaining sufficient cash flow to
fund Bellatrix's capital expenditure program. Any remaining production
is realized at market prices.
A summary of the financial commodity price risk management volumes and
average prices by quarter currently outstanding as of May 5, 2014 is
shown in the following tables:
Natural gas
Average Volumes (GJ/d)
|
|
|
|
|
|
|
Q2 2014
|
Q3 2014
|
Q4 2014
|
Fixed
|
|
110,000
|
110,000
|
110,000
|
|
|
|
|
|
|
|
|
|
|
Average Price ($/GJ AECO C)
|
|
|
|
|
|
|
Q2 2014
|
Q3 2014
|
Q4 2014
|
Fixed
|
|
3.61
|
3.70
|
3.70
|
Crude oil and liquids
Average Volumes (bbls/d)
|
|
|
|
|
|
|
|
|
|
|
|
Q2 2014
|
Q3 2014
|
Q4 2014
|
Fixed (CDN$)
|
|
5,000
|
5,000
|
5,000
|
Fixed (US$)
|
|
1,000
|
1,000
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Price ($/bbl WTI)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2 2014
|
Q3 2014
|
Q4 2014
|
Fixed price (CDN$/bbl)
|
|
96.46
|
96.46
|
96.46
|
Fixed price (US$/bbl)
|
|
94.15
|
94.15
|
94.15
|
As of March 31, 2014, the fair value of Bellatrix's outstanding
commodity contracts was a net unrealized liability of $40.6 million as
reflected in the financial statements. The fair value or
mark-to-market value of these contracts is based on the estimated
amount that would have been received or paid to settle the contracts as
at March 31, 2014 and will differ from what will eventually be
realized. Changes in the fair value of the commodity contracts are
recognized in the Condensed Consolidated Statements of Comprehensive
Income within the financial statements.
The following is a summary of the gain (loss) on commodity contracts for
the three months ended March 31, 2014 and 2013 as reflected in the
Condensed Consolidated Statements of Comprehensive Income:
Commodity contracts
|
|
|
|
Three months ended March 31, 2014
|
($000s)
|
Crude Oil & Liquids
|
Natural Gas
|
Total
|
Realized cash loss on contracts (1)
|
(6,417)
|
(12,221)
|
(18,638)
|
Unrealized loss on contracts (3)
|
(6,064)
|
(17,612)
|
(23,676)
|
Total loss on commodity contracts
|
(12,481)
|
(29,833)
|
(42,314)
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
|
|
Three months ended March 31, 2013
|
($000s)
|
Crude Oil & Liquids
|
Natural Gas
|
Total
|
Realized cash gain (loss) on contracts (2)
|
(89)
|
6,591
|
6,502
|
Unrealized gain (loss) on contracts (3)
|
2,007
|
(14,306)
|
(12,299)
|
Total gain (loss) on commodity contracts
|
1,918
|
(7,715)
|
(5,797)
|
(1)
|
In January 2014, the Company settled a 1,500 bbl/d $105.00 US crude call
option for the term of February to December 31, 2014 for US $0.5
million.
|
(2)
|
In January 2013, the Company crystalized and realized $6.5 million in
cash proceeds by resetting the fixed prices on natural gas commodity
price risk management contracts for the period from April 1, 2013
through to October 31, 2013.
|
(3)
|
Unrealized gain (loss) on commodity contracts represents non-cash
adjustments for changes in the fair value of these contracts during
the period.
|
Royalties
For the first three months of 2014, total royalties were $27.4 million
compared to $11.8 million incurred in the first quarter of 2013.
Overall royalties as a percentage of revenue (after transportation
costs) in the first quarter of 2014 were 17% compared with 19% in the
same period in 2013.
The Company's minor heavy oil properties, principally consisting of the
Frog Lake Alberta assets, are subject to high Crown royalty rates. The
Company's light crude oil, condensate and NGLs, and natural gas
royalties are impacted by lower royalties on more recent wells in their
early years of production under the Alberta royalty incentive program.
This is offset by increased royalty rates on wells coming off initial
royalty incentive rates and wells drilled on Ferrier lands with higher
combined IOGC and GORR royalty rates.
|
Royalties by Commodity Type
|
Three months ended March 31,
|
($000s, except where noted)
|
2014
|
2013
|
Light crude oil, condensate and NGLs
|
18,590
|
8,273
|
|
$/bbl
|
16.75
|
15.89
|
|
Average light crude oil, condensate and NGLs royalty rate (%)
|
21
|
22
|
|
|
|
Heavy Oil
|
194
|
428
|
|
$/bbl
|
29.13
|
24.14
|
|
Average heavy oil royalty rate (%)
|
59
|
47
|
|
|
|
Natural Gas
|
8,603
|
3,084
|
|
$/mcf
|
0.70
|
0.43
|
|
Average natural gas royalty rate (%)
|
12
|
13
|
|
|
|
Total
|
27,387
|
11,785
|
$/boe
|
8.68
|
6.77
|
Average total royalty rate (%)
|
17
|
19
|
Royalties by Type
|
|
|
|
|
Three months ended March 31,
|
($000s)
|
|
2014
|
2013
|
Crown royalties
|
8,255
|
3,102
|
Indian Oil and Gas Canada royalties
|
3,525
|
2,720
|
Freehold & GORR
|
15,607
|
5,963
|
Total
|
27,387
|
11,785
|
Expenses
|
|
|
|
|
Three months ended March 31,
|
($000s)
|
|
2014
|
2013
|
Production
|
25,629
|
15,058
|
Transportation
|
5,037
|
1,445
|
General and administrative
|
5,525
|
3,586
|
Interest and financing charges (1)
|
3,727
|
3,044
|
Share-based compensation
|
2,509
|
1,450
|
(1)
|
Does not include financing charges in relation to the Company's
accretion of decommissioning liabilities.
|
Expenses per boe
|
|
|
|
|
Three months ended March 31,
|
($ per boe)
|
|
2014
|
2013
|
Production
|
8.12
|
8.65
|
Transportation
|
1.61
|
0.83
|
General and administrative
|
1.75
|
2.06
|
Interest and financing charges
|
1.18
|
1.75
|
Share-based compensation
|
0.80
|
0.83
|
Production Expenses
For the three months ended March 31, 2014, production expenses totaled
$25.6 million ($8.12/boe), compared to $15.1 million ($8.65/boe) in the
first quarter of 2013. In the first three months of 2014, production
expenses increased overall but decreased on a per boe basis when
compared to the same period in 2013.
Bellatrix is targeting production expenses of approximately $118.0
million ($7.50/boe) in the 2014 year, which is a reduction from the
$8.74/boe production expenses incurred for the 2013 year. This is
based upon assumptions of estimated 2014 average production of
approximately 42,500 boe/d to 43,500 boe/d, continued field
optimization work and planned capital expenditures in producing areas
which are anticipated to incur lower production expenses.
Production Expenses by Commodity Type
|
|
Three months ended March 31,
|
($000s, except where noted)
|
2014
|
2013
|
Light crude oil, condensate and NGLs
|
9,019
|
6,837
|
$/bbl
|
8.13
|
13.13
|
|
|
|
Heavy oil
|
105
|
290
|
$/bbl
|
15.77
|
16.36
|
|
|
|
Natural gas
|
16,505
|
7,931
|
$/mcf
|
1.35
|
1.10
|
|
|
|
Total
|
25,629
|
15,058
|
$/boe
|
8.12
|
8.65
|
|
|
|
Total
|
25,629
|
15,058
|
Processing and other third party income (1)
|
(1,866)
|
(635)
|
Total after deducting processing and other third party income
|
23,763
|
14,423
|
$/boe
|
7.53
|
8.28
|
(1)
|
Processing and other third party income is included within petroleum and
natural gas sales in the Condensed Consolidated Statements of
Comprehensive Income.
|
Transportation
Transportation expenses for the first quarter of 2014 were $5.0 million
($1.61/boe), compared to $1.4 million ($0.83/boe) in the same period in
2013. Transportation expenses increased on an overall and per boe basis
due primarily to additional firm service at certain receipt points and
increased fuel costs resulting from higher natural gas pricing realized
during the first quarter of 2014.
Operating Netback
Operating Netback - Corporate (before risk management)
|
|
|
|
|
Three months ended March 31,
|
($/boe)
|
|
2014
|
2013
|
Sales
|
51.27
|
37.28
|
Transportation
|
(1.61)
|
(0.83)
|
Royalties
|
(8.68)
|
(6.77)
|
Production expense
|
(8.12)
|
(8.65)
|
Operating netback
|
32.86
|
21.03
|
For the three months ended March 31, 2014, the corporate operating
netback (before commodity risk management contracts) was $32.86/boe
compared to $21.03/boe in the first quarter of 2013. The increased
netback was primarily the result of higher commodity prices and lower
production expenses, partially offset by increased transportation and
royalty expenses. After including commodity risk management contracts,
the corporate operating netback for the first three months of 2014 was
$26.95/boe compared to $24.77/boe in the same period in 2013. Per unit
metrics including risk management include realized gains or losses on
commodity contracts and exclude unrealized gains or losses on commodity
contracts.
Operating Netback - Crude Oil, Condensate and NGLs (before risk
management)
|
|
|
|
|
Three months ended March 31,
|
($/bbl)
|
|
2014
|
2013
|
Sales
|
80.41
|
73.60
|
Transportation
|
(1.89)
|
(0.93)
|
Royalties
|
(16.82)
|
(16.16)
|
Production expense
|
(8.17)
|
(13.24)
|
Operating netback
|
53.53
|
43.27
|
Operating netback for crude oil, condensate and NGLs averaged $53.53/bbl
for the three months ended March 31, 2014, a 24% increase from
$43.27/bbl realized in the first quarter of 2013. The increased netback
was primarily attributable to higher crude oil, condensate, and NGL
commodity prices as well as reduced production expenses, partially
offset by higher royalties and transportation expenses. After
including commodity price risk management contracts, operating netback
for crude oil, condensate, and NGLs for the first three months of 2014
decreased to $47.78/bbl compared to $43.11/bbl in the same period in
2013.
Operating Netback - Natural Gas (before risk management)
|
|
|
|
|
Three months ended March 31,
|
($/mcf)
|
|
2014
|
2013
|
Sales
|
5.88
|
3.50
|
Transportation
|
(0.24)
|
(0.13)
|
Royalties
|
(0.70)
|
(0.43)
|
Production expense
|
(1.35)
|
(1.10)
|
Operating netback
|
3.59
|
1.84
|
Operating netback for natural gas in the first quarter of 2014 increased
by 95% from $1.84/mcf realized in the first three months of 2013 to
$3.59/mcf, reflecting increased natural gas prices, partially offset by
increased production, transportation, and royalty expenses. After
including commodity risk management contracts, operating netback for
natural gas for the three months ended March 31, 2014 decreased to
$2.59/mcf, compared to $2.76/mcf in the same period in 2013.
General and Administrative
General and administrative ("G&A") expenses (after capitalized G&A and
recoveries) for the three months ended March 31, 2014 were $5.5 million
($1.75/boe), compared to $3.6 million ($2.06/boe) realized in the first
quarter of 2013. The higher G&A expenses in the 2013 period were
reflective of higher compensation costs and additional office rent,
partially offset by increased recoveries and capitalization. On a per
boe basis, G&A for the first three months of 2014 decreased by
approximately 15% when compared to the same period in 2013. The
decrease was primarily a result of higher average sales volumes, which
more than offset the higher overall costs realized between the 2013 and
2014 periods.
For 2014, the Company is anticipating G&A expenses after capitalization
and recoveries to be approximately $25.0 million ($1.60/boe) based on
estimated 2014 average production volumes of approximately 42,500 boe/d
to 43,500 boe/d.
General and Administrative Expenses
|
|
|
|
Three months ended March 31,
|
($000s, except where noted)
|
2014
|
2013
|
Gross expenses
|
13,902
|
6,166
|
Capitalized
|
(3,887)
|
(1,152)
|
Recoveries
|
(4,490)
|
(1,428)
|
G&A expenses
|
5,525
|
3,586
|
G&A expenses, per unit ($/boe)
|
1.75
|
2.06
|
Interest and Financing Charges
Bellatrix recorded $3.7 million ($1.18/boe) of interest and financing
charges related to bank debt in the first three months of 2014,
compared to $3.0 million ($1.75/boe) in the first quarter of 2013,
which included amounts relating to its then outstanding convertible
debentures. Bellatrix's convertible debentures were settled during
September and October of 2013. The overall increase in interest and
financing charges was primarily due to higher interest charges related
to the Company's long-term debt as the Company carried a higher average
debt balance in the first quarter of 2014 compared to the 2013 period.
Bellatrix's total net debt at March 31, 2014 of $473.2 million included
$335.1 million of bank debt and the net balance of the working capital
deficiency.
Interest and Financing Charges (1)
|
|
|
|
Three months ended March 31,
|
($000s, except where noted)
|
2014
|
2013
|
Interest and financing charges
|
3,727
|
3,044
|
Interest and financing charges ($/boe)
|
1.18
|
1.75
|
(1)
|
Does not include financing charges in relation to the Company's
accretion of decommissioning liabilities.
|
Debt to Funds Flow from Operations Ratio
|
|
Three months ended March 31,
|
($000s, except where noted)
|
2014
|
2013
|
|
|
|
Shareholders' equity
|
933,670
|
386,750
|
|
|
|
Long-term debt
|
335,118
|
150,827
|
Convertible debentures (liability component)
|
-
|
51,105
|
Working capital (excess) deficiency (2)
|
137,970
|
43,488
|
Total net debt (2) at period end
|
473,088
|
245,420
|
|
|
|
Debt to funds flow from operations (1) ratio (annualized) (3)
|
|
|
Funds flow from operations (1) (annualized)
|
310,568
|
150,180
|
Total net debt (2) at period end(5)
|
473,088
|
245,420
|
Total net debt to periods funds flow from operations ratio (annualized) (3)(5)
|
1.5x
|
1.6x
|
|
|
|
Debt to funds flow from operations (1) ratio (trailing) (4)
|
|
|
Funds flow from operations (1) (trailing) (4)(6)
|
229,091
|
119,389
|
Total net debt (2) to funds flow from operations ratio (1) (trailing) (4)(5)(6)
|
2.1x
|
2.1x
|
|
|
|
|
|
|
(1)
|
As detailed previously in this MD&A, funds flow from operations is a
term that does not have any standardized meaning under GAAP. Funds
flow from operations is calculated as cash flow from operating
activities, excluding decommissioning costs incurred, changes in
non-cash working capital incurred, and transaction costs. Refer to the
reconciliation of cash flow from operating activities to funds flow
from operations appearing elsewhere herein.
|
|
|
(2)
|
Net debt and total net debt are considered non-GAAP measures. Therefore
reference to the non-GAAP measures of net debt or total net debt may
not be comparable with the calculation of similar measures for other
entities. The Company's 2014 calculation of total net debt excludes
deferred lease inducements, long-term commodity contract liabilities,
decommissioning liabilities, the long-term finance lease obligation,
deferred lease inducements, and the deferred tax liability. Net debt
and total net debt include the adjusted working capital deficiency
(excess). The adjusted working capital deficiency (excess) is a
non-GAAP measure calculated as net working capital deficiency (excess)
excluding short-term commodity contract assets and liabilities, current
finance lease obligation, and deferred lease inducements. For the
comparative 2013 calculation, net debt also excludes the liability
component of convertible debentures which were then outstanding. A
reconciliation between total liabilities under GAAP and total net debt
and net debt as calculated by the Company is found in the MD&A.
|
|
|
(3)
|
Total net debt and net debt to periods funds flow from operations ratio
(annualized) is calculated based upon first quarter funds flow from
operations annualized.
|
|
|
(4)
|
Trailing periods funds flow from operations ratio annualized is based
upon the twelve-month periods ended March 31, 2014 and March 31, 2013.
|
|
|
(5)
|
During part of the 2013 year, Bellatrix had outstanding $55.0 million
4.75% convertible unsecured subordinated debentures (the "convertible
debentures"). The convertible debentures were converted or redeemed
during September and October of 2013. At March 31, 2013, net debt
excluding convertible debentures was $194.3 million, net debt excluding
convertible debentures to funds flow from operations ratio (trailing)
was 1.6x, and net debt excluding convertible debentures to periods
funds flow from operations ratio (annualized) was 1.3x .
|
|
|
(6)
|
The calculations of funds flow from operations (trailing) and total net
debt to funds flow from operations ratio (trailing) for March 31, 2014
include Angle funds flow from operations for the twelve-month period
ending March 31, 2014.
|
Reconciliation of Total Liabilities to Total Net Debt and Net Debt
|
|
|
As at March 31,
|
($000s)
|
|
|
2014
|
2013
|
Total liabilities per financial statements
|
|
|
774,259
|
373,025
|
|
Current liabilities included within working capital calculation
|
|
|
(318,301)
|
(110,055)
|
|
Commodity contract liability - long term
|
|
|
-
|
(2,999)
|
|
Decommissioning liabilities
|
|
|
(71,479)
|
(44,497)
|
|
Finance lease obligation
|
|
|
(11,262)
|
(12,776)
|
|
Deferred lease inducements
|
|
|
(2,493)
|
-
|
|
Deferred taxes
|
|
|
(35,606)
|
(766)
|
|
|
|
|
|
Working Capital
|
|
|
|
|
|
Current assets
|
|
|
(137,924)
|
(56,000)
|
|
Current liabilities
|
|
|
318,301
|
110,055
|
|
Current portion of finance lease
|
|
|
(1,514)
|
(1,441)
|
|
Current portion of deferred lease inducements
|
|
|
(285)
|
-
|
|
Net commodity contract liability
|
|
|
(40,608)
|
(9,126)
|
|
|
|
137,970
|
43,488
|
Total net debt
|
|
|
473,088
|
245,420
|
|
Convertible debentures
|
|
|
-
|
(51,105)
|
Net debt
|
|
|
473,088
|
194,315
|
Share-Based Compensation
Non-cash share-based compensation expense for the three months ended
March 31, 2014 was $2.5 million compared to $1.5 million in the first
quarter of 2013. The increase in non-cash share-based compensation
expense was primarily a result of a higher expense net of forfeitures
for the Company's outstanding share options of $1.3 million (2013: $1.0
million), an expense of $0.9 million (2013: nil) for Restricted Awards
("RAs"), and an expense of $0.4 million (2013: nil) for Performance
Awards ("PAs"). The increase was partially offset by higher capitalized
share-based compensation of $1.0 million (2013: $0.4 million).
Depletion and Depreciation
Depletion and depreciation expense for the first quarter of 2014 was
$36.4 million ($11.54/boe), compared to $17.1 million ($9.82/boe)
recognized in the first three months of 2013. The increase in
depletion and depreciation expense on a per boe basis was primarily a
result of a higher cost base and increased future development costs,
partially offset by an increase in the reserve base used for the
depletion calculation.
For the three months ended March 31, 2014, Bellatrix has included a
total of $1.1 billion (2013: $456.2 million) for future development
costs in the depletion calculation and excluded from the depletion
calculation a total of $69.9 million (2013: $37.9 million) for
estimated salvage.
Depletion and Depreciation
|
|
|
|
Three months ended March 31,
|
($000s, except where noted)
|
2014
|
2013
|
Depletion and Depreciation
|
36,405
|
17,090
|
Per unit ($/boe)
|
11.54
|
9.82
|
A total net gain on dispositions of $19.1 million was recognized for the
three months ended March 31, 2014 relating to gains on wells drilled
under the Grafton Joint Venture and the Troika Joint Venture which were
completed during the three months ended March 31, 2014.
Impairment of Assets
As at March 31, 2014, Bellatrix determined there were no impairment
indicators requiring an impairment test to be performed.
Income Taxes
Deferred income taxes arise from differences between the accounting and
tax basis of the Company's assets and liabilities. For the three
months ended March 31, 2014, the Company recognized a deferred income
tax expense of $8.6 million, compared to $1.8 million in the first
quarter of 2013.
At March 31, 2014, the Company had a total deferred tax liability
balance of $35.6 million.
At March 31, 2014, Bellatrix had approximately $1.3 billion in tax pools
available for deduction against future income as follows:
|
|
|
|
($000s)
|
Rate %
|
2014
|
2013
|
Intangible resource pools:
|
|
|
|
|
Canadian exploration expenses
|
100
|
99,800
|
56,200
|
|
Canadian development expenses
|
30
|
787,500
|
424,300
|
|
Canadian oil and gas property expenses
|
10
|
74,500
|
41,400
|
|
Foreign resource expenses
|
10
|
800
|
700
|
Attributed Canadian Royalty Income
|
(Alberta) 100
|
-
|
16,100
|
Alberta non-capital losses greater than
Federal non-capital losses
|
(Alberta) 100
|
16,100
|
-
|
Undepreciated capital cost (1)
|
6 - 55
|
218,300
|
87,600
|
Non-capital losses (expire through 2030)
|
100
|
94,500
|
10,000
|
Financing costs
|
20 S.L.
|
9,900
|
2,000
|
|
|
1,301,400
|
638,300
|
(1)
|
Approximately $186 million of undepreciated capital cost pools are class
41, which is claimed at a 25% rate.
|
Cash Flow from Operating Activities, Funds Flow from Operations and Net
Profit
As detailed previously in this MD&A, funds flow from operations is a
term that does not have any standardized meaning under GAAP.
Bellatrix's method of calculating funds flow from operations may differ
from that of other companies, and accordingly, may not be comparable to
measures used by other companies. Funds flow from operations is
calculated as cash flow from operating activities before
decommissioning costs incurred, changes in non-cash working capital
incurred, and transaction costs.
Reconciliation of Cash Flow from Operating Activities and Funds Flow
from Operations
|
|
Three months ended March 31,
|
($000s)
|
2014
|
2013
|
Cash flow from operating activities
|
84,300
|
35,527
|
Decommissioning costs incurred
|
64
|
279
|
Change in non-cash working capital
|
(6,722)
|
1,739
|
Funds flow from operations
|
77,642
|
37,543
|
Bellatrix's cash flow from operating activities of $84.3 million ($0.49
per basic share and $0.48 per diluted share) for the three months ended
March 31, 2014 increased by 137% from $35.5 million ($0.33 per basic
share and $0.30 per diluted share) generated in the comparative 2013
period. Bellatrix generated funds flow from operations of $77.6
million ($0.45 per basic share and $0.45 per diluted share) for the
first quarter of 2014, an increase of 107% from $37.5 million ($0.35
per basic share and $0.32 per diluted share) generated in the first
three months of 2013. The increase in funds flow from operations
between the 2014 and 2013 periods was principally due to increased
overall production volumes and higher realized prices for all
commodities, partially offset by a higher net realized loss on
commodity contracts, increased general and administrative expenses,
operating, transportation, and royalties expenses.
Bellatrix maintains a commodity price risk management program to provide
a measure of stability to funds flow from operations. Unrealized
mark-to-market gains or losses are non-cash adjustments to the fair
market value of the contract over its entire term and are included in
the calculation of net profit.
A net profit of $25.2 million ($0.15 per basic share and $0.14 per
diluted share) was recognized for the three months ended March 31,
2014, compared to a net profit of $4.6 million ($0.04 per basic share
and $0.04 per diluted share) in the first quarter of 2013. The higher
net profit recorded in the first three months of 2014 compared to 2013
was primarily the result of higher funds from operating activities as
noted above and a higher gain on property dispositions. These positive
impacts to net profit were partially offset by increased depletion and
depreciation, stock-based compensation, and deferred tax expenses, a
realized loss on commodity contracts in the first quarter of 2014
compared to a realized gain in the first quarter of 2013, and a greater
unrealized loss on commodity contracts in the first quarter of 2014
compared to the same period in 2013.
Cash Flow from Operating Activities, Funds Flow from Operations and Net
Profit
|
|
Three months ended March 31,
|
($000s, except per share amounts)
|
2014
|
2013
|
Cash flow from operating activities
|
84,300
|
35,527
|
Basic ($/share)
|
0.49
|
0.33
|
Diluted ($/share)
|
0.48
|
0.30
|
Funds flow from operations
|
77,642
|
37,545
|
Basic ($/share)
|
0.45
|
0.35
|
Diluted ($/share)
|
0.45
|
0.32
|
Net profit
|
25,167
|
4,561
|
Basic ($/share)
|
0.15
|
0.04
|
Diluted ($/share)
|
0.14
|
0.04
|
Capital Expenditures
Bellatrix invested $155.9 million in capital expenditures during the
three months ended March 31, 2014, compared to $91.6 million in the
first quarter of 2013.
Capital Expenditures
|
|
Three months ended March 31,
|
($000s)
|
2014
|
2013
|
Lease acquisitions and retention
|
2,473
|
5,606
|
Geological and geophysical
|
745
|
23
|
Drilling and completion costs
|
100,380
|
76,362
|
Facilities and equipment
|
49,088
|
9,468
|
|
Exploration and development (1)
|
152,686
|
91,459
|
Corporate (2)
|
2,956
|
140
|
Property acquisitions
|
260
|
10
|
|
Total capital expenditures - cash
|
155,902
|
91,609
|
Property dispositions - cash
|
(39)
|
5
|
|
Total net capital expenditures - cash
|
155,863
|
91,614
|
Capital lease additions - non-cash
|
-
|
-
|
Other - non-cash (3)
|
-
|
787
|
|
Total non-cash
|
-
|
787
|
Total net capital expenditures
|
155,863
|
92,401
|
(1)
|
Excludes capitalized costs related to decommissioning liabilities
expenditures incurred during the period.
|
(2)
|
Corporate includes office leasehold improvements, furniture, fixtures
and equipment before recoveries realized from landlord lease
inducements.
|
(3)
|
Other includes non-cash adjustments for the current period's
decommissioning liabilities and share based compensation.
|
In the first quarter of 2014, Bellatrix posted a 100% success rate,
drilling and/or participating in 44 gross (25.56 net) wells, resulting
in 36 gross (21.87 net) Cardium oil wells, 7 gross (3.04 net)
Notikewin/Falher liquids-rich gas wells, and one gross (0.65 net)
Cardium gas well.
By comparison, during the 2013 first quarter, Bellatrix drilled or
participated in 21 gross (17.08 net) wells, which included 18 gross
(14.98 net) Cardium light oil horizontal wells and 3 gross (2.10 net)
Notikewin/Falher liquids-rich gas horizontal wells.
The $155.9 million capital program for the three months ended March 31,
2014 was financed from a combination of funds flow from operations and
bank debt.
Based on the current economic conditions and Bellatrix's operating
forecast for 2014, the Company budgets a revised net capital program of
$440 million funded from the Company's cash flows and to the extent
necessary, bank indebtedness. The 2014 capital budget is expected to
be directed primarily towards horizontal drilling and completions
activities in the Cardium and Mannville formations.
Decommissioning Liabilities
At March 31, 2014, Bellatrix has recorded decommissioning liabilities of
$71.5 million, compared to $67.1 million at December 31, 2013, for
future abandonment and reclamation of the Company's properties. For
the three months ended March 31, 2014, decommissioning liabilities
increased by a net $4.4 million as a result of $1.4 million incurred on
development activities, $2.6 million resulting from changes in
estimates, and $0.4 million as a result of charges for the unwinding of
the discount rates used for assessing liability fair values. The $2.6
million increase as a result of changes in estimates was primarily due
to discount rate variations between March 31, 2014 and December 31,
2013.
Liquidity and Capital Resources
As an oil and gas business, Bellatrix has a declining asset base and
therefore relies on ongoing development and acquisitions to replace
production and add additional reserves. Future oil and natural gas
production and reserves are highly dependent upon the success of
exploiting the Company's existing asset base and in acquiring
additional reserves. To the extent Bellatrix is successful or
unsuccessful in these activities, cash flow could be increased or
decreased.
Bellatrix is focused on growing oil and natural gas production from its
diversified portfolio of existing and emerging resource plays in
Western Canada. Bellatrix remains highly focused on key business
objectives of maintaining financial strength and optimizing capital
investments - which it seeks to attain through a disciplined approach
to capital spending, a flexible investment program and financial
stewardship. Natural gas prices are primarily driven by North American
supply and demand, with weather being the key factor in the short
term. Bellatrix believes that natural gas represents an abundant,
secure, long-term supply of energy to meet North American needs.
Bellatrix's results are affected by external market and risk factors,
such as fluctuations in the prices of crude oil and natural gas,
movements in foreign currency exchange rates and inflationary pressures
on service costs. Recent market conditions have resulted in Bellatrix
experiencing recent upward trends in natural gas, light oil and
condensate, and NGL pricing.
Liquidity risk is the risk that Bellatrix will not be able to meet its
financial obligations as they become due. Bellatrix actively manages
its liquidity through daily and longer-term cash, debt and equity
management strategies. Such strategies encompass, among other factors:
having adequate sources of financing available through its bank credit
facilities, estimating future cash generated from operations based on
reasonable production and pricing assumptions, analysis of economic
risk management opportunities, and maintaining sufficient cash flows
for compliance with operating debt covenants. Bellatrix is fully
compliant with all of its operating debt covenants.
Bellatrix generally relies upon its operating cash flows and its credit
facilities to fund capital requirements and provide liquidity. Future
liquidity depends primarily on cash flow generated from operations,
existing credit facilities and the ability to access debt and equity
markets. From time to time, the Company accesses capital markets to
meet its additional financing needs and to maintain flexibility in
funding its capital programs. There can be no assurance that future
debt or equity financing, or cash generated by operations will be
available or sufficient to meet these requirements or for other
corporate purposes or, if debt or equity financing is available, that
it will be on terms acceptable to Bellatrix.
Credit risk is the risk of financial loss to Bellatrix if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from Bellatrix's trade receivables
from joint venture partners, petroleum and natural gas marketers, and
financial derivative counterparties.
A substantial portion of Bellatrix's accounts receivable are with
customers and joint interest partners in the petroleum and natural gas
industry and are subject to normal industry credit risks. Bellatrix
currently sells substantially all of its production to nine primary
purchasers under standard industry sale and payment terms. The most
significant 60 day exposure to a single counterparty is approximately
$24.6 million. Purchasers of Bellatrix's natural gas, crude oil and
natural gas liquids are subject to a periodic internal credit review to
minimize the risk of non-payment. Bellatrix has continued to closely
monitor and reassess the creditworthiness of its counterparties,
including financial institutions. This has resulted in Bellatrix
reducing or mitigating its exposures to certain counterparties where it
is deemed warranted and permitted under contractual terms.
Bellatrix may be exposed to third party credit risk through its
contractual arrangements with its current or future partners and joint
venture partners, marketers of its petroleum and natural gas
production, derivative counterparties and other parties. In the event
such entities fail to meet their contractual obligations to Bellatrix,
such failures may have a material adverse effect on the Company's
business, financial condition, results of operations and prospects. In
addition, poor credit conditions in the industry and of joint venture
partners may impact a joint venture partner's willingness to
participate in Bellatrix's ongoing capital program, potentially
delaying the program and the results of such program until Bellatrix
finds a suitable alternative partner.
Total net debt levels of $473.1 million at March 31, 2014 have increased
by $77.6 million from $395.5 million at December 31, 2013, primarily as
a consequence of an increase in a working capital deficiency and bank
debt as the Company executed its 2014 capital program. Included within
the working capital deficiency is $81.0 million in advances from joint
venture partner, the majority of which represents drilling obligations
predominantly under the Company's joint venture obligations with TCA
and Grafton, and under the Daewoo and Devonian Partnership. Total net
debt excludes unrealized commodity contract assets and liabilities,
deferred taxes, finance lease obligations, deferred lease inducements
and decommissioning liabilities.
Funds flow from operations represents 50% of the funding requirements
for Bellatrix's capital expenditures for the three months ended March
31, 2014.
As of March 31, 2014, the Company's credit facilities are available on
an extendible revolving term basis and consist of a $50 million
operating facility provided by a Canadian bank and a $450 million
syndicated facility provided by nine financial institutions, subject to
a borrowing base test.
Amounts borrowed under the credit facilities will bear interest at a
floating rate based on the applicable Canadian prime rate, U.S. base
rate, CDOR rate or LIBOR margin rate, plus between 1.00% to 3.50%,
depending on the type of borrowing and the Company's debt to cash flow
ratio. A standby fee is charged of between 0.50% and 0.875% on the
undrawn portion of the credit facilities, depending on the Company's
debt to cash flow ratio. The credit facilities are secured by a $1
billion debenture containing a first ranking charge and security
interest. Bellatrix has provided a negative pledge and undertaking to
provide fixed charges over its properties in certain circumstances.
The revolving period for the revolving term credit facility will end on
June 24, 2014, unless extended for a further 364 day period. Should
the facility not be extended it will convert to a non-revolving term
facility with the full amount outstanding due 366 days after the last
day of the revolving period of June 24, 2014. The borrowing base will
be subject to re-determination on May 31 and November 30 in each year
prior to maturity, with the next semi-annual redetermination occurring
on May 31, 2014.
The Company's credit facilities contain market standard terms and
conditions, and include, for instance, restrictions on asset
dispositions and hedging. Generally speaking, dispositions of
properties to which the Company is given lending value in the
determination of the borrowing base are not permitted unless the NPV
10% value attributed to all properties sold in a fiscal year does not
exceed 5% of the current borrowing base, or unless there would be no
borrowing base shortfall as a result of such properties being sold.
Hedging transactions must not be done for speculative purposes, and the
term of any hedging contract cannot exceed 3 years for commodity swaps
or 2 years for interest rate or exchange rate swaps. The aggregate
amount hedged under all oil and gas commodity swaps cannot exceed 70%
of the Company's average daily sales volume for the first year of a
rolling 3 year period, 60% for the second year of such period or 50%
for the third year of such period, with the average daily sales volume
being based on our production for the previous fiscal quarter. The
aggregate amount hedged under all interest rate swaps cannot exceed 60%
of the amount of the commitment under the credit facilities, and the
aggregate amount hedged under all exchange rate swaps cannot exceed 60%
of our US dollar revenue over the previous 3 months.
As at March 31, 2014, approximately $164.4 million or 33% of unused and
available bank credit under its credit facilities was available to fund
Bellatrix's ongoing capital spending and operational requirements.
Bellatrix currently has commitments associated with its credit
facilities outlined above and the commitments outlined under the
"Commitments" section. Bellatrix continually monitors its capital
spending program in light of the recent volatility with respect to
commodity prices and Canadian dollar exchange rates with the aim of
ensuring the Company will be able to meet future anticipated
obligations incurred from normal ongoing operations with funds flow
from operations and draws on Bellatrix's credit facility, as
necessary. Bellatrix has the ability to fund its revised 2014 capital
program of $440 million by utilizing cash flow, proceeds from asset
dispositions, and to the extent necessary, bank indebtedness.
As at April 30, 2014, Bellatrix had outstanding a total of 9,196,172
options exercisable at an average exercise price of $5.43 per share and
172,988,561 common shares.
Commitments
As at March 31, 2014, Bellatrix committed to drill 4 gross (2.0 net)
wells pursuant to farm-in agreements. Bellatrix expects to satisfy
these drilling commitments at an estimated cost of approximately $6.9
million.
In addition, Bellatrix entered into two joint operating agreements
during the 2011 year and an additional joint operation agreement during
2012. The agreements include a minimum commitment for the Company to
drill a specified number of wells each year over the term of the
individual agreements. The details of these agreements are provided in
the table below:
|
|
|
|
Joint Operating Agreement
|
Feb. 1, 2011
|
Aug. 4, 2011
|
Dec. 14, 2012
|
Commitment Term
|
2011 to 2015
|
2011 to 2016
|
2014 to 2018
|
Minimum wells per year (gross and net)
|
3
|
5 to 10
|
2
|
Minimum total wells (gross and net)
|
15
|
40
|
10
|
Estimated total cost ($000s)
|
$ 52.5
|
$ 140.0
|
$ 35.0
|
Remaining wells to drill at March 31, 2014
|
5
|
12
|
7
|
Remaining estimated total cost ($000s)
|
$ 17.5
|
$ 42.0
|
$ 24.5
|
Bellatrix also has certain drilling commitments relating to the Grafton
Joint Venture, the Daewoo and Devonian Partnership, and the Troika
Joint Venture previously discussed. In meeting the drilling
commitments under these agreements, Bellatrix will satisfy some of the
drilling commitments under the joint operating agreements described
above.
|
|
|
|
|
|
|
|
|
|
Agreement
|
|
|
Grafton (2)
|
|
|
Daewoo and
Devonian
|
|
|
Troika
|
Commitment Term
|
|
|
2013 to 2015
|
|
|
2013 to 2016
|
|
|
2013 to 2014
|
Minimum total wells (gross) (1)
|
|
|
58
|
|
|
70
|
|
|
63
|
Minimum total wells (net) (1)
|
|
|
10.5
|
|
|
30.4
|
|
|
31.5
|
Estimated total cost ($000s) (gross) (1)
|
|
|
$ 244.0
|
|
|
$ 200.0
|
|
|
$ 240.0
|
Estimated total cost ($000s) (net) (1)
|
|
|
$ 44.0
|
|
|
$ 100.0
|
|
|
$ 120.0
|
Remaining wells to drill at March 31, 2014 (gross)
|
|
|
41
|
|
|
47
|
|
|
29
|
Remaining wells to drill at March 31, 2014 (net)
|
|
|
7.3
|
|
|
20.6
|
|
|
14.5
|
Remaining estimated total cost ($000s) (gross) (1)
|
|
|
$ 167.4
|
|
|
$ 137.6
|
|
|
$ 110.5
|
Remaining estimated total cost ($000s) (net) (1)
|
|
|
$ 30.1
|
|
|
$ 80.8
|
|
|
$ 55.2
|
(1)
|
Gross and net estimated total cost values and gross and net minimum
estimated total wells for the Troika and Grafton Joint Ventures
represent Bellatrix's total capital and well commitments pursuant to
the Troika and Grafton joint venture agreements. Gross and net minimum
total wells for the Daewoo and Devonian Partnership represent
Bellatrix's total well commitments pursuant to the Daewoo and Devonian
Partnership agreement. Gross and net estimated total cost values for
the Daewoo and Devonian Partnership represent Bellatrix's estimated
cost associated with its well commitments under the Daewoo and Devonian
Partnership agreement. Remaining estimated total cost (gross) for the
Daewoo and Devonian Partnership is based on initial Daewoo and Devonian
Partnership gross capital divided by initial total gross capital
including third parties.
|
(2)
|
Subsequent to March 31, 2014, Grafton elected to exercise an option to
increase committed capital investment to the Grafton Joint Venture
established during 2013 by an additional $50 million, for a total
commitment of $250 million, on the same terms and conditions as the
previously announced Grafton Joint Venture.
|
The Company had the following liabilities as at March 31, 2014:
|
|
|
|
|
|
Liabilities ($000s)
|
Total
|
< 1 Year
|
1-3 Years
|
3-5 Years
|
More than
5 years
|
Accounts payable and accrued liabilities (1)
|
$ 194,856
|
$ 194,856
|
$ -
|
$ -
|
$ -
|
Advances from joint venture partners
|
81,038
|
81,038
|
-
|
-
|
-
|
Long-term debt - principal (2)
|
335,118
|
-
|
335,118
|
-
|
-
|
Commodity contract liability
|
40,608
|
40,608
|
-
|
-
|
-
|
Decommissioning liabilities (3)
|
71,479
|
-
|
2,248
|
3,375
|
65,856
|
Finance lease obligation
|
12,776
|
1,514
|
3,207
|
2,448
|
5,607
|
Deferred lease inducements
|
2,778
|
285
|
285
|
285
|
1,923
|
Total
|
$ 738,653
|
$ 318,301
|
$ 340,858
|
$ 6,108
|
$ 73,386
|
(1)
|
Includes $0.5 million of accrued interest payable in relation to the
credit facilities is included in Accounts Payable and Accrued
Liabilities.
|
(2)
|
Bank debt is based on a revolving term which is reviewed annually and
converts to a 366 day non-revolving facility if not renewed. Interest
due on the bank credit facility is calculated based upon floating
rates.
|
(3)
|
Amounts represent the inflated, discounted future abandonment and
reclamation expenditures anticipated to be incurred over the life of
the Company's properties (between 2017 and 2068).
|
Off-Balance Sheet Arrangements
The Company has certain fixed-term lease agreements, including primarily
office space leases, which were entered into in the normal course of
operations. All leases have been treated as operating leases whereby
the lease payments are included in operating expenses or G&A expenses
depending on the nature of the lease. The lease agreements do not
currently provide for early termination. No asset or liability value
has been assigned to these leases in the balance sheet as of March 31,
2014.
Business Prospects and 2014 Year Outlook
Bellatrix continues to develop its core assets and conduct exploration
programs utilizing its large inventory of geological prospects.
During the second quarter the Company will utilize its existing
multi-well drilling and production pad sites to maintain at least 5
active drilling rigs targeting 20 to 22 gross (9 to 10 net) wells. As
soon as practical, when existing road restrictions are removed,
Bellatrix will be active in drilling with 10 to 12 rigs operating in
its two core resource plays, the Cardium oil (Bellatrix is the second
largest land holder with 338 net sections in the Cardium play) and
Mannville condensate rich gas, utilizing horizontal drilling
multi-fracturing technology for the remainder of 2014.
A revised net capital budget of $440 million has been set for fiscal
2014. Based on the timing of proposed expenditures, downtime for
anticipated plant turnarounds and normal production declines, execution
of the 2014 budget is anticipated to provide 2014 average daily
production of approximately 42,500 boe/d to 43,500 boe/d and an exit
rate of approximately 47,000 boe/d.
Business Risks and Uncertainties
The reader is advised that Bellatrix continues to be subject to various
types of business risks and uncertainties as described in the Company's
Annual Information Form for the year ended December 31, 2013.
Critical Accounting Estimates and Accounting Policies
The reader is advised that the critical accounting estimates, policies,
and practices described in the Company's Management Discussion and
Analysis for the year ended December 31, 2013 continue to be critical
in determining Bellatrix's unaudited financial results as of March 31,
2014. There were no changes in accounting policies during the three
months ended March 31, 2014, except as noted below.
IFRIC 21 - "Levies", which establishes guidelines for the recognition
and accounting treatment of a liability relating to a levy imposed by a
government. This standard is effective for annual periods beginning on
or after January 1, 2014 and was adopted by Bellatrix effective January
1, 2014. The adoption of IFRIC 21 had no impact on Bellatrix.
Amendments to "Offsetting Financial Assets and Financial Liabilities"
addressed within IAS 32 - "Financial Instruments: Presentation", which
provides guidance regarding when it is appropriate and permissible for
an entity to disclose offsetting financial assets and financial
liabilities on a net basis. The amendments to this standard are
effective for annual periods beginning on or after January 1, 2014 and
were adopted by Bellatrix effective January 1, 2014. The adoption of
IAS 32 amendments had no impact on Bellatrix.
A summary of future accounting pronouncements is found in the Company's
Management Discussion and Analysis for the year ended December 31,
2013, available at www.sedar.com or as part of the Company's annual report on Form 40-F for the year
ended December 31, 2013, which may be found at www.sec.gov.
Legal, Environmental Remediation and Other Contingent Matters
The Company is involved in various claims and litigation arising in the
normal course of business. While the outcome of these matters is
uncertain and there can be no assurance that such matters will be
resolved in the Company's favor, the Company does not currently believe
that the outcome of adverse decisions in any pending or threatened
proceeding related to these and other matters or any amount which it
may be required to pay by reason thereof would have a material adverse
impact on its financial position or results of operations.
The Company reviews legal, environmental remediation and other
contingent matters to both determine whether a loss is probable based
on judgment and interpretation of laws and regulations and determine
that the loss can reasonably be estimated. When the loss is
determined, it is charged to earnings. The Company's management
monitor known and potential contingent matters and makes appropriate
provisions by charges to earnings when warranted by the circumstances.
With the above risks and uncertainties the reader is cautioned that
future events and results may vary substantially from that which
Bellatrix currently foresees.
Controls and Procedures
Disclosure Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer have
designed, or caused to be designed under their supervision, disclosure
controls and procedures to provide reasonable assurance that: (i)
material information relating to the Company is made known to the
Company's Chief Executive Officer and Chief Financial Officer by
others, particularly during the period in which the annual and interim
filings are being prepared; and (ii) information required to be
disclosed by the Company in its annual filings, interim filings or
other reports filed or submitted by it under securities legislation is
recorded, processed, summarized and reported within the time period
specified in securities legislation.
Internal Control over Financial Reporting
The Company's Chief Executive Officer and Chief Financial Officer have
designed, or caused to be designed under their supervision, internal
control over financial reporting to provide reasonable assurance
regarding the reliability of the Company's financial reporting and the
preparation of financial statements for external purposes in accordance
with GAAP.
The Company is required to disclose herein any change in the Company's
internal control over financial reporting that occurred during the
period beginning on January 1, 2014 and ended on March 31, 2014 that
has materially affected, or is reasonably likely to materially affect,
the Company's internal control over financial reporting. No material
changes in the Company's internal control over financial reporting were
identified during such period that has materially affected, or are
reasonably likely to materially affect, the Company's internal control
over financial reporting.
It should be noted that a control system, including the Company's
disclosure and internal controls and procedures, no matter how well
conceived, can provide only reasonable, but not absolute, assurance
that the objectives of the control system will be met and it should not
be expected that the disclosure and internal controls and procedures
will prevent all errors or fraud.
Sensitivity Analysis
The table below shows sensitivities to funds flow from operations as a
result of product price, exchange rate, and interest rate changes.
This is based on actual average prices received for the first quarter
of 2014 and average production volumes of 35,049 boe/d during that
period, as well as the same level of debt outstanding as at March 31,
2014. Diluted weighted average shares are based upon the first quarter
of 2014. These sensitivities are approximations only, and not
necessarily valid under other significantly different production levels
or product mixes. Commodity price risk management activities can
significantly affect these sensitivities. Changes in any of these
parameters will affect funds flow as shown in the table below:
|
|
|
|
Funds Flow from Operations (1)
|
Funds Flow from Operations (1)
|
|
(annualized)
|
Per Diluted Share
|
Sensitivity Analysis
|
($000s)
|
($)
|
Change of US $1/bbl WTI
|
4,000
|
0.02
|
Change of $0.10/ mcf
|
4,400
|
0.03
|
Change of US $0.01 CDN/ US exchange rate
|
2,600
|
0.02
|
Change in prime of 1%
|
3,400
|
0.02
|
(1)
|
The term "funds flow from operations" should not be considered an
alternative to, or more meaningful than cash flow from operating
activities as determined in accordance with GAAP as an indicator of the
Company's performance. Therefore reference to non-GAAP measures of
diluted funds flow from operations or funds flow from operations per
share may not be comparable with the calculation of similar measures
for other entities. Management uses funds flow from operations to
analyze operating performance and leverage and considers funds flow
from operations to be a key measure as it demonstrates the Company's
ability to generate the cash necessary to fund future capital
investments and to repay debt. The reconciliation between cash flow
from operating activities and funds flow from operations can be found
elsewhere herein. Funds flow from operations per share is calculated
using the weighted average number of common shares for the period.
|
Selected Quarterly Consolidated Information
The following table sets forth selected consolidated financial
information of the Company for the quarters in 2014, 2013 and 2012.
|
|
|
|
|
2014 - Quarter ended (unaudited)
($000s, except per share amounts)
|
March 31
|
|
|
|
Revenues before royalties and risk management
|
163,585
|
|
|
|
Cash flow from operating activities
|
84,300
|
|
|
|
Cash flow from operating activities per share
|
|
|
|
|
|
Basic
|
$0.49
|
|
|
|
|
Diluted
|
$0.48
|
|
|
|
Funds flow from operations (1)
|
77,642
|
|
|
|
Funds flow from operations per share (1)
|
|
|
|
|
|
Basic
|
$0.45
|
|
|
|
|
Diluted
|
$0.45
|
|
|
|
Net profit
|
25,167
|
|
|
|
Net profit per share
|
|
|
|
|
|
Basic
|
$0.15
|
|
|
|
|
Diluted
|
$0.14
|
|
|
|
Net capital expenditures (cash)
|
155,863
|
|
|
|
2013 - Quarter ended (unaudited)
($000s, except per share amounts)
|
March 31
|
June 30
|
Sept. 30
|
Dec. 31
|
Revenues before royalties and risk management
|
65,543
|
74,564
|
68,329
|
83,455
|
Cash flow from operating activities
|
35,527
|
29,611
|
25,069
|
38,025
|
Cash flow from operating activities per share
|
|
|
|
|
|
Basic
|
$0.33
|
$0.27
|
$0.23
|
$0.30
|
|
Diluted
|
$0.30
|
$0.25
|
$0.21
|
$0.29
|
Funds flow from operations (1)
|
37,545
|
36,563
|
30,002
|
39,349
|
Funds flow from operations per share (1)
|
|
|
|
|
|
Basic
|
$0.35
|
$0.34
|
$0.28
|
$0.31
|
|
Diluted
|
$0.32
|
$0.31
|
$0.25
|
$0.30
|
Net profit
|
4,561
|
15,466
|
29,453
|
22,195
|
Net profit per share
|
|
|
|
|
|
Basic
|
$0.04
|
$0.14
|
$0.27
|
$0.17
|
|
Diluted
|
$0.04
|
$0.13
|
$0.25
|
$0.17
|
Net capital expenditures (cash)
|
91,614
|
46,700
|
49,452
|
99,199
|
2012 - Quarter ended (unaudited)
($000s, except per share amounts)
|
March 31
|
June 30
|
Sept. 30
|
Dec. 31
|
Revenues before royalties and risk management
|
58,191
|
50,714
|
48,126
|
62,283
|
Cash flow from operating activities
|
24,056
|
28,458
|
24,807
|
32,007
|
Cash flow from operating activities per share
|
|
|
|
|
|
Basic
|
$0.22
|
$0.24
|
$0.23
|
$0.30
|
|
Diluted
|
$0.21
|
$0.22
|
$0.22
|
$0.28
|
Funds flow from operations (1)
|
29,194
|
25,366
|
26,613
|
29,865
|
Funds flow from operations per share (1)
|
|
|
|
|
|
Basic
|
$0.27
|
$0.24
|
$0.25
|
$0.28
|
|
Diluted
|
$0.25
|
$0.22
|
$0.23
|
$0.26
|
Net profit (loss)
|
9,172
|
9,963
|
(615)
|
9,251
|
Net profit (loss) per share
|
|
|
|
|
|
Basic
|
$0.09
|
$0.09
|
($0.01)
|
$0.09
|
|
Diluted
|
$0.08
|
$0.09
|
($0.01)
|
$0.08
|
Net capital expenditures (cash)
|
73,831
|
16,284
|
35,515
|
64,383
|
(1)
|
Refer to "Non-GAAP Measures" in respect of the term "funds flow from
operations" and "funds flow from operations per share".
|
|
|
BELLATRIX EXPLORATION LTD.
|
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, expressed in Canadian dollars)
|
|
|
March 31,
|
December 31,
|
($000s)
|
|
2014
|
2013
|
|
|
|
|
ASSETS
|
|
|
|
Current assets
|
|
|
|
|
Restricted cash
|
|
$ 19,743
|
$ 38,148
|
|
Accounts receivable (note 12)
|
|
103,682
|
80,306
|
|
Deposits and prepaid expenses
|
|
14,499
|
10,001
|
|
Commodity contract asset (note 12)
|
|
-
|
345
|
|
|
137,924
|
128,800
|
Exploration and evaluation assets (note 3)
|
|
123,182
|
132,971
|
Property, plant and equipment (note 4)
|
|
1,446,823
|
1,293,409
|
Total assets
|
|
$ 1,707,929
|
$ 1,555,180
|
|
|
|
|
LIABILITIES
|
|
|
|
Current liabilities
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$ 194,856
|
$ 137,465
|
|
Advances from joint venture partners
|
|
81,038
|
99,380
|
|
Current portion of finance lease obligation
|
|
1,514
|
1,495
|
|
Current portion of deferred lease inducements
|
|
285
|
285
|
|
Commodity contract liability (note 12)
|
|
40,608
|
17,278
|
|
|
318,301
|
255,903
|
|
|
|
|
Long-term debt (note 5)
|
|
335,118
|
287,092
|
Finance lease obligation
|
|
11,262
|
11,637
|
Deferred lease inducements
|
|
2,493
|
2,565
|
Decommissioning liabilities
|
|
71,479
|
67,075
|
Deferred taxes (note 8)
|
|
35,606
|
27,034
|
Total liabilities
|
|
774,259
|
651,306
|
|
|
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
Shareholders' capital
|
|
828,073
|
824,065
|
|
Contributed surplus
|
|
39,579
|
38,958
|
|
Retained earnings
|
|
66,018
|
40,851
|
Total shareholders' equity
|
|
933,670
|
903,874
|
Total liabilities and shareholders' equity
|
|
$ 1,707,929
|
$ 1,555,180
|
|
COMMITMENTS (note 11)
|
|
SUBSEQUENT EVENTS (note 14)
|
See accompanying notes to the condensed consolidated financial
statements.
|
|
BELLATRIX EXPLORATION LTD.
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
(unaudited, expressed in Canadian dollars)
For the three months ended March 31,
|
($000s, except per share amounts)
|
2014
|
2013
|
|
|
|
REVENUES
|
|
|
|
Petroleum and natural gas sales
|
$ 161,719
|
$ 64,908
|
|
Other income
|
1,866
|
635
|
|
Royalties
|
(27,387)
|
(11,785)
|
|
Total revenues
|
136,198
|
53,758
|
|
|
|
|
|
Realized gain (loss) on commodity contracts
|
(18,638)
|
6,502
|
|
Unrealized loss on commodity contracts
|
(23,676)
|
(12,299)
|
|
93,884
|
47,961
|
|
|
|
EXPENSES
|
|
|
|
Production
|
25,629
|
15,058
|
|
Transportation
|
5,037
|
1,445
|
|
General and administrative
|
5,525
|
3,586
|
|
Share-based compensation (note 6)
|
2,509
|
1,450
|
|
Depletion and depreciation (note 4)
|
36,405
|
17,090
|
|
Gain on property dispositions and swaps (note 4)
|
(19,114)
|
(250)
|
|
55,991
|
38,379
|
|
|
|
|
|
|
NET PROFIT BEFORE FINANCE AND TAXES
|
37,893
|
9,582
|
|
|
|
|
Finance expenses (note 9)
|
4,157
|
3,217
|
|
|
|
NET PROFIT BEFORE TAXES
|
33,736
|
6,365
|
|
|
|
TAXES
|
|
|
|
Deferred tax expense (note 8)
|
8,569
|
1,804
|
|
|
|
NET PROFIT AND COMPREHENSIVE INCOME
|
$ 25,167
|
$ 4,561
|
|
|
|
|
|
|
|
|
|
Net profit per share (note 10)
|
|
|
|
Basic
|
$0.15
|
$0.04
|
|
Diluted
|
$0.14
|
$0.04
|
|
See accompanying notes to the condensed consolidated financial
statements.
|
|
BELLATRIX EXPLORATION LTD.
|
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
|
(unaudited, expressed in Canadian dollars)
For the three months ended March 31,
|
($000s)
|
|
|
2014
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' CAPITAL
|
|
|
|
|
|
Common shares
|
|
|
|
|
|
|
Balance, beginning of year
|
|
|
$ 824,065
|
$ 371,576
|
|
|
Issued for cash on exercise of share options
|
|
|
3,251
|
191
|
|
|
Share issue costs adjustment, net of tax
|
|
|
32
|
-
|
|
|
Contributed surplus transferred on exercised options
|
|
|
725
|
83
|
|
|
Balance, end of period
|
|
|
828,073
|
371,850
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY COMPONENT OF CONVERTIBLE DEBENTURES
|
|
|
|
|
|
|
Balance, beginning and end of period
|
|
|
-
|
4,378
|
|
|
|
|
|
|
CONTRIBUTED SURPLUS (note 6)
|
|
|
|
|
|
|
Balance, beginning of year
|
|
|
38,958
|
37,284
|
|
|
Share-based compensation expense
|
|
|
1,428
|
975
|
|
|
Adjustment of share-based compensation expense
for forfeitures of unvested share options
|
|
|
(82)
|
(83)
|
|
|
Transfer to share capital for exercised options
|
|
|
(725)
|
(83)
|
|
|
Balance, end of period
|
|
|
39,579
|
38,093
|
|
|
|
|
|
|
|
|
|
|
|
|
RETAINED EARNINGS (DEFICIT)
|
|
|
|
|
|
|
Balance, beginning of year
|
|
|
40,851
|
(32,132)
|
|
|
Net profit
|
|
|
25,167
|
4,561
|
|
|
Balance, end of period
|
|
|
66,018
|
(27,571)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL SHAREHOLDERS' EQUITY
|
|
|
$ 933,670
|
$ 386,750
|
|
|
|
|
|
|
See accompanying notes to the condensed consolidated financial
statements.
|
|
BELLATRIX EXPLORATION LTD.
|
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
(unaudited, expressed in Canadian dollars)
For the three months ended March 31,
|
($000s)
|
2014
|
2013
|
|
|
|
Cash provided by (used in):
|
|
|
|
|
|
CASH FLOW FROM (USED IN) OPERATING ACTIVITIES
|
|
|
Net profit
|
$ 25,167
|
$ 4,561
|
Adjustments for:
|
|
|
|
Depletion and depreciation
|
36,405
|
17,090
|
|
Finance expenses (note 9)
|
430
|
591
|
|
Share-based compensation (note 6)
|
2,509
|
1,450
|
|
Unrealized loss on commodity contracts
|
23,676
|
12,299
|
|
Gain on property dispositions and swaps (note 4)
|
(19,114)
|
(250)
|
|
Deferred tax expense (note 8)
|
8,569
|
1,804
|
|
Decommissioning costs incurred
|
(64)
|
(279)
|
|
Change in non-cash working capital (note 7)
|
6,722
|
(1,739)
|
|
|
84,300
|
35,527
|
|
|
|
|
CASH FLOW FROM (USED IN) FINANCING ACTIVITIES
|
|
|
|
Issuance of share capital
|
3,251
|
191
|
|
Issue costs on share capital
|
34
|
-
|
|
Advances from loans and borrowings
|
485,800
|
171,030
|
|
Repayment of loans and borrowings
|
(437,774)
|
(153,250)
|
|
Obligations under finance lease
|
(356)
|
(339)
|
|
Deferred lease inducements
|
(71)
|
-
|
|
Change in non-cash working capital (note 7)
|
(190)
|
716
|
|
|
50,694
|
18,348
|
|
|
|
|
CASH FLOW FROM (USED IN) INVESTING ACTIVITIES
|
|
|
|
Expenditure on exploration and evaluation assets
|
(800)
|
(5,692)
|
|
Additions to property, plant and equipment
|
(155,102)
|
(85,917)
|
|
Proceeds on sale of property, plant and equipment
|
39
|
(5)
|
|
Change in non-cash working capital (note 7)
|
20,869
|
37,739
|
|
|
(134,994)
|
(53,875)
|
|
|
|
|
|
Change in cash
|
-
|
-
|
|
|
|
|
|
Cash, beginning of period
|
-
|
-
|
|
|
|
|
|
Cash, end of period
|
$ -
|
$ -
|
|
|
|
|
Cash paid:
|
|
|
Interest
|
$ 3,480
|
$ 1,318
|
Taxes
|
-
|
-
|
See accompanying notes to the condensed consolidated financial
statements.
|
|
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, expressed in Canadian dollars)
1. CORPORATE INFORMATION
Bellatrix Exploration Ltd. (the "Company" or "Bellatrix") is a growth
oriented, public exploration and production oil and gas company.
2. BASIS OF PREPARATION
a. Statement of compliance
These condensed consolidated financial statements ("interim financial
statements") were authorized by the Board of Directors on May 5, 2014.
The Company prepared these interim financial statements in accordance
with IAS 34 Interim Financial Reporting. The interim financial
statements do not include all information and disclosures normally
provided in annual financial statements and should be read in
conjunction with the Company's 2013 audited annual financial
statements, available at www.sedar.com. The Company has prepared these interim financial statements using the
same accounting policies and critical accounting estimates applied in
the 2013 audited annual financial statements, except as noted below.
b. Change in accounting policies
IFRIC 21 - "Levies", which establishes guidelines for the recognition
and accounting treatment of a liability relating to a levy imposed by a
government. This standard is effective for annual periods beginning on
or after January 1, 2014 and was adopted by Bellatrix effective January
1, 2014. The adoption of IFRIC 21 had no impact on Bellatrix.
Amendments to "Offsetting Financial Assets and Financial Liabilities"
addressed within IAS 32 - "Financial Instruments: Presentation", which
provides guidance regarding when it is appropriate and permissible for
an entity to disclose offsetting financial assets and financial
liabilities on a net basis. The amendments to this standard are
effective for annual periods beginning on or after January 1, 2014 and
were adopted by Bellatrix effective January 1, 2014. The adoption of
IAS 32 amendments had no impact on Bellatrix.
c. Basis of measurement
The interim financial statements are presented in Canadian dollars, the
Company's functional currency, and have been prepared on the historical
cost basis except for derivative financial instruments and liabilities
for cash-settled share-based payment arrangements measured at fair
value. The interim financial statements have, in management's opinion,
been properly prepared using careful judgment and reasonable limits of
materiality. These interim financial statements are prepared within the
framework of the same significant accounting policies, critical
judgments, accounting estimates, accounting policies and methods of
computation as the consolidated financial statements for the fiscal
year ended December 31, 2013. The interim financial statement note
disclosures do not include all of those required by IFRS applicable for
annual financial statements. Accordingly, the interim financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto as at and for the year ended
December 31, 2013.
3. EXPLORATION AND EVALUATION ASSETS
($000s)
|
|
|
|
Cost
|
|
Balance, December 31, 2012
|
$ 38,177
|
Acquisitions through business combinations, net
|
97,520
|
Additions
|
10,391
|
Transfer to oil and natural gas properties
|
(7,424)
|
Disposals (1)
|
(5,693)
|
Balance, December 31, 2013
|
132,971
|
Additions
|
800
|
Transfer to oil and natural gas properties
|
(10,589)
|
Disposals (1)
|
-
|
Balance, March 31, 2014
|
$ 123,182
|
(1)
|
Disposals include swaps.
|
4. PROPERTY, PLANT AND EQUIPMENT
($000s)
|
|
|
|
|
Oil and
natural gas
properties
|
Office
furniture and
equipment
|
Total
|
Cost
|
|
|
|
Balance, December 31, 2012
|
$ 851,108
|
$ 2,802
|
$ 853,910
|
Acquisitions through business combinations, net
|
498,371
|
-
|
498,371
|
Additions
|
298,288
|
9,270
|
307,558
|
Transfer from exploration and evaluation assets
|
7,424
|
-
|
7,424
|
Farmout wells
|
11,244
|
-
|
11,244
|
Disposals (1)
|
(37,408)
|
(487)
|
(37,895)
|
Balance, December 31, 2013
|
1,629,027
|
11,585
|
1,640,612
|
Additions
|
157,160
|
2,956
|
160,116
|
Transfer from exploration and evaluation assets
|
10,589
|
-
|
10,589
|
Farmout wells
|
19,608
|
-
|
19,608
|
Disposals (1)
|
(494)
|
-
|
(494)
|
Balance, March 31, 2014
|
$ 1,815,890
|
$ 14,541
|
$ 1,830,431
|
|
|
|
|
Accumulated Depletion, Depreciation and Impairment losses
|
|
|
|
Balance, December 31, 2012
|
$ 262,570
|
$ 1,581
|
$ 264,151
|
Charge for time period
|
84,902
|
927
|
85,829
|
Disposals (1)
|
(2,510)
|
(267)
|
(2,777)
|
Balance, December 31, 2013
|
$ 344,962
|
$ 2,241
|
$ 347,203
|
Charge for time period
|
35,804
|
601
|
36,405
|
Balance, March 31, 2014
|
$ 380,766
|
$ 2,842
|
$ 383,608
|
(1) Disposals include swaps.
|
|
|
|
|
|
|
|
Carrying amounts
|
|
|
|
At December 31, 2013
|
$ 1,284,065
|
$ 9,344
|
$ 1,293,409
|
At March 31, 2014
|
$ 1,435,124
|
$ 11,699
|
$ 1,446,823
|
Bellatrix has included $1.1 billion (2013: $456.2 million) for future
development costs and excluded $69.9 million (2013: $37.9 million) for
estimated salvage from the depletion calculation for the three months
ended March 31, 2014.
A total net gain on dispositions of $19.1 million was recognized for the
three months ended March 31, 2014 relating to gains on wells drilled
under the Grafton Joint Venture and the Troika Joint Venture which were
completed during the three months ended March 31, 2014.
For the three months ended March 31, 2014, the Company capitalized $3.9
million (2013: $1.2 million) of general and administrative expenses,
and $1.0 million (2013: $0.4 million) of share-based compensation
expense directly related to exploration and development activities.
Bellatrix's credit facilities are secured against all of the assets of
the Corporation by a $1 billion debenture containing a first ranking
floating charge and security interest. The Corporation has provided a
negative pledge and undertaking to provide fixed charges over major
petroleum and natural gas reserves in certain circumstances.
5. LONG-TERM DEBT
As of March 31, 2014, the Company's credit facilities are available on
an extendible revolving term basis and consist of a $50 million
operating facility provided by a Canadian bank and a $450 million
syndicated facility provided by nine financial institutions.
Amounts borrowed under the credit facilities will bear interest at a
floating rate based on the applicable Canadian prime rate, U.S. base
rate, CDOR rate or LIBOR margin rate, plus between 1.00% to 3.50%,
depending on the type of borrowing and the Company's debt to cash
ratio. A standby fee is charged of between 0.50% and 0.875% on the
undrawn portion of the credit facilities, depending on the Company's
debt to cash flow ratio. The credit facilities are secured by a $1
billion debenture containing a first ranking charge and security
interest. Bellatrix has provided a negative pledge and undertaking to
provide fixed charges over its properties in certain circumstances.
The revolving period for the revolving term credit facility will end on
June 24, 2014, unless extended for a further 364 day period. Should
the facility not be extended it will convert to a non-revolving term
facility with the full amount outstanding due 366 days after the last
day of the revolving period of June 24, 2014. The borrowing base will
be subject to re-determination on May 31 and November 30 in each year
prior to maturity, with the next semi-annual redetermination occurring
on May 31, 2014.
As principal payment would not be required under the revolving term
facility for more than 365 days from March 31, 2014 if the facility was
not extended, the entire amounts owing on the credit facilities have
been classified as long-term.
As at March 31, 2014, the Company had outstanding letters of credit
totaling $0.5 million that reduce the amount otherwise available to be
drawn on the syndicated facility.
As at March 31, 2014, the Company had approximately $164.4 million or
33% of unused and available bank credit under its credit facilities.
Bellatrix was fully compliant with all of its debt covenants.
6. SHARE-BASED COMPENSATION PLANS
The following table provides a summary of the Company's share-based
compensation plans for the three months ended March 31, 2014:
($000s)
|
|
|
|
|
|
|
Share
Options
|
Deferred
Share Units
|
Restricted
Awards
|
Performance
Awards
|
Total
|
Expense for the period (1)
|
$ 813
|
$ 867
|
$ 583
|
$ 246
|
$ 2,509
|
Liability balance, March 31, 2014
|
$ -
|
$ 4,912
|
$ 1,890
|
$ 850
|
$ 7,652
|
(1)
|
The expense for share options is net of adjustments for forfeitures of
$0.1 million, and capitalization of $0.5 million. The expense for
restricted awards is net of capitalization of $0.3 million. The
expense for performance awards is net of capitalization of $0.2
million.
|
The following table provides a summary of the Company's share-based
compensation plans for the three months ended March 31, 2013:
($000s)
|
|
|
|
|
|
|
Share
Options
|
Deferred
Share Units
|
Restricted
Awards
|
Performance
Awards
|
Total
|
Expense for the period (1)
|
$ 521
|
$ 929
|
$ -
|
$ -
|
$ 1,450
|
Liability balance, March 31, 2013
|
$ -
|
$ 2,657
|
$ -
|
$ -
|
$ 2,657
|
(1)
|
The expense for share options is net of adjustments for forfeitures of
$0.1 million, and capitalization of $0.4 million.
|
a. Share Option Plan
During the three months ended March 31, 2014, Bellatrix granted 228,000
(2013: nil) share options. The fair values of all share options
granted are estimated on the date of grant using the Black-Scholes
option-pricing model. The weighted average fair market value of share
options granted during the three months ended March 31, 2014, and the
weighted average assumptions used in their determination are as noted
below:
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
Inputs:
|
|
|
|
|
Share price
|
|
|
$ 8.55
|
|
Exercise price
|
|
|
$ 8.55
|
|
Risk free interest rate (%)
|
|
|
1.2
|
|
Option life (years)
|
|
|
2.8
|
|
Option volatility (%)
|
|
|
45
|
|
Results:
|
|
|
|
|
Weighted average fair value of each share option granted
|
|
$ 2.63
|
Bellatrix calculates volatility based on historical share price.
Bellatrix incorporates an estimated forfeiture rate between 3% and 10%
for stock options that will not vest, and adjusts for actual
forfeitures as they occur.
The weighted average trading price of the Company's common shares on the
Toronto Stock Exchange ("TSX") for the three months ended March 31,
2014 was $8.41 (2013: $5.37).
The following tables summarize information regarding Bellatrix's Share
Option Plan:
Share Options Continuity
|
Weighted Average
Exercise Price
|
Number
|
Balance, December 31, 2013
|
$ 4.75
|
11,182,963
|
Granted
|
$ 8.55
|
228,000
|
Exercised
|
$ 1.84
|
(1,770,623)
|
Forfeited
|
$ 6.61
|
(167,835)
|
Balance, March 31, 2014
|
$ 5.36
|
9,472,505
|
As of March 31, 2014, a total of 14,067,450 common shares were reserved
for issuance on exercise of share options, leaving an additional
4,594,945 available for future share option grants.
Share Options Outstanding, March 31, 2014
|
|
Outstanding
|
|
Exercisable
|
Exercise Price
|
At
March 31, 2014
|
Weighted
Average
Exercise Price
|
Weighted
Average
Remaining
Contractual Life
|
At
March 31, 2014
|
Exercise Price
|
$ 0.75 - $ 3.36
|
815,336
|
$ 2.43
|
1.9
|
528,668
|
$ 2.04
|
$ 3.37 - $ 3.81
|
1,415,666
|
$ 3.42
|
3.1
|
519,659
|
$ 3.46
|
$ 3.82 - $ 3.91
|
1,478,000
|
$ 3.88
|
1.0
|
1,478,000
|
$ 3.88
|
$ 3.92 - $ 5.22
|
595,668
|
$ 4.41
|
2.9
|
254,663
|
$ 4.60
|
$ 5.23 - $ 5.38
|
1,723,668
|
$ 5.33
|
2.2
|
1,141,985
|
$ 5.33
|
$ 5.39 - $ 7.68
|
1,716,167
|
$ 7.23
|
4.5
|
47,500
|
$ 5.49
|
$ 7.69 - $ 8.84
|
1,728,000
|
$ 8.07
|
4.8
|
-
|
-
|
$ 0.75 - $ 8.84
|
9,472,505
|
$ 5.36
|
3.0
|
3,970,475
|
$ 4.06
|
b. Deferred Share Unit Plan
During the three months ended March 31, 2014, the Company granted 14,115
(2013: 2,164) DSUs, and had 547,021 DSUs outstanding as at March 31,
2014 (2013: 410,688).
c. Incentive Plan
On August 7, 2013, the Directors of Bellatrix approved an Incentive Plan
where the Company may grant Restricted Awards ("RAs") and Performance
Awards ("PAs") to officers, employees, and other service providers.
Unless approved by the TSX (or such other stock exchange on which the
common shares may be listed) and the shareholders, the Incentive Plan
does not provide for the issuance of common shares to holders of PAs or
RAs, but rather cash in lieu of such common shares.
During the three months ended March 31, 2014, the Company granted nil
(2013: nil) RAs, and had 490,300 RAs outstanding as at March 31, 2014
(2013: nil).
During the three months ended March 31, 2014, the Company granted nil
(2013: nil) PAs, and had 452,700 PAs outstanding as at March 31, 2014
(2013: nil).
7. SUPPLEMENTAL CASH FLOW INFORMATION
Change in Non-cash Working Capital
|
|
Three months ended March 31,
|
($000s)
|
2014
|
2013
|
Changes in non-cash working capital items:
|
|
|
|
Restricted cash
|
$ 18,405
|
$ -
|
|
Accounts receivable
|
(23,376)
|
(8,116)
|
|
Deposits and prepaid expenses
|
(4,498)
|
(2,956)
|
|
Accounts payable and accrued liabilities
|
55,212
|
50,054
|
|
Advances from joint venture partners
|
(18,342)
|
(2,266)
|
|
Deferred lease inducements
|
-
|
-
|
|
$ 27,401
|
$ 36,716
|
Changes related to:
|
|
|
|
Operating activities
|
$ 6,722
|
$ (1,739)
|
|
Financing activities
|
(190)
|
716
|
|
Investing activities
|
20,869
|
37,739
|
|
$ 27,401
|
$ 36,716
|
8. INCOME TAXES
Bellatrix is a corporation as defined under the Income Tax Act (Canada)
and is subject to Canadian federal and provincial taxes. Bellatrix is
subject to provincial taxes in Alberta, British Columbia and
Saskatchewan as the Company operates in those jurisdictions.
Deferred taxes reflect the tax effects of differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts reported for tax purposes. As at March 31,
2014, Bellatrix had approximately $1.3 billion in tax pools available
for deduction against future income. Included in this tax basis are
estimated non-capital loss carry forwards of approximately $94.5
million that expire in years through 2030.
9. FINANCE INCOME AND EXPENSES
|
|
|
|
Three months ended March 31,
|
($000s)
|
2014
|
2013
|
Finance expense
|
|
|
|
Interest on long-term debt
|
$ 3,727
|
$ 1,982
|
|
Interest on convertible debentures
|
-
|
644
|
|
|
|
|
Accretion on convertible debentures
|
-
|
418
|
|
Accretion on decommissioning liabilities
|
430
|
173
|
|
430
|
591
|
Finance expense
|
$ 4,157
|
$ 3,217
|
10. PER SHARE AMOUNTS
The calculation of basic earnings per share for the three months ended
March 31, 2014 was based on a net profit of $25.2 million (2013: $4.6
million).
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2014
|
2013
|
Basic common shares outstanding
|
|
|
172,761,228
|
107,919,329
|
Dilutive effect of:
|
|
|
|
|
|
Share options outstanding
|
|
|
9,472,505
|
9,293,228
|
|
Shares issuable for convertible debentures
|
|
|
-
|
9,821,429
|
Fully diluted common shares outstanding
|
|
|
182,233,733
|
127,033,986
|
Weighted average shares outstanding
|
|
|
171,626,707
|
107,882,027
|
Dilutive effect of share options and convertible debentures (1)
|
|
|
2,695,223
|
2,843,057
|
Diluted weighted average shares outstanding
|
|
|
174,321,930
|
110,725,084
|
(1)
|
For the three months ended March 31, 2014, a total of 2,695,223 share
options were included in the calculation as they were dilutive.
|
|
For the three months ended March 31, 2013, a total of 2,843,057 share
options were included in the calculation as they were dilutive, and
9,821,429 common shares issuable pursuant to the conversion of the
4.75% Debentures were excluded from the calculation as they were not
dilutive.
|
11. COMMITMENTS
As at March 31, 2014, Bellatrix committed to drill 4 gross (2.0 net)
wells pursuant to farm-in agreements. Bellatrix expects to satisfy
these drilling commitments at an estimated cost of approximately $6.9
million.
In addition, Bellatrix entered into two joint operating agreements
during the 2011 year and an additional joint operation agreement during
2012. The agreements include a minimum commitment for the Company to
drill a specified number of wells each year over the term of the
individual agreements. The details of these agreements are provided in
the table below:
|
|
|
|
|
|
|
|
|
|
Joint Operating Agreement
|
|
|
Feb. 1, 2011
|
|
|
Aug. 4, 2011
|
|
|
Dec. 14, 2012
|
Commitment Term
|
|
|
2011 to 2015
|
|
|
2011 to 2016
|
|
|
2014 to 2018
|
Minimum wells per year (gross and net)
|
|
|
3
|
|
|
5 to 10
|
|
|
2
|
Minimum total wells (gross and net)
|
|
|
15
|
|
|
40
|
|
|
10
|
Estimated total cost ($000s)
|
|
|
$ 52.5
|
|
|
$ 140.0
|
|
|
$ 35.0
|
Remaining wells to drill at March 31, 2014
|
|
|
5
|
|
|
12
|
|
|
7
|
Remaining estimated total cost ($000s)
|
|
|
$ 17.5
|
|
|
$ 42.0
|
|
|
$ 24.5
|
Bellatrix also has certain drilling commitments relating to the Grafton
Joint Venture, the Daewoo and Devonian Partnership, and the Troika
Joint Venture. In meeting the drilling commitments under these
agreements, Bellatrix will satisfy some of the drilling commitments
under the joint operating agreements described above.
|
|
|
|
|
|
|
|
|
|
Agreement
|
|
|
Grafton (2)
|
|
|
Daewoo and
Devonian
|
|
|
Troika
|
Commitment Term
|
|
|
2013 to 2015
|
|
|
2013 to 2016
|
|
|
2013 to 2014
|
Minimum total wells (gross) (1)
|
|
|
58
|
|
|
70
|
|
|
63
|
Minimum total wells (net) (1)
|
|
|
10.5
|
|
|
30.4
|
|
|
31.5
|
Estimated total cost ($000s) (gross) (1)
|
|
|
$ 244.0
|
|
|
$ 200.0
|
|
|
$ 240.0
|
Estimated total cost ($000s) (net) (1)
|
|
|
$ 44.0
|
|
|
$ 100.0
|
|
|
$ 120.0
|
Remaining wells to drill at March 31, 2014 (gross)
|
|
|
41
|
|
|
47
|
|
|
29
|
Remaining wells to drill at March 31, 2014 (net)
|
|
|
7.3
|
|
|
20.6
|
|
|
14.5
|
Remaining estimated total cost ($000s) (gross) (1)
|
|
|
$ 167.4
|
|
|
$ 137.6
|
|
|
$ 110.5
|
Remaining estimated total cost ($000s) (net) (1)
|
|
|
$ 30.1
|
|
|
$ 80.8
|
|
|
$ 55.2
|
(1)
|
Gross and net estimated total cost values and gross and net minimum
estimated total wells for the Troika and Grafton Joint Ventures
represent Bellatrix's total capital and well commitments pursuant to
the Troika and Grafton joint venture agreements. Gross and net minimum
total wells for the Daewoo and Devonian Partnership represent
Bellatrix's total well commitments pursuant to the Daewoo and Devonian
Partnership agreement. Gross and net estimated total cost values for
the Daewoo and Devonian Partnership represent Bellatrix's estimated
cost associated with its well commitments under the Daewoo and Devonian
Partnership agreement. Remaining estimated total cost (gross) for the
Daewoo and Devonian Partnership is based on initial Daewoo and Devonian
Partnership gross capital divided by initial total gross capital
including third parties.
|
(2)
|
Subsequent to March 31, 2014, Grafton elected to exercise an option to
increase committed capital investment to the Grafton Joint Venture
established during 2013 by an additional $50 million, for a total
commitment of $250 million, on the same terms and conditions as the
previously announced Grafton Joint Venture.
|
12. FINANCIAL RISK MANAGEMENT
a. Credit Risk
As at March 31, 2014, accounts receivable was comprised of the
following:
|
|
|
|
|
Aging ($000s)
|
Not past due
(less than 90 days)
|
|
Past due (90
days or more)
|
Total
|
Joint venture and other trade accounts receivable
|
$ 34,747
|
|
$ 4,039
|
$ 38,786
|
Amounts due from government agencies
|
-
|
|
-
|
-
|
Revenue and other accruals
|
57,406
|
|
8,013
|
65,419
|
Cash call receivables
|
-
|
|
21
|
21
|
Less: Allowance for doubtful accounts
|
-
|
|
(544)
|
(544)
|
Total accounts receivable
|
$ 92,153
|
|
$ 11,529
|
$ 103,682
|
Amounts due from government agencies include GST and royalty
adjustments. Accounts payable due to same partners includes amounts
which may be available for offset against certain receivables.
Cash calls receivables consist of advances paid to joint interest
partners for capital projects.
The carrying amount of accounts receivable and derivative assets
represents the maximum credit exposure.
b. Liquidity Risk
The following are the contractual maturities of liabilities as at March
31, 2014:
|
|
|
|
|
|
Liabilities ($000s)
|
Total
|
< 1 Year
|
1-3 Years
|
3-5 Years
|
More than
5 years
|
Accounts payable and accrued liabilities (1)
|
$ 194,856
|
$ 194,856
|
$ -
|
$ -
|
$ -
|
Advances from joint venture partners
|
81,038
|
81,038
|
-
|
-
|
-
|
Long-term debt - principal (2)
|
335,118
|
-
|
335,118
|
-
|
-
|
Commodity contract liability
|
40,608
|
40,608
|
-
|
-
|
-
|
Decommissioning liabilities (3)
|
71,479
|
-
|
2,248
|
3,375
|
65,856
|
Finance lease obligation
|
12,776
|
1,514
|
3,207
|
2,448
|
5,607
|
Deferred lease inducements
|
2,778
|
285
|
285
|
285
|
1,923
|
Total
|
$ 738,653
|
$ 318,301
|
$ 340,858
|
$ 6,108
|
$ 73,386
|
(1)
|
Includes $0.5 million of accrued interest payable in relation to the
credit facilities is included in Accounts Payable and Accrued
Liabilities.
|
(2)
|
Bank debt is based on a revolving term which is reviewed annually and
converts to a 366 day non-revolving facility if not renewed. Interest
due on the bank credit facility is calculated based upon floating
rates.
|
(3)
|
Amounts represent the inflated, discounted future abandonment and
reclamation expenditures anticipated to be incurred over the life of
the Company's properties (between 2017 and 2068).
|
c. Commodity Price Risk
The Company utilizes both financial derivatives and physical delivery
sales contracts to manage commodity price risks. All such transactions
are conducted in accordance with the commodity price risk management
policy that has been approved by the Board of Directors.
As at March 31, 2014, the Company has entered into commodity price risk
management arrangements as follows:
|
|
|
|
|
|
|
Type
|
Period
|
Volume
|
Price Floor
|
Price Ceiling
|
Index
|
Crude oil fixed
|
January 1, 2014 to Dec. 31, 2014
|
500 bbl/d
|
$ 93.30 US
|
$ 93.30 US
|
WTI
|
Crude oil fixed
|
January 1, 2014 to Dec. 31, 2014
|
1,500 bbl/d
|
$ 94.00 CDN
|
$ 94.00 CDN
|
WTI
|
Crude oil fixed
|
January 1, 2014 to Dec. 31, 2014
|
500 bbl/d
|
$ 95.00 US
|
$ 95.00 US
|
WTI
|
Crude oil fixed
|
January 1, 2014 to Dec. 31, 2014
|
1,500 bbl/d
|
$ 95.22 CDN
|
$ 95.22 CDN
|
WTI
|
Crude oil fixed
|
January 1, 2014 to Dec. 31, 2014
|
500 bbl/d
|
$ 98.30 CDN
|
$ 98.30 CDN
|
WTI
|
Crude oil fixed
|
January 1, 2014 to Dec. 31, 2014
|
1,000 bbl/d
|
$ 99.50 CDN
|
$ 99.50 CDN
|
WTI
|
Crude oil fixed
|
January 1, 2014 to Dec. 31, 2014
|
500 bbl/d
|
$ 99.60 CDN
|
$ 99.60 CDN
|
WTI
|
Natural gas fixed
|
January 1, 2014 to June 30, 2014
|
15,000 GJ/d
|
$ 3.05 CDN
|
$ 3.05 CDN
|
AECO
|
Natural gas fixed
|
January 1, 2014 to Dec. 31, 2014
|
20,000 GJ/d
|
$ 3.30 CDN
|
$ 3.30 CDN
|
AECO
|
Natural gas fixed
|
January 1, 2014 to Dec. 31, 2014
|
20,000 GJ/d
|
$ 3.60 CDN
|
$ 3.60 CDN
|
AECO
|
Natural gas fixed
|
July 1, 2014 to Dec. 31, 2014
|
15,000 GJ/d
|
$ 3.71 CDN
|
$ 3.71 CDN
|
AECO
|
Natural gas fixed
|
February 1, 2014 to Dec. 31, 2014
|
10,000 GJ/d
|
$ 3.79 CDN
|
$ 3.79 CDN
|
AECO
|
Natural gas fixed
|
February 1, 2014 to Dec. 31, 2014
|
10,000 GJ/d
|
$ 3.80 CDN
|
$ 3.80 CDN
|
AECO
|
Natural gas fixed
|
February 1, 2014 to Dec. 31, 2014
|
15,000 GJ/d
|
$ 3.85 CDN
|
$ 3.85 CDN
|
AECO
|
Natural gas fixed
|
February 1, 2014 to Dec. 31, 2014
|
10,000 GJ/d
|
$ 3.84 CDN
|
$ 3.84 CDN
|
AECO
|
Natural gas fixed
|
March 1, 2014 to Dec. 31, 2014
|
10,000 GJ/d
|
$ 4.14 CDN
|
$ 4.14 CDN
|
AECO
|
13. FAIR VALUE
The Company's financial instruments as at March 31, 2014 include
restricted cash, accounts receivable, deposits, commodity contract
asset, accounts payable and accrued liabilities, advances from joint
venture partners, deferred lease inducements, finance lease
obligations, and long-term debt. The fair value of accounts receivable,
deposits, accounts payable and accrued liabilities approximate their
carrying amounts due to their short-terms to maturity.
The fair value of commodity contracts is determined by discounting the
difference between the contracted price and published forward price
curves as at the balance sheet date, using the remaining contracted
petroleum and natural gas volumes. The fair value of commodity
contracts as at March 31, 2014 was a net liability of $40.6 million
(March 31, 2013: $12.1 million net liability). The commodity contracts
are classified as level 2 within the fair value hierarchy.
Long-term bank debt bears interest at a floating market rate and the
credit and market premiums therein are indicative of current rates;
accordingly the fair market value approximates the carrying value.
14. SUBSEQUENT EVENTS
Grafton Joint Venture Capital Investment Increase
On April 10, 2014, Bellatrix announced that Grafton elected to exercise
an option to increase committed capital investment to the Grafton Joint
Venture established during 2013 by an additional $50 million, for a
total commitment of $250 million, on the same terms and conditions as
the previously announced Grafton Joint Venture. Grafton's increased
capital investment will continue to support the accelerated development
of a portion of Bellatrix's extensive undeveloped land holdings.
The Grafton Joint Venture is located in the Willesden Green and Brazeau
areas of West-Central Alberta. Under the terms of the amended agreement
prior to the exercise of this option, Grafton was committed to
contributing 82%, or $200 million, to the $244 million Joint Venture to
participate in an expected 58 net Notikewin/Falher and Cardium well
program. Under the agreement, Grafton will earn 54% of Bellatrix's
working interest ("WI") in each well drilled in the development program
until payout (being recovery of Grafton's capital investment plus an 8%
return) on the total program, reverting to 33% of Bellatrix's WI after
payout. At any time after payout of the entire program, Grafton shall
have the option to elect to convert all wells from the 33% WI to a
17.5% Gross Overriding Royalty on Bellatrix's pre-Joint Venture WI. The
effective date of the initial agreement for the Joint Venture is July
1, 2013 and had an initial term of 2 years. With the exercise of the
$50 million option, Bellatrix shall have until the end of the third
anniversary of the effective date to spend the additional capital.
Blaze Pipeline
On April 2, 2014, Bellatrix announced the completion of a 1.6 km river
bore and a 7 km pipeline in conjunction with Blaze Energy Ltd.
("Blaze"), completing a 55 km pipeline to tie-in Bellatrix natural gas
for processing in the Blaze gas plant located at 4-31-48-12W5.
Bellatrix has secured firm processing capacity of 100 mmcf/d in the
plant.
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 ("TSX") and on
the NYSE MKT under the symbol BXE.
SOURCE Bellatrix Exploration Ltd.
Source: PR Newswire
(May 6, 2014 - 2:05 AM EDT)
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