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Bellatrix Exploration Ltd. Announces Second Quarter 2013 Financial Results
TSX, NYSE MKT: BXE
CALGARY, Aug. 8, 2013 /CNW/ - Bellatrix Exploration Ltd. ("Bellatrix" or
the "Company") (TSX, NYSE MKT: BXE) announces its financial and
operating results for the three and six months ended June 30, 2013.
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.
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HIGHLIGHTS
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Three months ended June 30,
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Six months ended June 30,
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2013
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2012
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2013
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2012
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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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74,564
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50,714
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140,107
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108,905
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Funds flow from operations (2)
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36,563
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25,366
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74,108
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54,560
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Per basic share (6)
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$0.34
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$0.24
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$0.69
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$0.51
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Per diluted share (6)
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$0.31
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$0.22
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$0.63
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$0.47
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Cash flow from operating activities
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29,611
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28,458
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65,138
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52,514
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Per basic share (6)
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$0.27
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$0.24
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$0.60
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$0.49
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Per diluted share (6)
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$0.25
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$0.22
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$0.55
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$0.45
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Net profit before certain non-cash items (5)
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10,972
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3,124
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24,570
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9,214
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Per basic share (6)
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$0.10
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$0.03
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$0.23
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$0.09
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Per diluted share (6)
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$0.10
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$0.03
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$0.22
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$0.08
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Net profit
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15,466
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9,963
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20,027
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19,135
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Per basic share (6)
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$0.14
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$0.09
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$0.19
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$0.18
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Per diluted share (6)
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$0.13
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$0.09
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$0.18
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$0.17
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Exploration and development
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46,172
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18,224
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137,632
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92,285
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Corporate and property acquisitions
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527
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105
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676
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175
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Capital expenditures - cash
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46,699
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18,329
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138,308
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92,460
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Property dispositions - cash
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-
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(2,045)
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5
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(2,345)
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Non-cash items
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(1,308)
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298
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(521)
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144
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Total capital expenditures - net
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45,391
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16,582
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137,792
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90,259
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Long-term debt
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194,002
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114,275
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194,002
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114,275
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Convertible debentures (3)
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51,536
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49,860
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51,536
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49,860
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Adjusted working capital (excess) deficiency (3)
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10,927
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(7,794)
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10,927
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(7,794)
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Total net debt (3)
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256,465
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156,341
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256,465
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156,341
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Total assets
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779,648
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620,131
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779,648
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620,131
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Total shareholders' equity
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402,904
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369,812
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402,904
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369,812
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OPERATING
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Three months ended June 30,
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Six months ended June 30,
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2013
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2012
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2013
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2012
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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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6,206
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5,817
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6,095
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5,970
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Natural gas
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(mcf/d)
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95,376
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64,513
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87,812
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61,586
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Total oil equivalent
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(boe/d)
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22,102
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16,569
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20,730
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16,234
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Average prices
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Light crude oil and condensate
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($/bbl)
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94.84
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87.73
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93.47
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88.95
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NGLs (excluding condensate)
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($/bbl)
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36.20
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33.59
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39.05
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43.35
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Heavy oil
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($/bbl)
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69.28
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68.40
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61.69
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71.59
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Crude oil, condensate and NGLs
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($/bbl)
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71.84
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72.47
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72.70
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76.99
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Crude oil, condensate and NGLs (including
risk management (1))
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($/bbl)
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73.10
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71.45
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73.26
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73.76
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Natural gas
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($/mcf)
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3.85
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2.03
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3.69
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2.17
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Natural gas (including risk management (1))
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($/mcf)
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3.68
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3.13
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4.01
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2.75
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Total oil equivalent
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($/boe)
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36.78
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33.35
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37.01
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36.54
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Total oil equivalent (including risk
management (1))
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($/boe)
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36.39
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37.28
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38.54
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37.55
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Statistics
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Operating netback (4)
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($/boe)
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21.06
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16.42
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21.04
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20.60
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Operating netback (4) (including risk
management (1))
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($/boe)
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20.68
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20.35
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22.58
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21.61
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Transportation
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($/boe)
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0.83
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0.55
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0.83
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0.83
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Production expenses
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($/boe)
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8.64
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8.80
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8.65
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9.00
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General & administrative
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($/boe)
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1.24
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2.47
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1.62
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2.19
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Royalties as a % of sales after
transportation
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17%
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23%
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18%
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17%
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COMMON SHARES
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Common shares outstanding
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107,919,329
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107,490,218
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107,919,329
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107,490,218
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Share options outstanding
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9,173,560
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9,108,506
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9,173,560
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9,108,506
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Shares issuable on conversion of convertible
debentures (7)
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9,821,429
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9,821,429
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9,821,429
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9,821,429
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Fully diluted common shares outstanding
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126,914,318
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126,420,153
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126,914,318
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126,420,153
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Diluted weighted average shares - net profit (6)
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121,265,334
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118,704,703
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121,038,666
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119,330,060
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Diluted weighted average shares - funds flow from
operations and cash flow from operating activities (2) (6)
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121,265,334
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118,704,703
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121,038,666
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119,330,060
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SHARE TRADING STATISTICS
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TSX and Other (8)
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(CDN$, except volumes) based on intra-day trading
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High
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6.94
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5.52
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6.94
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5.67
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Low
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4.70
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2.45
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4.03
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2.45
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Close
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6.45
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3.17
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6.45
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3.17
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Average daily volume
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1,005,989
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768,180
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844,333
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816,370
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NYSE MKT (9)
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(US$, except volumes) based on intra-day trading
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High
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6.85
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-
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6.85
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Low
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4.55
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-
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4.03
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-
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Close
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6.08
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-
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6.08
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-
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Average daily volume
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67,541
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-
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70,189
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-
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(1) 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) 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 additional
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 period.
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(3) Net debt and total net debt are considered additional GAAP measures.
The Company's calculation of total net debt includes the liability
component of convertible debentures and excludes deferred liabilities,
long-term commodity contract liabilities, decommissioning liabilities,
long-term finance lease obligations and the deferred tax liability.
Net debt and total net debt include the net working capital deficiency
(excess) before short-term commodity contract assets and liabilities
and current finance lease obligations. Net debt also excludes the
liability component of convertible debentures. 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) Operating netbacks is considered a non-GAAP term. Operating netbacks
are calculated by subtracting royalties, transportation, and operating
costs from revenues before other income.
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(5) Net profit before certain non-cash items is considered a non-GAAP term.
Net profit before certain non-cash items is calculated as net profit
per the Consolidated Statement of Comprehensive Income, excluding the
unrealized gain or loss on commodity contracts, and gain or loss on
property dispositions and swaps, net of the deferred tax impact on
these adjustments. The Company's reconciliation between net profit and
net profit before certain non-cash items is found in the MD&A.
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(6) Basic weighted average shares for the three and six months ended June
30, 2013 were 107,919,329 (2012: 107,485,303), and 107,900,781 (2012:
107,455,699), respectively.
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In computing weighted average diluted earnings per share and weighted
average diluted cash flow from operating activities and funds flow from
operations per share for the three and six months ended June 30, 2013,
a total of 3,524,576 (2012: 1,397,971) and 3,316,456 (2012: 2,052,932)
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 9,821,429 (2012: 9,821,429) and 9,821,429 (2012:
9,821,429) common shares issuable on conversion of convertible
debentures were also added to the denominator as they were dilutive,
resulting in diluted weighted average common shares of 121,265,334
(2012: 118,704,703) and 121,038,666 (2012: 119,330,060), respectively.
As a consequence, a total of $0.8 million (2012: $0.8 million) and $1.6
million (2012: $1.5 million) for interest and accretion expense (net of
income tax effect) was added to the numerator for the three and six
month calculations, respectively.
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In computing weighted average diluted net profit before certain non-cash
items per share for the three and six months ended June 30, 2013, a
total of 3,524,576 and 3,316,546 common shares were added to the
denominator as a consequence of applying the treasury stock method to
the Company's outstanding share options as they were dilutive, and a
total of 9,821,429 and 9,821,429 common shares issuable on conversion
of convertible debentures were also added to the denominator as they
were dilutive, resulting in diluted weighted average shares of
121,265,334 and 121,038,666, respectively. As a consequence, a total of
$0.8 million and $1.6 million for interest and accretion expense (net
of income tax effect) was added to the numerator for the three and six
month calculations, respectively.
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In computing weighted average diluted net profit before certain non-cash
items per share for the three and six months ended June 30, 2012, a
total of 1,397,971 and 2,052,932 common shares were added to the
denominator as a consequence of applying the treasury stock method to
the Company's outstanding share options as they were dilutive, and a
total of 9,821,429 and 9,821,429 common shares issuable on conversion
of convertible debentures were excluded from the denominator as they
were not dilutive, resulting in diluted weighted average shares of
108,883,427 and 109,508,631, respectively.
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(7) Shares issuable on conversion of convertible debentures are 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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(8) TSX and Other includes the trading statistics for the Toronto Stock
Exchange and other Canadian trading markets.
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(9) The Company's common shares commenced trading on the NYSE MKT on
September 24, 2012.
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REPORT TO SHAREHOLDERS
Bellatrix continues to demonstrate top decile organic growth culminating
in the Company's share price more than doubling in the past year. Since
inception in 2009, the share price has ballooned by over 12 times
despite a "Desultory Energy Market". Driven by a successful drilling
program in the Cardium and Notikewin/Falher resource plays, Bellatrix
achieved record sales volumes of 22,102 boe/d, while posting a profit
of $15.5 million in the second quarter of 2013. Q2 2013 average
production levels have increased approximately 14% over Q1 2013 average
production levels of 19,343 boe/d and have overshadowed Q2 2012 by 33%,
despite spring break-up and downtime experienced due to scheduled and
unscheduled plant turnarounds in the Company's core area.
The key to the Company's success is our people. Through them we have:
Leadership, Strategy, Culture, Innovation, Vision and Integrity. The
Company's common goal is "Creating Value". That's why do we do Joint Ventures. Simply put it's "To Change the Game" by providing growth in value without encumbering debt and without diluting shareholders.
As previously announced on June 27, 2013, Bellatrix closed a Joint
Venture with Grafton Energy Co I Ltd. ("Grafton"), to accelerate
development on a portion of Bellatrix's extensive undeveloped land
holdings. The Joint Venture is in the Willesden Green and Brazeau areas
of West-Central Alberta. Under the terms of the agreement, Grafton will
contribute 82%, or $100 million, to the $122 million Joint Venture to
participate in an expected 29 Notikewin/Falher and Cardium well
program. Under the agreement, Grafton will earn 54% of Bellatrix's
working interest in each well drilled in the well program until payout
(being recovery of Grafton's capital investment plus an 8% return on
investment) on the total program, reverting to 33% of Bellatrix's
working interest ("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-Joint Venture working interest. Grafton will have until
September 15, 2013 to elect on an option to increase the committed
capital investment by an additional $100 million on the same terms and
conditions. Grafton shall also have an additional one-time option
within 12 months of the effective date to increase its exposure by an
additional $50 million on the same terms and conditions. The effective
date of the agreement is July 1, 2013 and has a term of 2 years. If the
$50 million option is exercised, Bellatrix shall have until the end of
the third anniversary of the effective date to spend the additional
capital (if the $100 million option is exercised it will not result in
an extension of the term of the Joint Venture).
On August 1, 2013 the Company announced it entered into a definitive
agreement for an asset sale (the "Asset Sale") and joint venture (the
"Joint Venture") with two Korean entities, Daewoo International
Corporation ("Daewoo") and Devonian Natural Resources Private Equity
Fund ("Devonian"). Under the terms of the associated agreements,
Bellatrix will sell, effective July 1, 2013, to Daewoo and Devonian
jointly 50% of the Company's working interest share of its producing
assets, an operated compressor station and gathering system and related
land acreage in the Baptiste area of West Central Alberta (the "Sold
Assets") for gross consideration of $52.5 million, subject to closing
adjustments. The Sold Assets are producing approximately 268 boe/d
(67% gas and 33% oil and liquids) net and include 3,858 net acres of
Cardium rights and 1,119 net acres of Mannville rights.
The Joint Venture, which will be effective as of July 1, 2013, will
encompass a multi-year commitment to jointly develop the aforementioned
acreage in Ferrier and Willesden Green of West Central Alberta
encompassing 70 gross wells with anticipated total capital expenditures
to the Joint Venture of approximately $200 million. Certain conditions
precedent to closing, including Korean governmental and regulatory
approvals, are expected to be satisfied or waived by August 30, 2013,
which is expected to enable closing to occur on or before September 16,
2013.
As a result of the aforementioned joint ventures and based on the
initial funding requirements, Bellatrix's updated net capital
expenditure plan for 2013 is expected to be $235 million, not including
joint venture partner capital.
Operational highlights for the three and six months ended June 30, 2013
include:
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During the first six months of 2013, Bellatrix posted a 100% success rate drilling and/or participating in 26 gross (22.08 net) wells resulting
in 23 gross (19.98 net) Cardium oil wells, and 3 gross (2.10 net)
Notikewin/Falher liquids-rich gas wells. Bellatrix drilled 5 gross (5
net) Cardium oil wells in the second quarter of 2013. Three wells were
completed and placed on production during the quarter, the fourth well
commenced production July 1st with one well waiting on completion.
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On March 11, 2013, the Company announced the successful drilling and
completion of a 100% working interest long reach horizontal well in the
Spirit River Falher interval. After the first 120 days of production
the well had recovered 2.1 Bcf of gas with 73,944 barrels of natural gas liquids.
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Q2 2013 sales volumes averaged 22,102 boe/d (weighted 28% to oil, condensate and NGLs and 72% to natural gas).
This represents a 33% increase from the second quarter 2012 average
sales volumes of 16,569 boe/d and a 14% increase from first quarter
2013 average sales volumes of 19,343 boe/d. These volumes were achieved
in spite of a mechanical problem on the Minnehik Buck Lake Gas Plant
pipeline which created an unplanned shutdown at the end of June that
required re-routing of a significant portion of the Company's
production in the Ferrier area, negatively impacting field production
in the month of June by approximately 330 boe/d.
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During the month of July 2013 field production averaged approximately
22,000 boe/d weighted 28% oil and liquids and 72% natural gas.
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As at June 30, 2013, Bellatrix had approximately 201,891 net undeveloped acres of land in Alberta, British Columbia and Saskatchewan.
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In April 2013, the Company commissioned 26.5 km of 12 inch pipeline and
7.76 km of dual 10 inch pipelines designed to send up to 120 mmcf/d
from the Ferrier area to the third party operated Minnehik Buck Lake
Gas Plant. In addition, on April 20, 2013 Bellatrix completed doubling
the capacity of the 100% working interest 09-03 Compression Facility to
50 mmcf/day. The Company also initiated expansion of the 2-10 Brazeau
Battery and Gas Compression Facility from 15mmcf/d to 40 mmcf/d of
capacity. The expansion was commissioned on August 1, 2013.
Financial highlights for the three and six months ended June 30, 2013
include:
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The net profit for Q2 2013 was $15.5 million after unrealized gains on commodity contracts and the loss on property
dispositions and swaps, net of associated deferred tax impacts,
compared to a net profit of $10.0 million in Q2 2012. The net profit
for the first six months of 2013 was $20.0 million after unrealized
gains (losses) on commodity contracts and gains (losses) on property
dispositions and swaps, net of associated deferred tax impacts,
compared to a net profit of $19.1 million in the 2012 period.
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Q2 2013 revenue before royalties and risk management contracts was $74.6 million, 47% higher than the $50.7 million recorded in Q2 2012. The increase in revenues
between the periods was primarily due to increased natural gas and NGL
sales volumes and higher prices for all commodities between the
periods, partially offset by reduced crude oil and condensate sales
volumes experienced in the second quarter of 2013. Revenue for the
first six months of 2013 was $140.1 million, up 29% from $108.9 million in the same period in 2012.
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Funds flow from operations for Q2 2013 was $36.6 million ($0.34 per basic share), down 2% from $37.5 million in Q1 2013, and up 44% from $25.4 million ($0.24 per basic share) in Q2 2012. The increase in funds flow from operations between the
three months ended June 30, 2013 and the same period in 2012 was
principally due to higher overall funds from operating netbacks and
reduced general and administrative expenses, offset partially by
increased financing expenses and a net loss on realized commodity
contracts in the 2013 three month period compared a gain realized in
the same period in 2012. Funds flow from operations for Q1 2013 were
slightly higher than Q2 2013, due to the Company realizing $6.5 million
in cash proceeds in Q1 2013 by resetting the fixed prices on certain
natural gas commodity price risk management contracts. Funds flow from
operations for the first six months of 2013 was $74.1 million ($0.69 per basic share), up 36% from $54.6 million ($0.51
per basic share) in the same period in 2012.
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For the three and six months ended June 30, 2013, net profit before
unrealized gain (loss) on commodity contracts and gain (loss) on
property dispositions, net of associated deferred tax impacts, was
$11.0 million and $24.6 million, compared to $3.1 million and $9.2
million in the 2012 periods, respectively.
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Crude oil, condensate and NGLs produced 55% and 58% of petroleum and natural gas sales revenue for the three and
six month periods ended June 30, 2013, respectively.
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Production expenses for Q2 2013 were $8.64/boe ($17.4 million), compared to $8.80/boe ($13.3 million) for Q2 2012 and
$8.65/boe ($15.1 million) for Q1 2013. Production expenses for the six
months ended June 30, 2013 were $8.65/boe ($32.4 million), compared to $9.00/boe ($26.6 million) for the same
period in 2012. The year over year decreases in production expenses
per boe were due to increased production volumes which were a result of
2012 and 2013 drilling in areas with lower production expenses, as well
as reduced processing fees in certain areas and continued field
optimization projects. Q2 2013 production expenses per boe were
slightly higher than anticipated due to plant turnarounds during the
quarter requiring some natural gas to be temporarily shifted to a plant
with higher fees.
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Operating netbacks after including risk management for Q2 2013 were $20.68/boe, up from $20.35/boe in Q2 2012. Operating netbacks before risk
management for Q2 2013 were $21.06/boe, up from $16.42/boe in Q2 2012
and up from $21.03/boe in Q1 2013. The increased netback before risk
management for Q2 2013 compared to Q2 2012 was primarily the result of
higher prices for all commodities in conjunction with lower royalty and
production expenses, offset slightly by increased transportation
expenses.
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Operating netbacks after including risk management for the six months
ended June 30, 2013 were $22.58/boe, up from $21.61/boe in the same period in 2012. Operating netbacks
before risk management for the six months ended June 30, 2013 were
$21.04/boe, up from $20.60/boe in the same period in 2012. The higher
netback was primarily the result of higher natural gas, light oil and
condensate prices in conjunction with reduced production expenses,
offset partially by lower NGL and heavy oil prices, and increased
royalty expenses between the periods.
-
Bellatrix spent $46.7 million and $138.3 million on capital projects during the three
and six months ended June 30, 2013, compared to $18.3 million and $92.5 million during the same periods in
2012, respectively.
-
G&A expenses for Q2 2013 decreased to $1.24/boe ($2.5 million), compared to $2.47/boe ($3.7 million) for Q2 2012. G&A expenses for the six months ended June 30, 2013 were
$1.62 ($6.1 million), compared to $2.19/boe ($6.5 million) in the same
period in 2012.
-
As at June 30, 2013, Bellatrix had $61.0 million undrawn on its total $255 million credit facility.
-
Effective April 30, 2013, Bellatrix's banking syndicate approved
increasing the borrowing base from $220 million to $255 million through
to November 30, 2013 and extending the revolving period of the credit
facility from June 25, 2013 to June 24, 2014.
-
Total net debt as of June 30, 2013 was $256.5 million, including the liability component of convertible debentures.
COMMODITY PRICE RISK MANAGEMENT
As of August 7, 2013, the Company has entered into the following
commodity price risk management arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type
|
|
Period
|
|
Volume
|
|
Price Floor
|
|
Price Ceiling
|
|
Index
|
|
Crude oil fixed
|
|
January 1, 2013 to Dec. 31, 2013
|
|
1,500 bbl/d
|
|
$
|
94.50 CDN
|
|
$
|
94.50 CDN
|
|
WTI
|
|
Crude oil fixed
|
|
July 1, 2013 to Dec. 31, 2013
|
|
1,500 bbl/d
|
|
$
|
96.87 CDN
|
|
$
|
96.87 CDN
|
|
WTI
|
|
Crude oil fixed
|
|
August 1, 2013 to Dec. 31, 2013
|
|
1,000 bbl/d
|
|
$
|
106.02 CDN
|
|
$
|
106.02 CDN
|
|
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
|
|
1,500 bbl/d
|
|
$
|
95.22 CDN
|
|
$
|
95.22 CDN
|
|
WTI
|
|
Crude oil call option (1)
|
|
Nov. 1, 2013 to Dec. 31, 2013
|
|
3,000 bbl/d
|
|
|
-
|
|
$
|
110.00 US
|
|
WTI
|
|
Crude oil call option
|
|
January 1, 2014 to Dec. 31, 2014
|
|
3,000 bbl/d
|
|
|
-
|
|
$
|
105.00 US
|
|
WTI
|
|
Natural gas fixed
|
|
April 1, 2013 to Oct. 31, 2013
|
|
20,000 GJ/d
|
|
$
|
3.05 CDN
|
|
$
|
3.05 CDN
|
|
AECO
|
|
Natural gas fixed
|
|
April 1, 2013 to Oct. 31, 2013
|
|
10,000 GJ/d
|
|
$
|
3.095 CDN
|
|
$
|
3.095 CDN
|
|
AECO
|
|
Natural gas fixed
|
|
Feb. 1, 2013 to Dec. 31, 2013
|
|
10,000 GJ/d
|
|
$
|
3.05 CDN
|
|
$
|
3.05 CDN
|
|
AECO
|
|
Natural gas fixed
|
|
April 1, 2013 to June 30, 2014
|
|
15,000 GJ/d
|
|
$
|
3.05 CDN
|
|
$
|
3.05 CDN
|
|
AECO
|
|
(1)
|
This crude oil call option for the May 1, 2013 to October 31, 2013
period was settled for $0.2 million in April, 2013.
|
OUTLOOK
The most successful firms across a broad band of industries are the
companies that are able to capture the benefits of short term advantage even as they build organizational capabilities for long term sustainable growth. They transform themselves through proactive innovation and strategic change. Bellatrix has pushed the envelope of innovation in three major areas
of its own strategic business model. Firstly, through seizing control of the infrastructure in the Company's core operating theater. Secondly, the innovative evolution of modern technology as it is adapted to maximize reserves recovery from our existing
conventional resource based assets. Lastly, creating shareholder value
through employment of joint venture capital to accelerate asset development of Bellatrix's large inventory (40 years at 2013 development capital
cost and 2013 cash flow) of low risk high rate of return opportunities
on a promoted basis.
In the short term, as a result of disruption in field production in
early July due to the impact of rolling power blackouts and the delay
in commencing the Q3 drilling program due to the wet field conditions,
the Company is anticipating Q3 2013 production levels to remain
consistent with Q2 2013 production levels. However, Bellatrix continues
to expect it will meet its previously announced 2013 calendar year
guidance to provide average daily production of 23,000 to 24,000 boe/d
and 2013 exit rate of 30,000 to 31,000 boe/d.
The Company has 5 drilling rigs working in West Central Alberta
currently and will continue to ramp up activity into Q4 as the existing
joint ventures come into play. Our sempiternal commitment is shareholder value growth.
Raymond G. Smith, P. Eng.
President and CEO
August 7, 2013
MANAGEMENT'S DISCUSSION AND ANALYSIS
August 7, 2013 - 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 consolidated financial
statements of the Company for the three and six months ended June 30,
2013, and the audited consolidated financial statements of the Company
for the years ended December 31, 2012 and 2011, 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, August 7, 2013. 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.
ADDITIONAL GAAP MEASURES: This Management's Discussion and Analysis and
the accompanying report to shareholders and financial statements
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.
This Management's Discussion and Analysis and the accompanying report to
shareholders and financial statements also contain the term total net
debt and net debt. Total net debt is calculated as long-term debt plus
the liability component of the convertible debentures and the net
working capital deficiency (excess) before short-term commodity
contract assets and liabilities and current finance lease obligations.
Net debt is calculated as long-term debt plus the net working capital
deficiency (excess) before short-term commodity contract assets and
liabilities and current finance lease obligations. 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 also contains other terms such as
net profit before certain non-cash items and operating netbacks, which
are not recognized measures under GAAP. Net profit before certain
non-cash items is calculated as net profit per the Consolidated
Statement of Comprehensive Income, excluding the net unrealized gain or
loss on commodity contracts, and gain or loss on property dispositions
and swaps net of the deferred tax impact on these adjustments.
Operating netbacks are calculated by subtracting royalties,
transportation, and operating expenses from revenues before other
income. Management believes these measures are useful supplemental
measures of firstly, the amount of net profit before certain non-cash
items, and secondly, the amount of revenues received after
transportation, royalties and operating expenses. Readers are
cautioned, however, that these measures should not be construed as an
alternative to net income determined in accordance with GAAP as
measures of performance. Bellatrix's method of calculating these
measures may differ from other entities, and accordingly, may not be
comparable to measures used by other companies.
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 and
operations, drilling plans and the timing thereof, commodity price risk
management strategies, 2013 capital expenditure budget, the nature of
expenditures and the method of financing thereof, expected Q3 2013
average production and 2013 average production and exit rate,
anticipated liquidity of the Company and various matters that may
impact such liquidity, expected 2013 operating 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, timing of closing of an asset sale and joint
venture agreement and the expected number of wells to be drilled under
joint venture agreements and the effects thereof, and the ability to
fund the 2013 capital expenditure program utilizing various available
sources of capital 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, risks related to satisfaction of conditions
precedent to closing of pending asset sale and joint venture agreement,
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.
On March 31, 2013, the Company filed its December 31, 2012 annual Form
40-F with the SEC. A copy of the Company's annual report, including the
audited financial statements, is available on the Company's website at www.bellatrixexploration.com, or in hard copy by request and free of charge by contacting Investor
Relations at 403-750-7085, or at investor.relations@bellatrixexp.com.
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.
Bellatrix's common shares and convertible debentures are listed on the
Toronto Stock Exchange under the symbols BXE and BXE.DB.A,
respectively, and the common shares of Bellatrix trade on the NYSE MKT
under the symbol BXE.
Recent Transactions
As previously announced, the Seoul Korea based company was not able to
meet the remaining closing conditions required to close the Ferrier
area Korean $300 million Cardium Joint Venture on May 31, 2013.
Bellatrix chose not to extend the deadline for satisfying such
conditions beyond May 31, 2013.
Grafton Joint Venture
As previously announced on June 27, 2013, Bellatrix closed a joint
venture (the "Grafton Joint Venture") with Grafton Energy Co I Ltd.
("Grafton"), to accelerate development on a portion of Bellatrix's
extensive undeveloped land holdings. The joint venture is in Willesden
Green and Brazeau areas of West-Central Alberta. Under the terms of the
agreement, Grafton will contribute 82%, or $100 million, to the $122
million joint venture to participate in an expected 29 Notikewin/Falher
and Cardium well program. Under the agreement, Grafton will earn 54% of
Bellatrix's working interest in each well drilled in the well program
until payout (being recovery of Grafton's capital investment plus an 8%
return on investment) on the total program, reverting to 33% of
Bellatrix's working interest ("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-joint venture working interest. Grafton
will have until September 15, 2013 to elect on an option to increase
the committed capital investment by an additional $100 million on the
same terms and conditions. Grafton shall also have an additional
one-time option within 12 months of the effective date to increase its
exposure by an additional $50 million on the same terms and conditions.
The effective date of the agreement is July 1, 2013 and has a term of 2
years. If the $50 million option is exercised, Bellatrix shall have
until the end of the third anniversary of the effective date to spend
the additional capital (if the $100 million option is exercised it will
not result in an extension of the term of the joint venture).
Baptiste Asset Sale and Joint Venture
On August 1, 2013 the Company announced it entered into a definitive
agreement for an asset sale (the "Asset Sale") and joint venture (the
"Baptiste Joint Venture") with two Korean entities, Daewoo
International Corporation ("Daewoo") and Devonian Natural Resources
Private Equity Fund ("Devonian"). Under the terms of the associated
agreements, Bellatrix will sell, effective July 1, 2013, to Daewoo and
Devonian jointly 50% of the Company's working interest share of its
producing assets, an operated compressor station and gathering system
and related land acreage in the Baptiste area of West Central Alberta
(the "Sold Assets") for gross consideration of $52.5 million, subject
to closing adjustments. The Sold Assets are producing approximately
268 boe/d (67% gas and 33% oil and liquids) net and include 3,858 net
acres of Cardium rights and 1,119 net acres of Mannville rights.
The Baptiste Joint Venture, which will be effective as of July 1, 2013,
will encompass a multi-year commitment to jointly develop the
aforementioned acreage in Ferrier and Willesden Green of West Central
Alberta encompassing 70 gross wells with anticipated total capital
expenditures to the Joint Venture of approximately $200 million.
Certain conditions precedent to closing, including Korean governmental
and regulatory approvals, are expected to be satisfied or waived by
August 30, 2013, which is expected to enable closing to occur on or
before September 16, 2013. This agreement is anticipated to be
accounted for as a joint operation under IFRS.
Bellatrix will continue to consider alternative joint venture partners
for the Company's interests in the Cardium resource play.
Second Quarter 2013 Financial and Operational Results
Sales Volumes
Sales volumes for the three months ended June 30, 2013 averaged 22,102
boe/d compared to 16,569 boe/d for the same period in 2012,
representing a 33% increase. Total crude oil, condensate and NGLs
averaged approximately 28% of sales volumes for the three months ended
June 30, 2013, compared to 35% of sales volumes in the same period in
2012. Sales volumes for the six months ended June 30, 2013 averaged
20,730 boe/d, compared to 16,234 boe/d for the same period in 2012,
representing a 28% increase. The increase in sales was primarily a
result of a year over year increased capital program and the associated
drilling success achieved in the Cardium and Notikewin resource plays.
Capital expenditures for the six months ended June 30, 2013 were $138.3
million, compared to $92.5 million for the same period in 2012.
Sales Volumes
|
|
|
|
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
|
|
2013
|
2012
|
2013
|
2012
|
|
Light oil and condensate
|
(bbls/d)
|
3,657
|
3,941
|
3,685
|
4,204
|
|
NGLs
|
(bbls/d)
|
2,344
|
1,508
|
2,209
|
1,446
|
|
Heavy oil
|
(bbls/d)
|
205
|
368
|
201
|
320
|
|
Total crude oil, condensate and NGLs
|
(bbls/d)
|
6,206
|
5,817
|
6,095
|
5,970
|
|
|
|
|
|
|
|
|
Natural gas
|
(mcf/d)
|
95,376
|
64,513
|
87,812
|
61,586
|
|
|
|
|
|
|
|
|
Total boe/d
|
(6:1)
|
22,102
|
16,569
|
20,730
|
16,234
|
In the first half of 2013, Bellatrix posted a 100% success rate drilling
and/or participating in 26 gross (22.08 net) wells, resulting in 23
gross (15.98 net) Cardium oil wells, and 3 gross (2.10 net)
Notikewin/Falher liquids-rich gas wells. During the second quarter of
2013, Bellatrix drilled or participated in 5 gross (5 net) Cardium oil
wells.
By comparison, Bellatrix drilled or participated in 15 gross (12.44 net)
wells during the first half of 2012, which included 11 gross (8.94 net)
Cardium light oil horizontal wells, 1 gross (1 net) Duvernay natural
gas horizontal well, 1 gross (0.5 net) Notikewin natural gas horizontal
well, and 2 gross (2 net) Cardium natural gas horizontal well.
For the three months ended June 30, 2013, crude oil, condensate and NGL
sales volumes increased by approximately 7%, averaging 6,206 bbl/d
compared to 5,817 bbl/d in the second quarter of 2012. For the six
months ended June 30, 2013, crude oil, condensate and NGL sales volumes
increased by approximately 2%, averaging 6,095 bbl/d compared to 5,970
bbl/d in the same period in 2012.
Sales of natural gas averaged 95.4 Mmcf/d for the three months ended
June 30, 2013, compared to 64.5 Mmcf/d in the same period in 2012, an
increase of approximately 48%. For the six months ended June 30, 2013,
sales of natural gas averaged 87.8 Mmcf/d, an increase of approximately
43% from average sales volumes of 61.6 Mmcf/d realized in the
comparative 2012 period. The weighting towards crude oil, condensate
and NGLs for the three and six months ended June 30, 2013 was 28% and
29%, compared to 35% and 37% for the same periods in 2012,
respectively. The reduction in liquids weighting between the periods
was a result of bringing on several other high-productivity natural gas
wells throughout the 2012 year and first half of 2013.
As a result of the aforementioned joint ventures and based on the
initial funding requirements, Bellatrix's updated net capital
expenditure plan for 2013 is expected to be $235 million, not including
joint venture partner capital. Based on the timing of proposed
expenditures in the latter half of 2013, downtime for scheduled and
unscheduled plant turnarounds, completion of anticipated
infrastructure, and normal production declines, execution of the
updated 2013 capital expenditure plan is anticipated to provide average
daily production of approximately 23,000 to 24,000 boe/d and a 2013
exit rate of approximately 30,000 boe/d to 31,000 boe/d.
Commodity Prices
Average Commodity Prices
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
|
2013
|
2012
|
% Change
|
2013
|
2012
|
% Change
|
|
|
|
|
|
|
|
|
|
Exchange rate (US$/CDN$)
|
0.9774
|
0.9900
|
(1)
|
0.9846
|
0.9944
|
(1)
|
|
|
|
|
|
|
|
|
|
Crude oil:
|
|
|
|
|
|
|
|
WTI (US$/bbl)
|
94.17
|
93.35
|
1
|
94.26
|
98.15
|
(4)
|
|
Edmonton par - light oil ($/bbl)
|
92.94
|
84.39
|
10
|
90.77
|
88.54
|
3
|
|
Bow River - medium/heavy oil ($/bbl)
|
77.97
|
73.97
|
5
|
71.78
|
78.50
|
(9)
|
|
Hardisty Heavy - heavy oil ($/bbl)
|
68.61
|
62.88
|
9
|
59.40
|
68.00
|
(13)
|
|
Bellatrix's average prices ($/bbl)
|
|
|
|
|
|
|
|
|
Light crude oil and condensate
|
94.84
|
87.73
|
8
|
93.47
|
88.95
|
5
|
|
|
NGLs (excluding condensate)
|
36.20
|
33.59
|
8
|
39.05
|
43.35
|
(10)
|
|
|
Heavy crude oil
|
69.28
|
68.40
|
1
|
61.69
|
71.59
|
(14)
|
|
|
Total crude oil and NGLs
|
71.84
|
72.47
|
(1)
|
72.70
|
76.99
|
(6)
|
|
|
Total crude oil and NGLs (including risk management (1))
|
73.10
|
71.45
|
2
|
73.26
|
73.76
|
(1)
|
|
|
|
|
|
|
|
|
|
Natural gas:
|
|
|
|
|
|
|
|
NYMEX (US$/mmbtu)
|
4.02
|
2.35
|
71
|
3.76
|
2.43
|
55
|
|
AECO daily index (CDN$/mcf)
|
3.53
|
1.90
|
86
|
3.36
|
2.02
|
66
|
|
AECO monthly index (CDN$/mcf)
|
3.59
|
1.83
|
96
|
3.33
|
2.18
|
53
|
|
Bellatrix's average price ($/mcf)
|
3.85
|
2.03
|
90
|
3.69
|
2.17
|
70
|
|
Bellatrix's average price (including risk management(1)) ($/mcf)
|
3.68
|
3.13
|
18
|
4.01
|
2.75
|
46
|
(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 $94.84/bbl
before commodity price risk management contracts during the second
quarter of 2013, 8% higher than the average price received in the
comparative 2012 period. In comparison, the Edmonton par price
increased by 10% over the same period. The average WTI crude oil
benchmark price increased by 1% in the three months ended June 30, 2013
compared to the second quarter of 2012. For light oil and condensate,
Bellatrix recorded an average $93.47/bbl before commodity price risk
management contracts during the six months ended June 30, 2013, 5%
higher than the average price received in the comparative 2012 period.
In comparison, the Edmonton par price increased by 3% over the same
period. The average WTI crude oil benchmark price decreased by 4% in
the first half of 2013 compared to the same period in 2012. The
average US$/CDN$ foreign exchange rate was 0.9846 for the six months
ended June 30, 2013, a decrease of 1% compared to an average rate of
0.9944 in the same period in 2012.
For NGLs (excluding condensate), Bellatrix recorded an average
$36.20/bbl during the second quarter of 2013, an increase of 8% from
the $33.59/bbl received in the comparative 2012 period. For the six
months ended June 30, 2013, Bellatrix received an average NGL price of
$39.05/bbl, a 10% decrease from the $43.35/bbl received in the
comparative 2012 period. The overall decrease in NGL pricing between
the 2013 and 2012 six-month periods is largely attributable to changes
in NGL market supply conditions between the periods.
For heavy crude oil, Bellatrix received an average price before
commodity risk management contracts of $69.28/bbl in the 2013 second
quarter, an increase of 1% from the $68.40/bbl realized in the second
quarter of 2012. For the six months ended June 30, 2013, Bellatrix
received an average price of $61.69/bbl for heavy crude oil, a decrease
of 14% from the $71.59/bbl realized in the same period in 2012. In
comparison, the Bow River reference price increased by 5%, and the
Hardisty Heavy reference price increased by 9% between the second
quarter of 2012 and the second quarter of 2013. Between the first
half of 2012 and the first half of 2013, the Bow River reference price
decreased by 9%, and the Hardisty Heavy reference price decreased by
13%. 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 2013 second
quarter, the AECO daily reference price increased by 86%, and the AECO
monthly reference price increased by approximately 96% compared to the
second quarter of 2012. Bellatrix's natural gas average sales price
before commodity price risk management contracts for the three months
ended June 30, 2013 increased by 90% to $3.85/mcf compared to $2.03/mcf
in the second quarter of 2012. During the six months ended June 30,
2013, the AECO daily reference price increased by 66%, and the AECO
monthly reference price increased by approximately 53% compared to the
same period in 2012. Bellatrix's natural gas average sales price
before commodity price risk management contracts for the six months
ended June 30, 2013 increased by 70% to $3.69/mcf compared to $2.17mcf
in the first half of 2012. The greater increase in Bellatrix's realized
natural gas prices compared to the daily AECO index between the six
month periods was primarily due to the weighting of additional sales
volumes realized at increasing prices between the 2013 and 2012
periods. Bellatrix's natural gas average price after including
commodity price risk management contracts for the three and six months
ended June 30, 2013 was $3.68/mcf and $4.01/mcf, respectively, compared
to $3.13/mcf and $2.75/mcf in the same periods in 2012, respectively.
Revenue
Revenue before other income, royalties and commodity price risk
management contracts for the three months ended June 30, 2013 was $74.0
million, 47% higher than the $50.3 million realized in the second
quarter of 2012. The increase in revenues between the periods was
primarily due to increased natural gas and NGL sales volumes, and
higher realized prices for all commodities between the periods,
partially offset by reduced crude oil and condensate sales volumes
experienced in the second quarter of 2013. Revenue before other
income, royalties and commodity price risk management contracts for the
six month period ended June 30, 2013 was $138.9 million, 29% higher
than the $108.0 million realized in the comparative 2012 period.
Revenue before other income, royalties and commodity price risk
management contracts for crude oil and NGLs for the three months ended
June 30, 2013 increased from the comparative 2012 period by
approximately 6%, resulting from higher NGL sales volumes in
conjunction with increased crude oil and NGL prices, partially offset
by lower crude oil and condensate sales volumes when compared to the
same period in 2012. Revenue before other income, royalties and
commodity price risk management contracts for crude oil and NGLs for
the six months ended June 30, 2013 decreased from the comparative 2012
period by approximately 4%, resulting from increased NGL sales volumes
and higher light oil and condensate prices, partially offset by lower
crude oil sales volumes and reduced NGL and heavy oil prices when
compared to the first half of 2012. In the second quarter of 2013,
total crude oil, condensate and NGL revenues contributed 55% of total
revenue (before other) compared to 76% in the same period in 2012. For
the six months ended June 30, 2013, total crude oil, condensate and NGL
revenues contributed 58% of total revenue (before other), compared to
77% in the same period in 2012. Light crude oil, condensate and NGL
revenues in the three and six month periods ended June 30, 2013
comprised 97% of total crude oil, condensate and NGL revenues (before
other) for both periods, compared to a 94% and 95% composition realized
in the three month and six month periods ended June 30, 2012,
respectively.
Natural gas revenue before other income, royalties and commodity price
risk management contracts for the second quarter of 2013 increased by
approximately 180% compared to the second quarter of 2012 as a result
of a 90% increase in realized gas prices before risk management in
conjunction with an approximate 48% increase in sales volumes between
the periods. Natural gas revenue before other income, royalties and
commodity price risk management contracts for the first six months of
2013 increased by approximately 141% compared to the six months ended
June 30, 2012 as a result of a 70% increase in realized gas prices
before risk management and an approximate 43% increase in sales volumes
between the periods.
|
|
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
2013
|
2012
|
2013
|
2012
|
|
Light crude oil and condensate
|
31,557
|
31,467
|
62,346
|
68,060
|
|
NGLs (excluding condensate)
|
7,724
|
4,605
|
15,613
|
11,412
|
|
Heavy oil
|
1,292
|
2,292
|
2,244
|
4,163
|
|
Crude oil and NGLs
|
40,573
|
38,364
|
80,203
|
83,635
|
|
Natural gas
|
33,404
|
11,916
|
58,682
|
24,324
|
|
Total revenue before other
|
73,977
|
50,280
|
138,885
|
107,959
|
|
Other income (1)
|
587
|
434
|
1,222
|
946
|
|
Total revenue before royalties and risk management
|
74,564
|
50,714
|
140,107
|
108,905
|
|
(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 August 7, 2013 is
shown in the following tables:
|
Natural gas
|
|
|
|
|
|
Average Volumes (GJ/d)
|
|
|
|
|
|
|
|
|
Q3 2013
|
Q4 2013
|
|
Fixed
|
|
|
55,000
|
35,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2014
|
Q2 2014
|
Q3 2014
|
Q4 2014
|
|
Fixed
|
15,000
|
15,000
|
-
|
-
|
|
|
|
|
|
|
|
Average Price ($/GJ AECO C)
|
|
|
|
|
|
|
|
|
Q3 2013
|
Q4 2013
|
|
Fixed
|
|
|
3.06
|
3.05
|
|
|
|
|
|
|
|
|
Q1 2014
|
Q2 2014
|
Q3 2014
|
Q4 2014
|
|
Fixed
|
3.05
|
3.05
|
-
|
-
|
|
|
|
|
|
|
|
Crude oil and liquids
|
|
|
|
|
|
|
|
|
|
|
|
Average Volumes (bbls/d)
|
|
|
|
|
|
|
|
|
Q3 2013
|
Q4 2013
|
|
Fixed
|
|
|
3,663
|
4,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2014
|
Q2 2014
|
Q3 2014
|
Q4 2014
|
|
Fixed
|
3,000
|
3,000
|
3,000
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2013
|
|
Call option
|
|
|
|
1,989
|
|
|
|
|
|
|
|
|
Q1 2014
|
Q2 2014
|
Q3 2014
|
Q4 2014
|
|
Call option
|
3,000
|
3,000
|
3,000
|
3,000
|
|
|
|
|
|
|
|
Average Price ($/bbl WTI)
|
|
|
|
|
|
|
|
|
Q3 2013
|
Q4 2013
|
|
Fixed price (CDN$/bbl)
|
|
|
97.56
|
98.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2014
|
Q2 2014
|
Q3 2014
|
Q4 2014
|
|
Fixed price (CDN$/bbl)
|
94.61
|
94.61
|
94.61
|
94.61
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2013
|
|
Call option (ceiling price) (US$/bbl)
|
|
|
|
110.00
|
|
|
|
|
|
|
|
|
Q1 2014
|
Q2 2014
|
Q3 2014
|
Q4 2014
|
|
Call option (ceiling price) (US$/bbl)
|
105.00
|
105.00
|
105.00
|
105.00
|
As of June 30, 2013, the fair value of Bellatrix's outstanding commodity
contracts is a net unrealized liability of $6.1 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 June 30, 2013 and will
be different from what will eventually be realized. Changes in the
fair value of the commodity contracts are recognized in the
Consolidated Statements of Comprehensive Income within the financial
statements.
The following is a summary of the gain (loss) on commodity contracts for
the three and six months ended June 30, 2013 and 2012 as reflected in
the Condensed Consolidated Statements of Comprehensive Income in the
financial statements:
|
Commodity contracts
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
($000s)
|
Crude Oil & Liquids
|
Natural Gas
|
2013 Total
|
2012 Total
|
|
Realized cash gain (loss) on contracts
|
709
|
(1,494)
|
(785)
|
5,926
|
|
Unrealized gain (loss) on contracts (2)
|
(490)
|
6,482
|
5,992
|
11,388
|
|
Total gain on commodity contracts
|
219
|
4,988
|
5,207
|
17,314
|
|
|
|
|
|
|
|
Commodity contracts
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
($000s)
|
Crude Oil & Liquids
|
Natural Gas
|
2013 Total
|
2012 Total
|
|
Realized cash gain on contracts (1)
|
621
|
5,096
|
5,717
|
2,981
|
|
Unrealized gain (loss) on contracts (2)
|
1,517
|
(7,824)
|
(6,307)
|
16,256
|
|
Total gain (loss) on commodity contracts
|
2,138
|
(2,728)
|
(590)
|
19,237
|
|
(1)
|
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.
|
|
(2)
|
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 three months ended June 30, 2013, total royalties were $12.6
million compared to $11.4 million incurred in the second quarter of
2012. Overall royalties as a percentage of revenue (after
transportation costs) in the second quarter of 2013 were 17% compared
with 23% in the 2012 second quarter. For the six months ended June 30,
2013, total royalties were $24.3 million compared to $18.0 million
incurred in the first half of 2012. Overall royalties as a percentage
of revenue (after transportation costs) in the first six months of 2013
were 18%, compared with 17% in the same period in 2012.
Certain light oil wells are now incurring higher royalty rates as they
come off the initial royalty incentive rates. The Company's minor
heavy oil properties, principally consisting of the Frog Lake Alberta
assets, are also subject to high crown royalty rates. The Company's
natural gas royalties are impacted by lower royalties on more recent
wells in their early years of production under the Alberta royalty
incentive program, offset by increased royalty rates on other wells now
coming off initial royalty incentive rates and as other wells are
drilled on Ferrier lands with higher combined Indian Oil and Gas Canada
("IOGC") and GORR royalty rates.
Natural gas royalties in the three months ended June 30, 2013 were
reduced by $1.1 million of annual gas cost allowance adjustments.
Excluding these adjustments, the average natural gas and overall
corporate royalty rate percentages for the second quarter of 2013 would
be 9% and 19%, respectively.
Light oil royalties for the second quarter of 2012 include approximately
$0.3 million of revisions to prior period estimates related to wells
coming off the initial royalty incentive rates. Second quarter 2012
royalties for NGLs include approximately $0.8 million of adjustments
relating to previous estimates under the royalty incentive programs.
The heavy oil royalties for the second quarter of 2012 include $0.7
million of adjustments to royalty estimates of prior periods from a
third-party operator. Excluding the total $1.8 million adjustments
noted above, the overall corporate royalty rate percentage for the
second quarter of 2012 would be 19%.
|
|
|
Royalties by Commodity Type
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s, except where noted)
|
2013
|
2012
|
2013
|
2012
|
|
Light crude oil, condensate and NGLs
|
10,503
|
9,407
|
18,776
|
17,132
|
|
|
$/bbl
|
19.23
|
18.97
|
17.60
|
16.66
|
|
|
Average light crude oil,
condensate and NGLs royalty rate (%)
|
27
|
26
|
24
|
22
|
|
|
|
|
|
|
|
Heavy Oil
|
369
|
1,340
|
797
|
1,938
|
|
|
$/bbl
|
19.78
|
40.01
|
21.92
|
33.38
|
|
|
Average heavy oil royalty
rate (%)
|
29
|
61
|
37
|
48
|
|
|
|
|
|
|
|
Natural Gas
|
1,689
|
679
|
4,773
|
(1,031)
|
|
|
$/mcf
|
0.19
|
0.12
|
0.30
|
(0.09)
|
|
|
Average natural gas
royalty rate (%)
|
5
|
6
|
8
|
(4)
|
|
|
|
|
|
|
|
Total
|
12,561
|
11,426
|
24,346
|
18,039
|
|
$/boe
|
6.25
|
7.58
|
6.49
|
6.11
|
|
Average total royalty rate (%)
|
17
|
23
|
18
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties by Type
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
|
2013
|
2012
|
2013
|
2012
|
|
Crown royalties
|
2,994
|
4,088
|
6,113
|
5,909
|
|
Indian Oil and Gas Canada royalties
|
4,438
|
1,538
|
7,160
|
2,902
|
|
Freehold & GORR
|
5,129
|
5,800
|
11,073
|
9,228
|
|
Total
|
12,561
|
11,426
|
24,346
|
18,039
|
|
Expenses
|
|
|
|
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
|
2013
|
2012
|
2013
|
2012
|
|
Production
|
17,383
|
13,272
|
32,441
|
26,578
|
|
Transportation
|
1,662
|
820
|
3,107
|
2,478
|
|
General and administrative
|
2,499
|
3,724
|
6,085
|
6,485
|
|
Interest and financing charges (1)
|
3,542
|
2,426
|
6,586
|
4,528
|
|
Share-based compensation
|
241
|
767
|
1,691
|
1,560
|
|
(1) Does not include financing charges in relation to the Company's
accretion of decommissioning liabilities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses per boe
|
|
|
|
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($ per boe)
|
|
2013
|
2012
|
2013
|
2012
|
|
Production
|
8.64
|
8.80
|
8.65
|
9.00
|
|
Transportation
|
0.83
|
0.55
|
0.83
|
0.83
|
|
General and administrative
|
1.24
|
2.47
|
1.62
|
2.19
|
|
Interest and financing charges
|
1.76
|
1.61
|
1.75
|
1.53
|
|
Share-based compensation
|
0.12
|
0.51
|
0.45
|
0.53
|
Production Expenses
For the three and six months ended June 30, 2013, production expenses
totaled $17.4 million ($8.64/boe) and $32.4 million ($8.65/boe),
compared to $13.3 million ($8.80/boe) and $26.6 million ($9.00/boe) in
the three and six months ended June 30, 2012, respectively. For the
three and six months ended June 30, 2013, production expenses increased
overall, while decreasing on a per boe basis when compared to the same
periods in 2012. The decrease in production expenses on a boe basis in
the first half of 2013 was primarily due to increased production in
areas with lower production expenses, as well as reduced processing
fees in certain areas and continued field optimization projects. Q2
2013 production expenses per boe were slightly higher than anticipated
due to plant turnarounds during the quarter requiring some natural gas
to be temporarily shifted to a plant with higher fees.
Bellatrix is targeting operating costs of approximately $68.6 million
($8.00/boe) in the 2013 year, which is a reduction from the $8.73/boe
operating costs incurred for the 2012 year. This is based upon
assumptions of estimated 2013 average production of approximately
23,000 boe/d to 24,000 boe/d, continued field optimization work and
planned capital expenditures in producing areas which are anticipated
to have lower operating costs.
|
Production Expenses by Commodity Type
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s, except where noted)
|
2013
|
2012
|
2013
|
2012
|
|
Light crude oil, condensate and NGLs
|
7,300
|
6,096
|
14,137
|
10,630
|
|
|
$/bbl
|
13.37
|
12.30
|
13.25
|
10.34
|
|
|
|
|
|
|
|
Heavy oil
|
321
|
474
|
611
|
895
|
|
|
$/bbl
|
17.21
|
14.15
|
16.79
|
15.37
|
|
|
|
|
|
|
|
Natural gas
|
9,762
|
6,702
|
17,693
|
15,053
|
|
|
$/mcf
|
1.12
|
1.14
|
1.11
|
1.34
|
|
|
|
|
|
|
|
Total
|
17,383
|
13,272
|
32,441
|
26,578
|
|
|
$/boe
|
8.64
|
8.80
|
8.65
|
9.00
|
|
|
|
|
|
|
|
Total
|
17,383
|
13,272
|
32,441
|
26,578
|
|
Processing and other third party income (1)
|
(587)
|
(434)
|
(1,222)
|
(946)
|
Total after deducting processing and
other third party income
|
16,796
|
12,838
|
31,219
|
25,632
|
|
$/boe
|
8.35
|
8.51
|
8.32
|
8.68
|
|
(1)
|
Processing and other third party income is included within petroleum and
natural gas sales on the
Consolidated Statements of Comprehensive Income.
|
Transportation
Transportation expenses for the three and six months ended June 30, 2013
were $1.7 million ($0.83/boe) and $3.1 million ($0.83/boe),
respectively, compared to $0.8 million ($0.55/boe) and $2.5 million
($0.83/boe) in the same periods in 2012. The increase in overall and
per boe costs between the second quarter of 2012 and the second quarter
of 2013 is reflective of liquids production from new wells which came
on production during Q2 2013 initially being trucked at a higher cost
per boe rather than transported through pipelines.
Operating Netback
|
Field Operating Netback - Corporate (before risk management)
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($/boe)
|
|
2013
|
2012
|
2013
|
2012
|
|
Sales
|
36.78
|
33.35
|
37.01
|
36.54
|
|
Transportation
|
(0.83)
|
(0.55)
|
(0.83)
|
(0.83)
|
|
Royalties
|
(6.25)
|
(7.58)
|
(6.49)
|
(6.11)
|
|
Production expense
|
(8.64)
|
(8.80)
|
(8.65)
|
(9.00)
|
|
Field operating netback
|
21.06
|
16.42
|
21.04
|
20.60
|
For the second quarter of 2013, the corporate field operating netback
(before commodity price risk management contracts) was $21.06/boe
compared to $16.42/boe in the second quarter of 2012. The higher
netback was primarily the result of higher commodity prices in
conjunction with lower royalty and production expenses, offset slightly
by increased transportation expenses. After including commodity price
risk management contracts, the corporate field operating netback for
the three months ended June 30, 2013 was $20.68/boe compared to
$20.35/boe in the 2012 second quarter. Per unit metrics including risk
management include realized gains or losses on commodity contracts and
exclude unrealized gains or losses on commodity contracts.
For the six months ended June 30, 2013, the corporate field operating
netback (before commodity price risk management contracts) was
$21.04/boe compared to $20.60/boe in the same period in 2012. The
higher netback was primarily the result of higher natural gas, light
oil and condensate prices in conjunction with reduced production
expenses, offset partially by lower NGL and heavy oil prices, and
increased royalty expenses between the periods. After including
commodity price risk management contracts, the corporate field
operating netback for the six months ended June 30, 2013 was $22.58/boe
compared to $21.61/boe in the first half of 2012.
|
Field Operating Netback - Crude Oil, Condensate and NGLs (before risk
management)
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($/bbl)
|
|
2013
|
2012
|
2013
|
2012
|
|
Sales
|
71.84
|
72.47
|
72.70
|
76.99
|
|
Transportation
|
(0.85)
|
(0.55)
|
(0.89)
|
(1.01)
|
|
Royalties
|
(19.25)
|
(20.30)
|
(17.74)
|
(17.55)
|
|
Production expense
|
(13.49)
|
(12.41)
|
(13.37)
|
(10.61)
|
|
Field operating netback
|
38.25
|
39.21
|
40.70
|
47.82
|
Field operating netback for crude oil, condensate and NGLs averaged
$38.25/bbl for the three months ended June 30, 2013, a 2% decrease from
$39.21/bbl realized in the second quarter of 2012. In the second
quarter of 2013, Bellatrix's combined crude oil and NGLs average price
(before risk management) decreased by approximately 1% compared to the
same period in 2012. The commodity price decrease in conjunction with
increases in production and transportation expenses was partially
offset by decreased royalty expenses, resulting in the overall decrease
to the field operating netback for crude oil, condensate and NGLs.
After including commodity price risk management contracts, field
operating netback for crude oil and NGLs for the three months ended
June 30, 2013 increased to $39.50/boe compared to $38.18/boe in the
second quarter of 2012.
For the six months ended June 30, 2013, field operating netback for
crude oil, condensate and NGLs averaged $40.70/bbl, a decrease of 15%
from $47.82/bbl realized in the same period in 2012. In the first half
of 2013, Bellatrix's combined crude oil and NGLs average price (before
risk management) decreased by approximately 6% compared to the same
period in 2012. The commodity price decrease in conjunction with
increased production and royalty expenses was partially offset by
decreased transportation expenses, resulting in the overall decrease to
the field operating netback for crude oil, condensate and NGLs. After
including commodity price risk management contracts, field operating
netback for crude oil and NGLs for the six months ended June 30, 2013
increased to $41.26/boe compared to $44.59/boe in the first half of
2012.
|
Field Operating Netback - Natural Gas (before risk management)
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($/mcf)
|
|
2013
|
2012
|
2013
|
2012
|
|
Sales
|
3.85
|
2.03
|
3.69
|
2.17
|
|
Transportation
|
(0.14)
|
(0.09)
|
(0.14)
|
(0.12)
|
|
Royalties
|
(0.19)
|
(0.12)
|
(0.30)
|
0.09
|
|
Production expense
|
(1.12)
|
(1.14)
|
(1.11)
|
(1.34)
|
|
Field operating netback
|
2.40
|
0.68
|
2.14
|
0.80
|
Field operating netback for natural gas in the three months ended June
30, 2013 increased by 253% to $2.40/mcf, compared to $0.68/mcf realized
in the second quarter of 2012, reflecting increased natural gas prices,
and reduced production expenses, offset somewhat by slightly increased
royalty and transportation expenses. After including commodity price
risk management contracts, field operating netback for natural gas for
the three months ended June 30, 2013 decreased to $2.22/mcf, which
compared to $1.78/mcf in the 2012 second quarter.
For the six months ended June 30, 2013, field operating netback for
natural gas increased by 168% to $2.14/mcf, compared to $0.80/mcf
realized in the first half of 2012, reflecting increased natural gas
prices, and reduced production expenses, offset somewhat by an overall
royalty expense compared to an overall recovery in the 2012 period, and
higher transportation costs. After including commodity price risk
management contracts, field operating netback for natural gas for the
six months ended June 30, 2013 increased to $2.47/mcf, which compared
to $1.37/mcf in the same period in 2012.
General and Administrative
General and administrative ("G&A") expenses (after capitalized G&A and
recoveries) for the three and six months ended June 30, 2013 were $2.5
million ($1.24/boe) and $6.1 million ($1.62/boe), respectively,
compared to $3.7 million ($2.47/boe) and $6.5 million ($2.19/boe), for
the same periods in 2012. G&A expenses in the second quarter of 2013
were lower in comparison to the same period in 2012, which is
reflective of higher capitalized G&A and recoveries offset partially by
higher compensation costs. G&A expenses in the first six months of 2013
were lower in comparison to the same period in 2012, which is
reflective of higher capitalized G&A and recoveries offset partially by
higher compensation costs. On a boe basis, G&A for the three months
ended June 30, 2013 decreased by approximately 50% when compared to the
second quarter of 2012. The decrease was primarily as a result of lower
overall costs and higher average sales volumes in the second quarter of
2013.
For 2013, the Company is anticipating G&A expenses after capitalization
to be approximately $19.3 million ($2.25/boe) based on estimated 2013
average production volumes of approximately 23,000 boe/d to 24,000
boe/d.
|
General and Administrative Expenses
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s, except where noted)
|
2013
|
2012
|
2013
|
2012
|
|
Gross expenses
|
6,754
|
5,116
|
12,919
|
9,994
|
|
Capitalized
|
(1,307)
|
(1,119)
|
(2,458)
|
(2,161)
|
|
Recoveries
|
(2,948)
|
(273)
|
(4,376)
|
(1,348)
|
|
G&A expenses
|
2,499
|
3,724
|
6,085
|
6,485
|
|
G&A expenses, per unit ($/boe)
|
1.24
|
2.47
|
1.62
|
2.19
|
Interest and Financing Charges
For the three and six months ended June 30, 2013, Bellatrix recorded
$3.5 million ($1.76/boe) and $6.6 million ($1.76/boe), respectively, of
interest and financing charges related to bank debt and its debentures,
compared to $2.4 million ($1.61/boe) and $4.5 million ($1.53/boe) for
the same periods in 2012. The overall increase in interest and
financing charges between the periods was primarily due to greater
interest and accretion charges in relation to the Company's outstanding
debentures in conjunction with higher interest charges related to the
Company's long-term debt as the Company carried a higher average debt
balance in the second quarter of 2013 compared to the 2012 second
quarter. Bellatrix's total net debt at June 30, 2013 of $256.5 million
includes the $51.5 million liability portion of its $55 million
principal amount of 4.75% convertible unsecured subordinated debentures
(the "4.75% Debentures"), $194.0 million of bank debt and the net
balance of the working capital deficiency. The 4.75% Debentures have a
maturity date of April 30, 2015.
|
Interest and Financing Charges (1)
|
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s, except where noted)
|
2013
|
2012
|
2013
|
2012
|
|
Interest and financing charges
|
3,542
|
2,428
|
6,586
|
4,530
|
|
Interest and financing charges ($/boe)
|
1.76
|
1.61
|
1.76
|
1.53
|
|
(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 June 30,
|
Six months ended June 30,
|
|
($000s, except where noted)
|
2013
|
2012
|
2013
|
2012
|
|
|
|
|
|
|
|
Shareholders' equity
|
402,904
|
369,812
|
402,904
|
369,812
|
|
|
|
|
|
|
|
Long-term debt
|
194,002
|
114,275
|
194,002
|
114,275
|
|
Convertible debentures (liability component)
|
51,536
|
49,860
|
51,536
|
49,860
|
|
Working capital (excess) deficiency (2)
|
10,927
|
(7,794)
|
10,927
|
(7,794)
|
|
Total net debt (2) at period end
|
256,465
|
156,341
|
256,465
|
156,341
|
|
|
|
|
|
|
|
Debt to funds flow from operations (1) ratio (annualized) (3)
|
|
|
|
|
|
Funds flow from operations (1) (annualized)
|
146,252
|
101,464
|
148,216
|
109,120
|
|
Total net debt (2) at period end
|
256,465
|
156,341
|
256,465
|
156,341
|
Total net debt to periods funds flow from operations
ratio (annualized) (3)
|
1.8x
|
1.5x
|
1.7x
|
1.4x
|
|
|
|
|
|
|
|
Net debt (2) (excluding convertible debentures) at period end
|
204,929
|
106,481
|
204,929
|
106,481
|
Net debt to periods funds flow from operations
ratio (annualized) (3)
|
1.4x
|
1.1x
|
1.4x
|
1.0x
|
|
|
|
|
|
|
|
Debt to funds flow from operations (1) ratio (trailing) (4)
|
|
|
|
|
|
Funds flow from operations (1) (trailing)
|
130,586
|
108,747
|
130,586
|
108,747
|
|
Total net debt (2) to funds flow from operations (trailing)
|
2.0x
|
1.4x
|
2.0x
|
1.4x
|
|
|
|
|
|
|
Net debt (2) (excluding convertible debentures) to funds
flow from operations for the period
|
1.6x
|
1.0x
|
1.6x
|
1.0x
|
|
|
|
|
|
|
|
(1)
|
As detailed previously in this Management's Discussion and Analysis,
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, less
decommissioning costs incurred and changes in non-cash working capital
incurred. 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 additional GAAP measures.
The Company's calculation of total net debt includes
the liability component of convertible debentures and excludes deferred
liabilities, long-term commodity contract liabilities,
decommissioning liabilities, long-term finance lease obligation and the
deferred tax liability. Net debt and total net debt
include the net working capital deficiency (excess) before short-term
commodity contract assets and liabilities and current
finance lease obligation. Net debt also excludes the liability
component of convertible debentures. Refer to the following
reconciliation of total liabilities to total net debt and net debt.
|
|
(3)
|
Total net debt and net debt to periods funds flow from operations ratio
(annualized) is calculated based upon second
quarter funds flow from operations annualized.
|
|
(4)
|
Trailing periods funds flow from operations ratio annualized is based on
the twelve-month periods ended June 30,
2013 and June 30, 2012.
|
|
Reconciliation of Total Liabilities to Total Net Debt and Net Debt
|
|
|
|
As at June 30,
|
|
($000s)
|
|
|
2013
|
2012
|
|
Total liabilities per financial statements
|
|
|
376,744
|
251,073
|
|
|
Current liabilities included within working capital calculation
|
|
|
(68,069)
|
(36,210)
|
|
|
Commodity contract liability
|
|
|
(1,539)
|
(1,625)
|
|
|
Decommissioning liabilities
|
|
|
(43,102)
|
(44,725)
|
|
|
Finance lease obligation
|
|
|
(12,406)
|
(4,378)
|
|
|
Deferred Taxes
|
|
|
(6,090)
|
-
|
|
|
|
|
|
|
|
Working Capital
|
|
|
|
|
|
|
Current assets
|
|
|
(51,089)
|
(50,752)
|
|
|
Current liabilities
|
|
|
68,069
|
36,210
|
|
|
Current portion of finance lease
|
|
|
(1,459)
|
(501)
|
|
|
Net commodity contract asset (liability)
|
|
|
(4,594)
|
7,249
|
|
|
|
|
10,927
|
(7,794)
|
|
Total net debt
|
|
|
256,465
|
156,341
|
|
|
Convertible debentures
|
|
|
(51,536)
|
(49,860)
|
|
Net debt
|
|
|
204,929
|
106,481
|
Share-Based Compensation
Non-cash share-based compensation expense for the three months ended
June 30, 2013 was $0.2 million compared to $0.8 million in the same
period in 2012. The overall decrease in non-cash share-based
compensation expense between the periods is primarily a result of a
Deferred Share Unit Plan expense recovery of $0.2 million (2012:
expense of $0.3 million) which resulted from the revaluation of
outstanding grants to a lower share trading price at June 30, 2013 than
at March 31, 2013, and a lower expense net of forfeitures for the
Company's outstanding share options of $0.7 million (2012: $0.9
million), offset partially by lower capitalized share-based
compensation of $0.3 million (2012: $0.4 million).
For the six months ended June 30, 2013, non-cash share-based
compensation expense was $1.7 million compared to $1.6 million in the
first half of 2012. The overall increase in non-cash share-based
compensation expense between the periods is primarily a result of
greater Deferred Share Unit Plan expenses of $0.8 million (2012: $0.4
million) which reflected increases to the Company's share trading price
during the six month period, and lower capitalized share-based
compensation of $0.7 million (2012: $0.9 million), offset partially by
a lower expense net of forfeitures for the Company's outstanding share
options of $1.6 million (2012: $2.1 million).
Depletion and Depreciation
Depletion and depreciation expense for the three and six month periods
ended June 30, 2013 was $20.9 million ($10.38/boe) and $38.0 million
($10.12/boe), compared to $19.7 million ($13.07/boe) and $39.2 million
($13.26/boe), recognized in the same periods in 2012, respectively.
For both the three and six month periods, the decrease in depletion and
depreciation expense between the periods, on a per boe basis, was
primarily a result of an increase in the reserve base used for the
depletion calculation, partially offset by a higher cost base and
increased future development costs.
For the three months ended June 30, 2013 Bellatrix has included a total
of $504.7 million (2012: $348.2 million) for future development costs
in the depletion calculation and excluded from the depletion
calculation a total of $39.3 million (2012: $35.1 million) for
estimated salvage.
Depletion and Depreciation
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s, except where noted)
|
2013
|
2012
|
2013
|
2012
|
|
Depletion and Depreciation
|
20,877
|
19,710
|
37,967
|
39,172
|
|
Per unit ($/boe)
|
10.38
|
13.07
|
10.12
|
13.26
|
Impairment of Assets
In accordance with IFRS, the Company calculates an impairment test when
there are indicators of impairment. The impairment test is performed
at the asset or cash generating unit ("CGU") level. IAS 36 -
"Impairment of Assets" ("IAS 36") is a one-step process for testing and
measuring impairment of assets. Under IAS 36, the asset or CGU's
carrying value is compared to the higher of: value-in-use and fair
value less costs to sell. Value-in-use is defined as the present value
of the future cash flows expected to be derived from the asset or CGU.
As at June 30, 2013, Bellatrix reviewed and determined there were no
impairment indicators requiring an impairment test to be performed.
When performed, the impairment test is based upon the higher of
value-in-use and estimated fair market values for the Company's
properties, including but not limited to an updated external reserve
engineering report. This report incorporates a full evaluation of
reserves on an annual basis or internal reserve updates at quarterly
periods, and the latest commodity pricing deck. Estimating reserves is
very complex, requiring many judgments based on available geological,
geophysical, engineering and economic data. Changes in these judgments
could have a material impact on the estimated reserves. 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.
Income Taxes
Deferred income taxes arise from differences between the accounting and
tax basis of the Company's assets and liabilities. For the three and
six month periods ended June 30, 2013, the Company recognized a
deferred income tax expense of $5.3 million and $7.1 million compared
to $3.5 million and $6.8 million in the same periods in 2012,
respectively.
At June 30, 2013, the Company had a total deferred tax liability balance
of $6.1 million.
At June 30, 2013, Bellatrix had approximately $649 million in tax pools
available for deduction against future income as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
($000s)
|
|
Rate %
|
2013
|
2012
|
|
Intangible resource pools:
|
|
|
|
|
|
Canadian exploration expenses
|
100
|
42,600
|
47,600
|
|
|
Canadian development expenses
|
30
|
443,500
|
368,300
|
|
|
Canadian oil and gas property expenses
|
10
|
39,400
|
23,700
|
|
|
Foreign resource expenses
|
10
|
700
|
800
|
|
Attributed Canadian Royalty Income
|
(Alberta) 100
|
16,100
|
16,100
|
|
Undepreciated capital cost (1)
|
6 - 55
|
94,900
|
80,800
|
|
Non-capital losses (expire through 2027)
|
100
|
10,000
|
10,000
|
|
Financing costs
|
20 S.L.
|
2,000
|
3,300
|
|
|
|
649,200
|
550,600
|
|
(1)
|
Approximately $88 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. Funds
flow from operations is calculated as cash flow from operating
activities before decommissioning costs incurred and changes in
non-cash working capital incurred.
|
Reconciliation of Cash Flow from Operating Activities and Funds Flow
from Operations
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
2013
|
2012
|
2013
|
2012
|
|
|
|
|
|
|
|
Cash flow from operating activities
|
29,611
|
28,458
|
65,138
|
52,514
|
|
|
|
|
|
|
|
Decommissioning costs incurred
|
268
|
186
|
547
|
363
|
|
|
|
|
|
|
|
Change in non-cash working capital
|
6,684
|
(3,278)
|
8,423
|
1,683
|
|
|
|
|
|
|
|
Funds flow from operations
|
36,563
|
25,366
|
74,108
|
54,560
|
Bellatrix's cash flow from operating activities of $29.6 million ($0.27
per basic share and $0.25 per diluted share) for the three months ended
June 30, 2013 increased approximately 4% from the $28.5 million ($0.24
per basic share and $0.22 per diluted share) generated in the second
quarter of 2012. Bellatrix generated funds flow from operations of
$36.6 million ($0.34 per basic share and $0.31 per diluted share) for
the three months ended June 30, 2013, an increase of 44% from $25.4
million ($0.24 per basic share and $0.22 per diluted share) for the
2012 second quarter.
Bellatrix's cash flow from operating activities of $65.1 million ($0.60
per basic share and $0.55 per diluted share) for the six months ended
June 30, 2013 increased approximately 24% from the $52.5 million ($0.49
per basic share and $0.45 per diluted share) generated in the first
half of 2012. Bellatrix generated funds flow from operations of $74.1
million ($0.69 per basic share and $0.63 per diluted share) for the six
months ended June 30, 2013, an increase of 36% from $54.6 million
($0.51 per basic share and $0.47 per diluted share) for the first six
months of 2012.
The increase in funds flow from operations between the three months
ended June 30, 2013 and the same period in 2012 was principally due to
higher overall funds from operating netbacks and reduced general and
administrative expenses, offset partially by increased financing
expenses and a net loss on realized commodity contracts in the 2013
three month period compared a gain realized in the same period in
2012. The increase in funds flow from operations between the six
months ended June 30, 2013 and the six months ended June 30, 2012 was
principally due to higher overall funds from operating netbacks, a
higher net realized gain on commodity contracts, and reduced general
and administrative expenses, offset partially by increased financing
expenses in the 2013 six month period compared to the same period in
2012.
Bellatrix's funds flow from operating activities of $36.6 million ($0.34
per basic share and $0.31 per diluted share) for the three months ended
June 30, 2013 decreased approximately 2% from the $37.5 million ($0.35
per basic share and $0.32 per diluted share) generated in the first
quarter of 2013 due to the Company realizing $6.5 million in cash
proceeds in Q1 2013 by resetting the fixed prices on certain natural
gas commodity price risk management contracts.
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 current
fair market value of the contract over its entire term and are included
in the calculation of net profit.
As previously noted in this MD&A, net profit before certain non-cash
items is a non-GAAP measure. A reconciliation between this measure and
net loss per the Consolidated Statement of Comprehensive Income is
provided below.
For the three and six months ended June 30, 2013, net profit before
certain non-cash items, net of associated deferred tax impacts, was
$11.0 million and $24.6 million, compared to $3.1 million and $9.2
million in the three and six months ended June 30, 2012, respectively.
|
Reconciliation of Net Profit to Net Profit Before Certain Non-Cash Items
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
2013
|
2012
|
2013
|
2012
|
|
|
|
|
|
|
|
Net profit per financial statements
|
15,466
|
9,963
|
20,027
|
19,135
|
|
|
|
|
|
|
|
Items subject to reversal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (gain) loss on commodity contracts
|
(5,992)
|
(11,388)
|
6,307
|
(16,256)
|
|
|
|
|
|
|
|
|
|
Loss (gain) on property dispositions and swaps
|
-
|
2,269
|
(250)
|
3,028
|
|
|
|
|
|
|
|
|
|
Deferred tax impact of above items
|
1,498
|
2,280
|
(1,514)
|
3,307
|
|
|
|
|
|
|
|
Net profit before certain non-cash items
|
10,972
|
3,124
|
24,570
|
9,214
|
A net profit of $15.5 million ($0.14 per basic share and $0.13 per
diluted share) was recognized for the three months ended June 30, 2013,
compared to a net profit of $10.0 million ($0.09 per basic share and
$0.09 per diluted share) in the second quarter of 2012. The higher net
profit recorded in the three months ended June 30, 2013 compared to the
2012 second quarter was primarily a consequence of higher cash flows as
noted above, lower stock-based compensation expenses, and a loss on
property disposition realized in the 2012 period, partially offset by a
lower unrealized gain on commodity contracts, increased depletion and
depreciation expense, higher future income tax expense, and increased
finance expense.
A net profit of $20.0 million ($0.19 per basic share and $0.18 per
diluted share) was recognized for the six months ended June 30, 2013,
compared to a net profit of $19.1 million ($0.18 per basic share and
$0.17 per diluted share) in the first half of 2012. The higher net
profit recorded in the six months ended June 30, 2013 compared to the
same period in 2012 was primarily a consequence of higher cash flows as
noted above, lower depletion and depreciation expense, and a total gain
on property dispositions in the 2013 period compared to a loss in the
2012 period, offset partially by a total loss on unrealized commodity
contracts in the 2013 period compared to a gain in the 2012 period,
slightly higher stock-based compensation expense, and higher future
income tax expense.
Cash Flow from Operating Activities, Funds Flow from Operations and Net
Profit
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s, except per share amounts)
|
2013
|
2012
|
2013
|
2012
|
|
Cash flow from operating activities
|
29,611
|
28,458
|
65,138
|
52,514
|
|
|
Basic ($/share)
|
0.27
|
0.24
|
0.60
|
0.49
|
|
|
Diluted ($/share)
|
0.25
|
0.22
|
0.55
|
0.45
|
|
Funds flow from operations
|
36,563
|
25,366
|
74,108
|
54,560
|
|
|
Basic ($/share)
|
0.34
|
0.24
|
0.69
|
0.51
|
|
|
Diluted ($/share)
|
0.31
|
0.22
|
0.63
|
0.47
|
|
Net profit
|
15,466
|
9,963
|
20,027
|
19,135
|
|
|
Basic ($/share)
|
0.14
|
0.09
|
0.19
|
0.18
|
|
|
Diluted ($/share)
|
0.13
|
0.09
|
0.18
|
0.17
|
Capital Expenditures
Bellatrix invested $46.7 million and $138.3 million in capital
expenditures during the three and six months ended June 30, 2013,
compared to $18.3 million and $92.5 million in the three and six months
ended June 30, 2012, respectively.
|
Capital Expenditures
|
|
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
2013
|
2012
|
2013
|
2012
|
|
Lease acquisitions and retention
|
1,235
|
205
|
6,841
|
3,194
|
|
Geological and geophysical
|
35
|
83
|
58
|
42
|
|
Drilling and completion costs
|
30,597
|
7,967
|
99,924
|
70,137
|
|
Facilities and equipment
|
14,305
|
9,969
|
30,809
|
18,912
|
|
|
|
Exploration and development (1)
|
46,172
|
18,224
|
137,632
|
92,285
|
|
Corporate (2)
|
543
|
75
|
682
|
145
|
|
Property acquisitions
|
(16)
|
30
|
(6)
|
30
|
|
|
|
Total capital expenditures - cash
|
46,699
|
18,329
|
138,308
|
92,460
|
|
Property dispositions - cash
|
-
|
(2,045)
|
5
|
(2,345)
|
|
|
|
Total net capital expenditures - cash
|
46,699
|
16,284
|
138,313
|
90,115
|
|
Other - non-cash (3)
|
(1,308)
|
298
|
(521)
|
114
|
|
Total net capital expenditures
|
45,391
|
16,582
|
137,792
|
90,259
|
|
(1)
|
Excludes capitalized costs related to decommissioning liabilities
expenditures incurred during
the period.
|
|
(2)
|
Corporate includes office leasehold improvements, furniture, fixtures
and equipment.
|
|
(3)
|
Other includes non-cash adjustments for the current period's
decommissioning liabilities and
share based compensation.
|
In the first half of 2013, Bellatrix posted a 100% success rate drilling
and/or participating in 26 gross (22.08 net) wells, resulting in 23
gross (19.98 net) Cardium oil wells, and 3 gross (2.10 net)
Notikewin/Falher liquids-rich gas wells. During the second quarter of
2013, Bellatrix drilled or participated in 5 gross (5 net) Cardium oil
wells.
By comparison, Bellatrix drilled or participated in 15 gross (12.44 net)
wells during the first half of 2012, which included 11 gross (8.94 net)
Cardium light oil horizontal wells, 1 gross (1 net) Duvernay natural
gas horizontal well, 1 gross (0.5 net) Notikewin natural gas horizontal
well, and 2 gross (2 net) Cardium natural gas horizontal well.
In April 2013, the Company commissioned 26.5 km of 12 inch pipeline and
7.76 km of dual 10 inch pipelines designed to send up to 120 mmcf/d
from the Ferrier area to the third party operated Minnehik Buck Lake
Gas Plant. In addition, on April 20, 2013 Bellatrix completed doubling
the capacity of the 100% working interest 09-03 Compression Facility to
50 mmcf/day. The Company also initiated expansion of the 2-10 Brazeau
Battery and Gas Compression Facility from 15mmcf/d to 40 mmcf/d of
capacity. The expansion was commissioned on August 1, 2013.
The $46.7 million capital program for the three months ended June 30,
2013 was financed from funds flow from operations and bank debt.
Based on the current economic conditions and Bellatrix's operating
forecast for 2013, the Company budgets a capital program of $235
million funded from the Company's cash flows and to the extent
necessary, bank indebtedness. The 2013 capital budget is expected to
be directed primarily towards horizontal drilling and completions
activities in the Cardium and Notikewin areas.
Decommissioning Liabilities
At June 30, 2013, Bellatrix has recorded decommissioning liabilities of
$43.1 million, compared to $43.9 million at December 31, 2012, for
future abandonment and reclamation of the Company's properties. For
the six months ended June 30, 2013, decommissioning liabilities
decreased by a net $0.8 million as a result of $0.9 million incurred on
property acquisitions and development activities and $0.4 million as a
result of charges for the unwinding of the discount rates used for
assessing liability fair values, offset by a $1.5 million decrease for
changes in estimates, and a $0.6 million decrease for liabilities
settled during the period. The $1.5 million decrease as a result of
changes in estimates was primarily due to a discount rate variation at
June 30, 2013 compared to December 31, 2012, in addition to other
abandonment liability revisions.
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. Market conditions have resulted in Bellatrix
experiencing recent upward trends in crude oil pricing and natural gas
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 seven primary
purchasers under standard industry sale and payment terms. The most
significant 60 day exposure to a single counterparty is currently
approximately $14 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 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 $256.5 million at June 30, 2013 have increased
by $66.9 million from $189.6 million at December 31, 2012, primarily as
a consequence of an increase in a working capital deficiency and bank
debt as the Company executed the first half of its 2013 capital
program. Total net debt includes the liability component of the 4.75%
Debentures and excludes unrealized commodity contract assets and
liabilities, deferred taxes, finance lease obligations, deferred
liabilities and decommissioning liabilities.
Funds flow from operations represents 54% of the funding requirements
for Bellatrix's capital expenditures for the six months ended June 30,
2013.
As of June 30, 2013, the Company's credit facilities consisted of a $45
million demand operating facility provided by a Canadian bank and a
$210 million extendible revolving term credit facility provided by two
Canadian banks and a Canadian financial institution. Amounts borrowed
under the credit facility bear interest at a floating rate based on the
applicable Canadian prime rate, U.S. base rate, the LIBOR margin rate,
or the bankers' acceptance stamping fee, plus between 1.00% and 3.50%,
depending on the type of borrowing and the Company's debt to cash flow
ratio. The credit facilities are secured by a $400 million 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. A standby fee is charged
of between 0.50% and 0.875% on the undrawn portion of the credit
facilities, depending upon the Company's debt to cash flow ratio.
Effective April 30, 2013, the banking syndicate approved to increase the
borrowing base from $220 million to $255 million through to November
30, 2013. The revolving period of the credit facility was extended
from June 25, 2013 to June 24, 2014.
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 November 30, 2013.
As at June 30, 2013, approximately $61.0 million or 24% 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 2013 capital program
of $235 million by utilizing cash flow, proceeds from asset
dispositions, and to the extent necessary, bank indebtedness.
As at July 31, 2013, Bellatrix had outstanding a total of 9,163,228
options exercisable at an average exercise price of $3.44 per share,
$55.0 million principal amount of 4.75% Debentures convertible into
common shares (at a conversion price of $5.60 per share) and
107,929,661 common shares.
Commitments
As at June 30, 2013, Bellatrix committed to drill 2 gross (1.17 net)
wells pursuant to farm-in agreements. Bellatrix expects to satisfy
these drilling commitments at an estimated cost of approximately $3.8
million.
In addition, Bellatrix entered into two joint operation 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 Operation Agreement
|
Feb. 1, 2011
|
Aug. 4, 2011
|
Dec. 14, 2012
|
|
Agreement 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 June 30, 2013
|
1
|
20
|
10
|
|
Remaining estimated total cost ($000s)
|
$3.5
|
$70.0
|
$35.0
|
Bellatrix will also have drilling commitments related to the recently
announced Grafton Joint Venture. Some of these drilling commitments are
expected to be satisfied in conjunction with drilling commitments
relating to the Joint Operation Agreements noted above. Bellatrix's
net capital commitment to the $122 million Grafton Joint Venture is
$22.0 million.
In addition, Bellatrix will also have drilling commitments associated
with its recently announced pending Baptiste joint venture agreement in
August, 2013. Closing of this agreement is expected to occur on or
before September 16, 2013. Refer to the details discussed earlier
herein.
The Company had the following liabilities as at June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities ($000s)
|
|
Total
|
|
< 1 Year
|
|
1-3 Years
|
|
4-5 Years
|
|
More than
5 years
|
|
Accounts payable and accrued liabilities (1)
|
$
|
62,016
|
$
|
62,016
|
$
|
-
|
$
|
-
|
$
|
-
|
|
Long-term debt - principal (2)
|
|
194,002
|
|
-
|
|
194,002
|
|
-
|
|
-
|
|
Convertible debentures - principal
|
|
55,000
|
|
-
|
|
55,000
|
|
-
|
|
-
|
|
Convertible debentures - interest (3)
|
|
4,789
|
|
2,613
|
|
2,176
|
|
-
|
|
-
|
|
Commodity contract liability
|
|
6,133
|
|
4,594
|
|
1,539
|
|
-
|
|
-
|
|
Decommissioning liabilities (4)
|
|
43,102
|
|
-
|
|
7,614
|
|
6,079
|
|
29,409
|
|
Finance lease obligation
|
|
13,865
|
|
1,459
|
|
3,142
|
|
2,972
|
|
6,292
|
|
Total
|
$
|
378,907
|
$
|
70,682
|
$
|
263,473
|
$
|
9,051
|
$
|
35,701
|
|
(1)
|
Includes $0.4 million of accrued coupon interest payable in relation to
the 4.75% Debentures and $0.4
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)
|
The 4.75% Debentures outstanding at June 30, 2013 bear interest at a
coupon rate of 4.75%, which
currently requires total annual interest payments of $2.6 million.
|
|
(4)
|
Amounts represent the inflated, discounted future abandonment and
reclamation expenditures anticipated
to be incurred over the life of the Company's properties (between 2014
and 2053).
|
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 June 30,
2013.
Business Prospects and 2013 Year Outlook
Bellatrix continues to develop its core assets and conduct exploration
programs utilizing its large inventory of geological prospects. As at
June 30, 2013, Bellatrix has approximately 201,891 net undeveloped
acres and approximately 1,700 net remaining locations ($8.22 billion in
future drilling capital requirements at current average costs) on the
Company's two core propitious resource plays to fuel Bellatrix's future
growth.
In the short term, as a result of disruption in field production in
early July due to the impact of rolling power blackouts and the delay
in commencing the Q3 drilling program due to the wet field conditions,
the Company is anticipating Q3 2013 production levels to remain
consistent with Q2 2013 production levels. However, Bellatrix continues
to expect it will meet its previously announced 2013 calendar year
guidance to provide average daily production of 23,000 to 24,000 boe/d
and 2013 exit rate of 30,000 to 31,000 boe/d. The Company has 5
drilling rigs working in West Central Alberta currently and will
continue to ramp up activity into Q4 as the existing joint ventures
come into play.
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
Management Discussion and Analysis for the year ended December 31,
2012, and the Company's Annual Information Form for the year ended
December 31, 2012, and the Company's Annual Report on Form 40-F for the
year ended December 31, 2012, which has been filed with the United
States Securities and Exchange Commission and may be accessed at www.sec.gov.
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, 2012 continue to be critical
in determining Bellatrix's unaudited financial results as of June 30,
2013. There were no changes in accounting policies during the six
months ended June 30, 2013, except as below:
On January 1, 2013, the Company adopted new standards with respect to
consolidations (IFRS 10), joint arrangements (IFRS 11), disclosure of
interests in other entities (IFRS 12), fair value measurements (IFRS
13), and amendments to financial instrument disclosures (IFRS 7). The
adoption of these standards had no impact on the amounts recorded in
the consolidated financial statements as at January 1, 2013 or on the
comparative periods.
A summary of future accounting pronouncements is found in the Company's
Management Discussion and Analysis for the year ended December 31,
2012, available at www.sedar.com or as part of the Company's annual report on Form 40-F for the year
ended December 31, 2012, which may be found at www.sec.gov.
IFRS 9 - "Financial Instruments", which is the result of the first phase
of the IASB's project to replace IAS 39, "Financial Instruments:
Recognition and Measurement". The new standard replaces the current
multiple classification and measurement models for financial assets and
liabilities with a single model that has only two classification
categories: amortized cost and fair value. This IASB has tentatively
decided to defer the effective date of IFRS 9, which previously had
been effective for annual periods beginning on or after January 1,
2015. The extent of the impact of the adoption of IFRS 9 has not yet
been determined.
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 April 1, 2013 and ended on June 30, 2013 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 second quarter
of 2013 and average production volumes of 22,102 boe/d during that
period, as well as the same level of debt outstanding as at June 30,
2013. Diluted weighted average shares are based upon the second
quarter of 2013. 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
|
1,700
|
0.01
|
|
Change of $0.10/ mcf
|
3,200
|
0.03
|
|
Change of US $0.01 CDN/ US exchange rate
|
1,200
|
0.01
|
|
Change in prime of 1%
|
1,900
|
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 additional 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 2013, 2012, and 2011.
|
|
|
|
|
|
|
|
|
|
|
|
2013 - Quarter ended (unaudited)
($000s, except per share amounts)
|
March 31
|
June 30
|
|
|
|
Revenues before royalties and risk management
|
65,543
|
74,564
|
|
|
|
Cash flow from operating activities
|
35,527
|
29,611
|
|
|
|
Cash flow from operating activities per share
|
|
|
|
|
|
|
Basic
|
$0.33
|
$0.27
|
|
|
|
|
Diluted
|
$0.30
|
$0.25
|
|
|
|
Funds flow from operations (1)
|
37,545
|
36,563
|
|
|
|
Funds flow from operations per share (1)
|
|
|
|
|
|
|
Basic
|
$0.35
|
$0.34
|
|
|
|
|
Diluted
|
$0.32
|
$0.31
|
|
|
|
Net profit
|
4,561
|
15,466
|
|
|
|
Net profit per share
|
|
|
|
|
|
|
Basic
|
$0.04
|
$0.14
|
|
|
|
|
Diluted
|
$0.04
|
$0.13
|
|
|
|
Net capital expenditures (cash)
|
91,614
|
46,700
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
2011 - Quarter ended (unaudited)
($000s, except per share amounts)
|
March 31
|
June 30
|
Sept. 30
|
Dec. 31
|
|
Revenues before royalties and risk management
|
40,535
|
53,444
|
49,145
|
59,194
|
|
Cash flow from operating activities
|
15,718
|
23,825
|
28,023
|
30,626
|
|
Cash flow from operating activities per share
|
|
|
|
|
|
|
Basic
|
$0.16
|
$0.23
|
$0.26
|
$0.28
|
|
|
Diluted
|
$0.15
|
$0.22
|
$0.24
|
$0.26
|
|
Funds flow from operations (1)
|
17,027
|
23,126
|
23,964
|
30,120
|
|
Funds flow from operations per share (1)
|
|
|
|
|
|
|
Basic
|
$0.17
|
$0.22
|
$0.22
|
$0.28
|
|
|
Diluted
|
$0.16
|
$0.21
|
$0.21
|
$0.26
|
|
Net profit (loss)
|
(5,487)
|
12,315
|
820
|
(13,597)
|
|
Net profit (loss) per share
|
|
|
|
|
|
|
Basic
|
($0.06)
|
$0.12
|
$0.01
|
($0.13)
|
|
|
Diluted
|
($0.06)
|
$0.11
|
$0.01
|
($0.13)
|
|
Net capital expenditures (cash)
|
59,247
|
28,784
|
40,087
|
47,240
|
|
(1) Refer to "Additional 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
As at June 30, 2013 and December 31, 2012
|
|
|
|
|
|
|
(unaudited, expressed in Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000s)
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Accounts receivable (note 12)
|
|
$
|
44,019
|
$
|
40,792
|
|
|
Deposits and prepaid expenses
|
|
|
7,070
|
|
4,136
|
|
|
Commodity contract asset (note 12)
|
|
|
-
|
|
7,519
|
|
|
|
|
|
51,089
|
|
52,447
|
|
Exploration and evaluation assets (note 3)
|
|
|
40,452
|
|
38,177
|
|
Property, plant and equipment (note 4)
|
|
|
688,107
|
|
589,759
|
|
Deferred taxes (note 8)
|
|
|
-
|
|
1,038
|
|
Total assets
|
|
$
|
779,648
|
$
|
681,421
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
62,016
|
$
|
50,771
|
|
|
Current portion of finance lease obligation
|
|
|
1,459
|
|
1,425
|
|
|
Commodity contract liability (note 12)
|
|
|
4,594
|
|
1,131
|
|
|
|
|
|
68,069
|
|
53,327
|
|
|
|
|
|
|
|
|
|
Commodity contract liability (note 12)
|
|
|
1,539
|
|
6,214
|
|
Long-term debt (note 5)
|
|
|
194,002
|
|
133,047
|
|
Convertible debentures
|
|
|
51,536
|
|
50,687
|
|
Finance lease obligation
|
|
|
12,406
|
|
13,131
|
|
Decommissioning liabilities
|
|
|
43,102
|
|
43,909
|
|
Deferred taxes (note 8)
|
|
|
6,090
|
|
-
|
|
Total liabilities
|
|
|
376,744
|
|
300,315
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Shareholders' capital
|
|
|
371,850
|
|
371,576
|
|
|
Equity component of convertible debentures
|
|
|
4,378
|
|
4,378
|
|
|
Contributed surplus
|
|
|
38,781
|
|
37,284
|
|
|
Deficit
|
|
|
(12,105)
|
|
(32,132)
|
|
Total shareholders' equity
|
|
|
402,904
|
|
381,106
|
|
Total liabilities and shareholders' equity
|
|
$
|
779,648
|
$
|
681,421
|
|
|
|
|
|
|
|
|
COMMITMENTS (note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUBSEQUENT EVENT (note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the condensed consolidated financial
statements.
|
|
BELLATRIX EXPLORATION LTD.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
For the three months and six months ended June 30,
|
|
(unaudited, expressed in Canadian dollars)
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
2013
|
2012
|
2013
|
2012
|
|
|
|
|
|
|
|
REVENUES
|
|
|
|
|
|
|
Petroleum and natural gas sales
|
$ 73,977
|
$ 50,280
|
$ 138,885
|
$ 107,959
|
|
|
Other income
|
587
|
434
|
1,222
|
946
|
|
|
Royalties
|
(12,561)
|
(11,426)
|
(24,346)
|
(18,039)
|
|
|
Total revenues
|
62,003
|
39,288
|
115,761
|
90,866
|
|
|
|
|
|
|
|
|
|
Realized gain (loss) on commodity contracts
|
(785)
|
5,926
|
5,717
|
2,981
|
|
|
Unrealized gain (loss) on commodity contracts
|
5,992
|
11,388
|
(6,307)
|
16,256
|
|
|
|
67,210
|
56,602
|
115,171
|
110,103
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
Production
|
17,383
|
13,272
|
32,441
|
26,578
|
|
|
Transportation
|
1,662
|
820
|
3,107
|
2,478
|
|
|
General and administrative
|
2,499
|
3,724
|
6,085
|
6,485
|
|
|
Share-based compensation (note 6)
|
241
|
767
|
1,691
|
1,560
|
|
|
Depletion and depreciation (note 4)
|
20,877
|
19,710
|
37,967
|
39,172
|
|
|
Loss (gain) on property dispositions and swaps
|
-
|
2,269
|
(250)
|
3,028
|
|
|
|
42,662
|
40,562
|
81,041
|
79,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET PROFIT BEFORE FINANCE AND TAXES
|
24,548
|
16,040
|
34,130
|
30,802
|
|
|
|
|
|
|
|
|
Finance expenses (note 9)
|
3,758
|
2,591
|
6,975
|
4,882
|
|
|
|
|
|
|
|
NET PROFIT BEFORE TAXES
|
20,790
|
13,449
|
27,155
|
25,920
|
|
|
|
|
|
|
|
|
TAXES
|
|
|
|
|
|
|
Deferred tax expense (note 8)
|
5,324
|
3,486
|
7,128
|
6,785
|
|
|
|
|
|
|
|
|
NET PROFIT AND COMPREHENSIVE INCOME
|
15,466
|
9,963
|
20,027
|
19,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit per share (note 10)
|
|
|
|
|
|
|
Basic
|
$0.14
|
$0.09
|
$0.19
|
$0.18
|
|
|
Diluted
|
$0.13
|
$0.09
|
$0.18
|
$0.17
|
|
|
|
See accompanying notes to the condensed consolidated financial
statements.
|
|
BELLATRIX EXPLORATION LTD.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
|
|
For the six months ended June 30,
|
|
(unaudited, expressed in Canadian dollars)
|
|
|
|
($000s)
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' CAPITAL
|
|
|
|
|
|
|
|
Common shares
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
|
$
|
371,576
|
$
|
370,048
|
|
|
Issued on exercise of share options
|
|
|
|
191
|
|
236
|
|
|
Contributed surplus transferred on exercised options
|
|
|
|
83
|
|
71
|
|
|
Balance, end of period
|
|
|
|
371,850
|
|
370,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY COMPONENT OF CONVERTIBLE DEBENTURES
|
|
|
|
|
|
|
|
|
Balance, beginning and end of period
|
|
|
|
4,378
|
|
4,378
|
|
|
|
|
|
|
|
|
|
|
CONTRIBUTED SURPLUS (note 6)
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
|
|
37,284
|
|
33,882
|
|
|
Share-based compensation expense
|
|
|
|
1,726
|
|
2,153
|
|
|
Adjustment of share-based compensation expense
|
|
|
|
|
|
|
|
|
for forfeitures of unvested share options
|
|
|
|
(146)
|
|
(117)
|
|
|
Transfer to share capital for exercised options
|
|
|
|
(83)
|
|
(71)
|
|
|
Balance, end of period
|
|
|
|
38,781
|
|
35,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFICIT
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
|
|
(32,132)
|
|
(59,903)
|
|
|
Net profit
|
|
|
|
20,027
|
|
19,135
|
|
|
Balance, end of period
|
|
|
|
(12,105)
|
|
(40,768)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL SHAREHOLDERS' EQUITY
|
|
|
$
|
402,904
|
$
|
369,812
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the condensed consolidated financial
statements.
|
|
BELLATRIX EXPLORATION LTD.
|
|
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
For the three and six months ended June 30,
|
|
(unaudited, expressed in Canadian dollars)
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net profit
|
$
|
15,466
|
$
|
9,963
|
$
|
20,027
|
$
|
19,135
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
Depletion and depreciation
|
|
20,877
|
|
19,710
|
|
37,967
|
|
39,172
|
|
|
Finance expenses (note 9)
|
|
647
|
|
559
|
|
1,238
|
|
1,136
|
|
|
Share-based compensation (note 6)
|
|
241
|
|
767
|
|
1,691
|
|
1,560
|
|
|
Unrealized (gain) loss on commodity contracts
|
|
(5,992)
|
|
(11,388)
|
|
6,307
|
|
(16,256)
|
|
|
Loss (gain) on property dispositions and swaps
|
|
-
|
|
2,269
|
|
(250)
|
|
3,028
|
|
|
Deferred tax expense (note 8)
|
|
5,324
|
|
3,486
|
|
7,128
|
|
6,785
|
|
|
Funds flow from operations
|
|
36,563
|
|
25,366
|
|
74,108
|
|
54,560
|
|
|
Decommissioning costs incurred
|
|
(268)
|
|
(186)
|
|
(547)
|
|
(363)
|
|
|
Change in non-cash working capital (note 7)
|
|
(6,684)
|
|
3,278
|
|
(8,423)
|
|
(1,683)
|
|
|
|
|
29,611
|
|
28,458
|
|
65,138
|
|
52,514
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM (USED IN) FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Issuance of share capital
|
|
-
|
|
69
|
|
191
|
|
236
|
|
|
Advances from loans and borrowings
|
|
301,000
|
|
128,386
|
|
472,030
|
|
264,775
|
|
|
Repayment of loans and borrowings
|
|
(257,825)
|
|
(110,872)
|
|
(411,075)
|
|
(207,201)
|
|
|
Obligations under finance lease
|
|
(353)
|
|
(121)
|
|
(692)
|
|
(238)
|
|
|
Change in non-cash working capital (note 7)
|
|
(479)
|
|
(1,467)
|
|
237
|
|
(879)
|
|
|
|
|
42,343
|
|
15,995
|
|
60,691
|
|
56,693
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM (USED IN) INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Expenditure on exploration and evaluation assets
|
|
(1,269)
|
|
(288)
|
|
(6,961)
|
|
(3,236)
|
|
|
Additions to property, plant and equipment
|
|
(45,430)
|
|
(18,041)
|
|
(131,347)
|
|
(89,224)
|
|
|
Proceeds on sale of property, plant and equipment
|
|
(1)
|
|
2,045
|
|
(6)
|
|
2,345
|
|
|
Change in non-cash working capital (note 7)
|
|
(25,254)
|
|
(28,169)
|
|
12,485
|
|
(19,092)
|
|
|
|
|
(71,954)
|
|
(44,453)
|
|
(125,829)
|
|
(109,207)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
$
|
2,895
|
$
|
2,383
|
$
|
4,212
|
$
|
3,176
|
|
|
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 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 August 7,
2013. The Company prepared these interim financial statements in
accordance with IAS 34 Interim Financial Reporting under IFRS. 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 2012 audited annual financial
statements, available at www.sedar.com. The Company has prepared these interim financial statements using the
same significant accounting policies, critical judgments, accounting
estimates and methods of computation applied in the 2012 audited annual
financial statements, except as noted below.
b. Change in accounting policies
On January 1, 2013, the Company adopted new standards with respect to
consolidations (IFRS 10), joint arrangements (IFRS 11), disclosure of
interests in other entities (IFRS 12), fair value measurements (IFRS
13), and amendments to financial instrument disclosures (IFRS 7). The
adoption of these standards had no impact on the amounts recorded in
the consolidated financial statements as at January 1, 2013 or on the
comparative periods.
c. Basis of measurement
The condensed consolidated 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 condensed consolidated
financial statements have, in management's opinion, been properly
prepared using careful judgment and reasonable limits of materiality.
d. Future accounting pronouncements
IFRS 9 - "Financial Instruments", which is the result of the first phase
of the IASB's project to replace IAS 39, "Financial Instruments:
Recognition and Measurement". The new standard replaces the current
multiple classification and measurement models for financial assets and
liabilities with a single model that has only two classification
categories: amortized cost and fair value. This IASB has tentatively
decided to defer the effective date of IFRS 9, which previously had
been effective for annual periods beginning on or after January 1,
2015. The extent of the impact of the adoption of IFRS 9 has not yet
been determined.
3. EXPLORATION AND EVALUATION ASSETS
|
($000s)
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
Balance, December 31, 2011
|
$
|
33,089
|
|
|
Additions
|
|
17,118
|
|
|
Transfer to oil and natural gas properties
|
|
(10,301)
|
|
|
Disposals (1)
|
|
(1,729)
|
|
|
Balance, December 31, 2012
|
|
38,177
|
|
|
Additions
|
|
7,148
|
|
|
Transfer to oil and natural gas properties
|
|
(4,873)
|
|
|
Balance, June 30, 2013
|
$
|
40,452
|
|
|
|
|
|
|
(1) Disposals include swaps.
|
4. PROPERTY, PLANT AND EQUIPMENT
|
($000s)
|
|
|
|
|
|
Oil and
natural gas
properties
|
Office
furniture and
equipment
|
Total
|
|
Cost
|
|
|
|
|
|
|
|
Balance, December 31, 2011
|
$
|
657,315
|
$
|
2,503
|
$
|
659,818
|
|
Additions
|
|
194,442
|
|
299
|
|
194,741
|
|
Transfer from exploration and evaluation assets
|
|
10,301
|
|
-
|
|
10,301
|
|
Disposals (1)
|
|
(10,950)
|
|
-
|
|
(10,950)
|
|
Balance, December 31, 2012
|
|
851,108
|
|
2,802
|
|
853,910
|
|
Additions
|
|
130,760
|
|
682
|
|
131,442
|
|
Transfer from exploration and evaluation assets
|
|
4,873
|
|
-
|
|
4,873
|
|
Balance, June 30, 2013
|
$
|
986,741
|
$
|
3,484
|
$
|
990,225
|
|
|
|
|
|
|
|
|
|
Accumulated Depletion, Depreciation and Impairment losses
|
|
Balance, December 31, 2011
|
$
|
174,250
|
$
|
1,267
|
$
|
175,517
|
|
Charge for time period
|
|
75,466
|
|
254
|
|
75,720
|
|
Impairment loss
|
|
14,760
|
|
60
|
|
14,820
|
|
Disposals (1)
|
|
(1,906)
|
|
-
|
|
(1,906)
|
|
Balance, December 31, 2012
|
$
|
262,570
|
$
|
1,581
|
$
|
264,151
|
|
Charge for time period
|
|
37,819
|
|
148
|
|
37,967
|
|
Balance, June 30, 2013
|
$
|
300,389
|
$
|
1,729
|
$
|
302,118
|
|
(1) Disposals include swaps.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts
|
|
|
|
|
|
|
|
At December 31, 2012
|
$
|
588,538
|
$
|
1,221
|
$
|
589,759
|
|
At June 30, 2013
|
$
|
686,352
|
$
|
1,755
|
$
|
688,107
|
Bellatrix has included $504.7 million (2012: $348.2 million) for future
development costs and excluded $39.3 million (2012: $35.1 million) for
estimated salvage from the depletion calculation for the three months
ended June 30, 2013.
For the six month period ended June 30, 2013, the Company capitalized
$2.5 million (2012: $2.2 million) of general and administrative
expenses, and $0.7 million (2012: $0.9 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 $400 million 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
|
($000s)
|
June 30, 2013
|
December 31, 2012
|
|
Operating facility
|
$
|
12,752
|
$
|
4,047
|
|
Revolving term facility
|
|
181,250
|
|
129,000
|
|
Balance, end of period
|
$
|
194,002
|
$
|
133,047
|
As of June 30, 2013, the Company's credit facilities consist of a $45
million demand operating facility provided by a Canadian bank and a
$210 million extendible revolving term credit facility provided by two
Canadian banks and a Canadian financial institution.
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 November 30, 2013.
As at June 30, 2013, 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 June 30, 2013, the Company had approximately $61.0 million, or 24%
of unused and available bank credit under its credit facilities.
Bellatrix was fully compliant with all of its operating debt covenants.
6. SHARE-BASED COMPENSATION PLANS
a. Share Option Plan
During the six months ended June 30, 2013, Bellatrix granted nil (2012:
1,718,000) share options, and recorded share-based compensation of $1.6
million (2012: $2.1 million) related to its outstanding share options,
net of forfeitures of $0.1 million (2012: $0.1 million), of which $0.7
million (2012: $0.9 million) was capitalized to property, plant and
equipment. In addition, $0.8 million (2012: $0.4 million) (note 6 b.)
was expensed in relation to the Director's Deferred Share Unit Plan,
resulting in total net share-based compensation of $1.7 million
recognized as an expense for the first half of 2013 (2012: $1.6
million).
The fair values of all share options granted are estimated on the date
of grant using the Black-Scholes option-pricing model. No options were
granted during the three and six month periods ended June 30, 2013.
The weighted average trading price of the Company's common shares on the
TSX for the three and six months ended June 30, 2013 was $5.91 (2012:
$3.86), and $5.70 (2012: $4.57), respectively.
The following tables summarize information regarding Bellatrix's Share
Option Plan:
Share Options Continuity
|
|
Weighted Average
Exercise Price
|
|
|
|
Number
|
|
Balance, December 31, 2012
|
$
|
3.46
|
|
|
|
9,420,451
|
|
Granted
|
$
|
-
|
|
|
|
-
|
|
Exercised
|
$
|
3.77
|
|
|
|
(50,555)
|
|
Forfeited and cancelled
|
$
|
4.28
|
|
|
|
(196,336)
|
|
Balance, June 30, 2013
|
$
|
3.44
|
|
|
|
9,173,560
|
As of June 30, 2013, a total of 10,791,933 share options were reserved,
leaving an additional 1,618,373 available for future grants.
|
Share Options Outstanding, June 30, 2013
|
|
|
Outstanding
|
|
Exercisable
|
|
|
At
|
Weighted
Average
|
Weighted
Average
Remaining
|
At
|
|
|
Exercise Price
|
June 30, 2013
|
Exercise Price
|
Contractual Life
|
June 30, 2013
|
Exercise Price
|
|
$ 0.65 - $ 1.45
|
680,726
|
$ 1.02
|
0.8
|
680,726
|
$ 1.02
|
|
$ 1.46 - $ 1.99
|
1,177,449
|
$ 1.65
|
0.7
|
1,177,449
|
$ 1.65
|
|
$ 2.00 - $ 3.36
|
1,403,719
|
$ 2.41
|
1.8
|
973,719
|
$ 2.09
|
|
$ 3.37 - $ 3.84
|
1,540,000
|
$ 3.42
|
3.8
|
547,658
|
$ 3.44
|
|
$ 3.85 - $ 4.72
|
2,114,334
|
$ 3.94
|
2.2
|
1,731,000
|
$ 3.91
|
|
$ 4.73 - $ 5.50
|
2,257,332
|
$ 5.28
|
3.0
|
1,390,644
|
$ 5.28
|
|
$ 0.65 - $ 5.50
|
9,173,560
|
$ 3.44
|
2.3
|
6,501,196
|
$ 3.18
|
b. Deferred Share Unit Plan
During the six months ended June 30, 2013, the Company granted 4,796
(2012: 243,164) DSUs, and had 413,320 DSUs outstanding as at June 30,
2013 (2012: 402,390). For the six months ended June 30, 2013,
Bellatrix recorded approximately $0.8 million (2012: $0.4 million) of
share based compensation expense and had a liability balance of $2.5
million (2012: $1.2 million) relating to the Company's outstanding
DSUs.
7. SUPPLEMENTAL CASH FLOW INFORMATION
|
Change in Non-cash Working Capital
|
|
|
|
($000s)
|
Three months ended June 30,
|
Six months ended June 30,
|
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
Changes in non-cash working capital items:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
$
|
4,889
|
$
|
9,328
|
$
|
(3,227)
|
$
|
8,323
|
|
|
|
Deposits and prepaid expenses
|
|
22
|
|
146
|
|
(2,934)
|
|
(2,124)
|
|
|
|
Accounts payable and accrued liabilities
|
|
(37,328)
|
|
(35,832)
|
|
10,460
|
|
(27,853)
|
|
|
$
|
(32,417)
|
$
|
(26,358)
|
$
|
4,299
|
$
|
(21,654)
|
|
|
Changes related to:
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
$
|
(6,684)
|
$
|
3,278
|
$
|
(8,423)
|
$
|
(1,683)
|
|
|
|
Financing activities
|
|
(479)
|
|
(1,467)
|
|
237
|
|
(879)
|
|
|
|
Investing activities
|
|
(25,254)
|
|
(28,169)
|
|
12,485
|
|
(19,092)
|
|
|
$
|
(32,417)
|
$
|
(26,358)
|
$
|
4,299
|
$
|
(21,654)
|
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 June 30,
2013, Bellatrix had approximately $649 million in tax pools available
for deduction against future income. Included in this tax basis are
estimated non-capital loss carry forwards of approximately $10 million
that expire in years through 2027.
9. FINANCE INCOME AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Finance expense
|
|
|
|
|
|
|
|
|
|
|
Interest on long-term debt
|
$
|
2,460
|
$
|
1,381
|
$
|
4,441
|
$
|
2,443
|
|
|
Interest on convertible debentures
|
|
651
|
|
651
|
|
1,296
|
|
1,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion on convertible debentures
|
|
431
|
|
396
|
|
849
|
|
784
|
|
|
Accretion on decommissioning liabilities
|
|
216
|
|
163
|
|
389
|
|
352
|
|
|
|
647
|
|
559
|
|
1,238
|
|
1,136
|
|
Finance expense
|
$
|
3,758
|
$
|
2,591
|
$
|
6,975
|
$
|
4,882
|
10. PER SHARE AMOUNTS
The calculation of basic earnings per share for the three and six months
ended June 30, 2013 was based on a net profit of $15.5 million (2012:
$10.0 million) and a net profit of $20.0 million (2012: $19.1 million),
respectively.
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
|
2013
|
2012
|
2013
|
2012
|
|
Basic common shares outstanding
|
107,919,329
|
107,490,218
|
107,919,329
|
107,490,218
|
|
Fully dilutive effect of:
|
|
|
|
|
|
|
Share options outstanding
|
9,173,560
|
9,108,506
|
9,173,560
|
9,108,506
|
|
|
Shares issuable for convertible debentures
|
9,821,429
|
9,821,429
|
9,821,429
|
9,821,429
|
|
Fully diluted common shares outstanding
|
126,914,318
|
126,420,153
|
126,914,318
|
126,420,153
|
|
Weighted average shares outstanding
|
107,919,329
|
107,485,303
|
107,900,781
|
107,455,699
|
|
Dilutive effect of share options and convertible debentures (1)
|
13,346,005
|
11,219,400
|
13,137,885
|
11,874,361
|
|
Diluted weighted average shares outstanding
|
121,265,334
|
118,704,703
|
121,038,666
|
119,330,060
|
|
(1)
|
For the three and six month periods ending June 30, 2013, a total of
3,524,576 (2012: 1,397,971) and 3,316,456
(2012: 2,052,932) share options, respectively, were included in the
calculation as they were dilutive. Additionally,
9,821,429 (2012: 9,821,429) and 9,821,429 (2012: 9,821,429) common
shares issuable pursuant to the conversion
of the convertible debentures were included in the calculation for the
three and six month periods ending June 30,
2013 as they were dilutive.
|
11. COMMITMENTS
As at June 30, 2013, Bellatrix committed to drill 2 gross (1.17 net)
wells pursuant to farm-in agreements. Bellatrix expects to satisfy
these drilling commitments at an estimated cost of approximately $3.8
million.
In addition, Bellatrix entered into two joint operation 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 Operation Agreement
|
Feb. 1, 2011
|
Aug. 4, 2011
|
Dec. 14, 2012
|
|
Agreement 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 June 30, 2013
|
1
|
20
|
10
|
|
Remaining estimated total cost ($000s)
|
$3.5
|
$70.0
|
$35.0
|
Bellatrix will also have drilling commitments related to the recently
announced Grafton joint venture. Some of these drilling commitments are
expected to be satisfied in conjunction with drilling commitments
relating to the Joint Operation Agreements noted above. Bellatrix's
net capital commitment to the $122 million Grafton joint venture is
$22.0 million.
12. FINANCIAL RISK MANAGEMENT
a. Credit risk
|
As at June 30, 2013, 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
|
7,214
|
|
2,251
|
|
9,465
|
|
Amounts due from government agencies
|
665
|
|
1,099
|
|
1,764
|
|
Revenue and other accruals
|
26,670
|
|
4,451
|
|
31,121
|
|
Cash call receivables
|
-
|
|
21
|
|
21
|
|
Plant revenue allocation receivable
|
-
|
|
2,855
|
|
2,855
|
|
Less: Allowance for doubtful accounts
|
-
|
|
(1,207)
|
|
(1,207)
|
|
Total accounts receivable
|
34,549
|
|
9,470
|
|
44,019
|
|
Less:
|
|
|
|
|
|
|
Accounts payable due to same partners
|
-
|
|
(312)
|
|
(312)
|
|
Subsequent receipts to July 31, 2013
|
(22,602)
|
|
(121)
|
|
(22,723)
|
|
|
11,947
|
|
9,037
|
|
20,984
|
Amounts due from government agencies include GST and royalty
adjustments. Plant revenue allocation receivable includes amounts
under dispute over plant revenue allocations, net of expenses, from an
operator. The Company has commenced legal action for collection of
these amounts. 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 June
30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities ($000s)
|
|
Total
|
|
< 1 Year
|
|
1-3 Years
|
|
4-5 Years
|
|
More than
5 years
|
|
Accounts payable and accrued liabilities (1)
|
$
|
62,016
|
$
|
62,016
|
$
|
-
|
$
|
-
|
$
|
-
|
|
Long-term debt - principal (2)
|
|
194,002
|
|
-
|
|
194,002
|
|
-
|
|
-
|
|
Convertible debentures - principal
|
|
55,000
|
|
-
|
|
55,000
|
|
-
|
|
-
|
|
Convertible debentures - interest (3)
|
|
4,789
|
|
2,613
|
|
2,176
|
|
-
|
|
-
|
|
Commodity contract liability
|
|
6,133
|
|
4,594
|
|
1,539
|
|
-
|
|
-
|
|
Decommissioning liabilities (4)
|
|
43,102
|
|
-
|
|
7,614
|
|
6,079
|
|
29,409
|
|
Finance lease obligation
|
|
13,865
|
|
1,459
|
|
3,142
|
|
2,972
|
|
6,292
|
|
Total
|
$
|
378,907
|
$
|
70,682
|
$
|
263,473
|
$
|
9,051
|
$
|
35,701
|
|
(1)
|
Includes $0.4 million of accrued coupon interest payable in relation to
the 4.75% Debentures and $0.4 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)
|
The 4.75% Debentures outstanding at June 30, 2013 bear interest at a
coupon rate of 4.75%, which currently
requires total annual interest payments of $2.6 million.
|
|
(4)
|
Amounts represent the inflated, discounted future abandonment and
reclamation expenditures anticipated to
be incurred over the life of the Company's properties (between 2014 and
2053).
|
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 June 30, 2013, 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, 2013 to Dec. 31, 2013
|
1,500 bbl/d
|
$
|
94.50 CDN
|
$
|
94.50 CDN
|
WTI
|
|
Crude oil fixed
|
July 1, 2013 to Dec. 31, 2013
|
1,500 bbl/d
|
$
|
96.87 CDN
|
$
|
96.87 CDN
|
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
|
1,500 bbl/d
|
$
|
95.22 CDN
|
$
|
95.22 CDN
|
WTI
|
|
Crude oil call option (1)
|
Nov. 1, 2013 to Dec. 31, 2013
|
3,000 bbl/d
|
|
-
|
$
|
110.00 US
|
WTI
|
|
Crude oil call option
|
January 1, 2014 to Dec. 31, 2014
|
3,000 bbl/d
|
|
-
|
$
|
105.00 US
|
WTI
|
|
Natural gas fixed
|
April 1, 2013 to Oct. 31, 2013
|
20,000 GJ/d
|
$
|
3.05 CDN
|
$
|
3.05 CDN
|
AECO
|
|
Natural gas fixed
|
April 1, 2013 to Oct. 31, 2013
|
10,000 GJ/d
|
$
|
3.095 CDN
|
$
|
3.095 CDN
|
AECO
|
|
Natural gas fixed
|
Feb. 1, 2013 to Dec. 31, 2013
|
10,000 GJ/d
|
$
|
3.05 CDN
|
$
|
3.05 CDN
|
AECO
|
|
Natural gas fixed
|
April 1, 2013 to June 30, 2014
|
15,000 GJ/d
|
$
|
3.05 CDN
|
$
|
3.05 CDN
|
AECO
|
|
(1) This crude oil call option for the May 1, 2013 to October 31, 2013
period was settled for $0.2 million in April, 2013.
|
Subsequent to June 30, 2013, the Company has entered into commodity
price risk management contracts as follows:
|
|
|
|
|
|
|
|
|
|
Type
|
Period
|
Volume
|
|
Price Floor
|
|
Price Ceiling
|
Index
|
|
Crude oil fixed
|
August 1, 2013 to Dec. 31, 2013
|
1,000 bbl/d
|
$
|
106.02 CDN
|
$
|
106.02 CDN
|
WTI
|
13. FAIR VALUE
The Company's financial instruments as at June 30, 2013 include accounts
receivable, deposits, commodity contract asset, accounts payable and
accrued liabilities, long-term debt and convertible debentures. 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 June 30, 2013 was a net liability of $6.1 million
(2012: $5.6 million net asset). The commodity contracts are classified
as level 2 within the fair value hierarchy.
|
($000s)
|
June 30, 2013
|
June 30, 2012
|
|
Commodity contract asset
|
$
|
-
|
$
|
7,249
|
|
Commodity contract liability
|
|
(6,133)
|
|
(1,625)
|
|
Net commodity contract asset (liability)
|
$
|
(6,133)
|
$
|
5,624
|
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.
The fair value of the 4.75% Debentures of $66.9 million is based on
exchange traded values. The 4.75% Debentures are classified as level 1
within the fair value hierarchy.
14. SUBSEQUENT EVENT
Baptiste Asset Sale and Joint Venture
On August 1, 2013 the Company announced it entered into a definitive
agreement for an asset sale (the "Asset Sale") and joint venture (the
"Joint Venture") with two Korean entities, Daewoo International
Corporation ("Daewoo") and Devonian Natural Resources Private Equity
Fund ("Devonian"). Under the terms of the associated agreements,
Bellatrix will sell, effective July 1, 2013, to Daewoo and Devonian
jointly 50% of the Company's working interest share of its producing
assets, an operated compressor station and gathering system and related
land acreage in the Baptiste area of West Central Alberta (the "Sold
Assets") for gross consideration of $52.5 million, subject to closing
adjustments. The Sold Assets are producing approximately 268 boe/d
(67% gas and 33% oil and liquids) net and include 3,858 net acres of
Cardium rights and 1,119 net acres of Mannville rights.
The Joint Venture, which will be effective as of July 1, 2013, will
encompass a multiyear commitment to jointly develop the aforementioned
acreage in Ferrier and Willesden Green of West Central Alberta
encompassing 70 gross wells with anticipated total capital expenditures
to the Joint Venture of approximately $200 million. Certain conditions
precedent to closing, including Korean governmental and regulatory
approvals, are expected to be satisfied or waived by August 30, 2013,
which is expected to enable closing to occur on or before September 16,
2013. This agreement is anticipated to be accounted for as a joint
operation under IFRS.
The Company's updated corporate presentation is available at www.bellatrixexploration.com.
Bellatrix Exploration Ltd. is a Western Canadian based growth oriented
oil and gas company engaged in the exploration for, and the
acquisition, development and production of oil and natural gas reserves
in the provinces of Alberta, British Columbia and Saskatchewan. Common
shares and convertible debentures of Bellatrix trade on the Toronto
Stock Exchange ("TSX") under the symbols BXE and BXE.DB.A,
respectively, and the common shares of Bellatrix trade on the NYSE MKT
under the symbol BXE.
SOURCE: Bellatrix Exploration Ltd.
Raymond G. Smith, P.Eng., President and CEO (403) 750-2420
or
Edward J. Brown, CA, Executive Vice President and CFO (403) 750-2655
or
Brent A. Eshleman, P.Eng., Executive Vice President (403) 750-5566
or
Troy Winsor, Investor Relations (800) 663-8072 Bellatrix Exploration Ltd.
2300, 530 - 8th Avenue SW
Calgary, Alberta, Canada T2P 3S8
Phone: (403) 266-8670
Fax: (403) 264-8163
www.bellatrixexploration.com Copyright CNW Group 2013
Source: Canada Newswire
(August 8, 2013 - 2:05 AM EDT)
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