Bellatrix Exploration Ltd. Announces Fourth Quarter and Year End 2015 Financial Results
Bellatrix Exploration Ltd. Announces Fourth Quarter and Year End 2015 Financial Results
Canada NewsWire
CALGARY, March 16, 2016
TSX, NYSE: BXE
CALGARY, March 16, 2016 /CNW/ - Bellatrix Exploration Ltd. ("Bellatrix" or the "Company") (TSX, NSE:
BXE) announces its financial and operating results for the fourth
quarter and year ended December 31, 2015. This press release contains
forward-looking statements. Please refer to our cautionary language on
forward-looking statements and the other matters set forth at the end
of this press release and the beginning of the Management's Discussion
and Analysis (the "MD&A") for the years ended December 31, 2015 and
2014. Bellatrix's audited Consolidated Financial Statements and Notes,
and the MD&A are available on Bellatrix's website at www.bellatrixexploration.com, and are filed on SEDAR at www.sedar.com.
FOURTH QUARTER AND ANNUAL 2015 HIGHLIGHTS
|
|
Three months ended
December 31,
|
Year ended
December 31,
|
|
2015
|
2014
|
2015
|
2014
|
SELECTED FINANCIAL RESULTS
|
|
|
|
|
(CDN$000s except share and per share amounts)
|
|
|
|
|
Total revenue (2)
|
72,125
|
130,160
|
333,318
|
583,467
|
Funds flow from operations (2)
|
29,653
|
61,757
|
109,485
|
270,753
|
|
Per basic share (3)
|
$0.15
|
$0.32
|
$0.57
|
$1.48
|
|
Per diluted share (3)
|
$0.15
|
$0.32
|
$0.57
|
$1.46
|
Cash flow from operating activities
|
42,033
|
90,459
|
103,075
|
294,828
|
|
Per basic share (3)
|
$0.22
|
$0.47
|
$0.54
|
$1.61
|
|
Per diluted share (3)
|
$0.22
|
$0.47
|
$0.54
|
$1.59
|
Adjusted net profit (loss) (2)
|
(8,587)
|
58,982
|
(53,244)
|
158,533
|
|
Per basic share (3)
|
($0.04)
|
$0.31
|
($0.28)
|
$0.87
|
|
Per diluted share (3)
|
($0.04)
|
$0.31
|
($0.28)
|
$0.86
|
Net profit (loss)
|
(356,631)
|
54,830
|
(444,208)
|
163,123
|
|
Per basic share (3)
|
($1.86)
|
$0.29
|
($2.31)
|
$0.89
|
|
Per diluted share (3)
|
($1.86)
|
$0.29
|
($2.31)
|
$0.88
|
Capital - exploration and development
|
16,775
|
81,873
|
155,151
|
504,467
|
Capital - corporate assets
|
153
|
3,346
|
3,440
|
11,163
|
Property acquisitions
|
287
|
148,857
|
1,036
|
176,428
|
Capital expenditures - cash
|
17,215
|
234,076
|
159,627
|
692,058
|
Property dispositions - cash
|
(5,129)
|
(1,435)
|
(15,436)
|
(9,809)
|
Total net capital expenditures - cash
|
12,086
|
232,641
|
144,191
|
682,249
|
Other non-cash items
|
2,594
|
64,612
|
8,613
|
88,616
|
Total capital expenditures - net (2)
|
14,680
|
297,253
|
152,804
|
770,865
|
Bank debt
|
340,743
|
549,792
|
340,743
|
549,792
|
Senior Notes
|
332,024
|
-
|
332,024
|
-
|
Adjusted working capital deficiency (2)
|
44,878
|
87,934
|
44,878
|
87,934
|
Total net debt (2)
|
717,645
|
637,726
|
717,645
|
637,726
|
Total assets
|
1,703,212
|
2,213,485
|
1,703,212
|
2,213,485
|
Total shareholders' equity
|
810,572
|
1,248,317
|
810,572
|
1,248,317
|
|
|
|
|
|
|
|
|
SELECTED OPERATING RESULTS
|
|
Three months ended
December 31,
|
Year ended
December 31,
|
|
|
2015
|
2014
|
2015
|
2014
|
Average daily sales volumes
|
|
|
|
|
|
|
|
Crude oil, condensate and NGLs
|
(bbl/d)
|
11,884
|
13,204
|
11,998
|
12,469
|
|
|
Natural gas
|
(mcf/d)
|
172,923
|
178,443
|
176,658
|
153,575
|
|
|
Total oil equivalent
|
(boe/d) (4)
|
40,705
|
42,945
|
41,441
|
38,065
|
Average realized prices
|
|
|
|
|
|
|
|
Crude oil and condensate
|
($/bbl)
|
48.76
|
71.92
|
54.34
|
91.41
|
|
|
Crude oil and condensate (including risk management (1))
|
($/bbl)
|
58.67
|
86.96
|
58.76
|
86.81
|
|
|
NGLs (excluding condensate)
|
($/bbl)
|
12.99
|
31.26
|
14.16
|
42.74
|
|
|
Crude oil, condensate and NGLs
|
($/bbl)
|
25.88
|
50.17
|
30.41
|
67.47
|
|
|
Natural gas
|
($/mcf)
|
2.66
|
4.01
|
2.95
|
4.77
|
|
|
Natural gas (including risk management (1))
|
($/mcf)
|
2.75
|
4.08
|
2.94
|
4.39
|
|
|
Total oil equivalent
|
($/boe) (4)
|
18.85
|
32.07
|
21.37
|
41.33
|
|
|
Total oil equivalent (including risk management (1))
|
($/boe) (4)
|
20.26
|
34.51
|
21.85
|
39.03
|
|
|
|
|
|
|
|
Net wells drilled
|
|
2.3
|
7.1
|
13.7
|
59.1
|
|
|
|
|
|
|
|
|
Selected Key Operating Statistics
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|
|
|
|
|
|
|
Operating netback (2)
|
($/boe) (4)
|
10.80
|
17.00
|
10.83
|
25.00
|
|
|
Operating netback (2) (including risk management (1))
|
($/boe) (4)
|
12.21
|
19.43
|
11.30
|
22.70
|
|
|
Transportation expense
|
($/boe) (4)
|
0.72
|
1.05
|
1.13
|
1.17
|
|
|
Production expense
|
($/boe) (4)
|
6.87
|
9.57
|
7.86
|
8.64
|
|
|
General & administrative expense
|
($/boe) (4)
|
1.18
|
2.33
|
1.55
|
1.83
|
|
|
Royalties as a % of sales (after
transportation)
|
|
5%
|
17%
|
11%
|
18%
|
|
COMMON SHARES
|
|
|
|
|
|
|
Common shares outstanding
|
|
191,963,910
|
191,950,576
|
191,963,910
|
191,950,576
|
|
Share options outstanding
|
|
12,846,332
|
10,913,337
|
12,846,332
|
10,913,337
|
|
Fully diluted common shares outstanding
|
|
204,810,242
|
202,863,913
|
204,810,242
|
202,863,913
|
|
Weighted average shares (3)
|
|
191,963,910
|
191,579,631
|
191,960,312
|
184,947,822
|
|
SHARE TRADING STATISTICS
|
|
|
|
|
|
|
TSX and Other (5)
|
|
|
|
|
|
|
(CDN$, except volumes) based on intra-day trading
|
|
|
|
|
|
|
High
|
|
2.92
|
7.03
|
4.47
|
11.65
|
|
Low
|
|
1.30
|
3.45
|
1.30
|
3.45
|
|
Close
|
|
1.64
|
4.23
|
1.64
|
4.23
|
|
Average daily volume
|
|
1,233,615
|
3,166,506
|
1,911,812
|
2,683,578
|
|
NYSE
|
|
|
|
|
|
|
(US$, except volumes) based on intra-day trading
|
|
|
|
|
|
|
High
|
|
2.25
|
6.28
|
3.81
|
10.70
|
|
Low
|
|
0.94
|
2.97
|
0.94
|
2.97
|
|
Close
|
|
1.21
|
3.64
|
1.21
|
3.64
|
|
Average daily volume
|
|
1,160,457
|
547,567
|
892,215
|
384,007
|
(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.
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.
|
|
|
(2)
|
The terms "funds flow from operations", "funds flow from operations per
share", "adjusted net profit (loss)", "total net debt",
"operating netbacks", "total capital expenditures - net", "adjusted
working capital deficiency (excess)", and "total revenue"
do not have a standard meaning under generally accepted accounting
principles ("GAAP"). Refer to "Non-GAAP measures"
disclosed at the end of this Press Release.
|
|
|
(3)
|
Basic weighted average shares for the three months and year ended
December 31, 2015 were 191,963,910 (2014: 191,579,631),
and 191,960,312 (2014: 183,216,536), respectively.
|
|
|
|
In computing weighted average diluted profit (loss) per share, weighted
average diluted cash flow from operating activities per
share, and weighted average diluted funds flow from operations per share
for the three and twelve months ended December
31, 2015, a total of nil (2014: nil), and nil (2014: 1,731,286) common
shares were added to the denominator as a consequence
of applying the treasury stock method to the Company's outstanding share
options, resulting in diluted weighted average
common shares of 191,963,910 (2014: 191,579,631), and 191,960,312 (2014:
184,947,822), respectively.
|
|
|
(4)
|
A boe conversion ratio of 6 mcf: 1 bbl has been used, which is based on
an energy equivalency conversion method primarily
applicable at the burner tip. Given that the value ratio based on the
current price of crude oil as compared to natural gas is
significantly different than the energy equivalency of the conversion
ratio, utilizing the 6:1 conversion ratio may be misleading
as an indication of value.
|
|
|
(5)
|
TSX and Other include the trading statistics for the Toronto Stock
Exchange ("TSX") and other Canadian trading markets.
|
PRESIDENT'S MESSAGE
Following 2014, the most active year in the Company's history, in 2015
Bellatrix focused on and achieved four primary objectives. First,
Bellatrix completed construction of and commissioned Phase 1 of the
Bellatrix O'Chiese Nees-Ohpawganu'ck deep cut gas plant in the Alder
Flats area of Alberta (the "Alder Flats Plant"). Second, Bellatrix
focused its development activities on its Spirit River liquids-rich
natural gas play using promoted capital available through its strategic
joint ventures. Third, Bellatrix successfully achieved material
reductions in capital costs, general and administrative ("G&A") costs
and operating costs. Fourth, in response to the continued decline in
commodity prices, Bellatrix worked proactively with its lenders to
amend, and then remove, certain financial covenants contained in the
agreement governing the Company's revolving Credit Facilities (as
defined below), and diversified the Company's balance sheet through the
issuance of US$250 million of Senior Notes (as defined below) maturing
in 2020. All of these activities are intended to maximize long term
shareholder value, and to position the Company to take advantage of
opportunities as commodity prices stabilize and begin to recover.
Despite a 15% reduction in average realized commodity prices in the
fourth quarter relative to the first nine months of 2015, Bellatrix
generated fourth quarter 2015 funds flow from operations of $29.7
million, which represents the strongest funds flow from operations
quarter of 2015 for the Company, due to record low operating costs of
$6.87/boe, record low net G&A costs of $1.18/boe and low royalty costs
of $0.86/boe (5% of sales after transportation expenses). For the
second consecutive quarter, Bellatrix underspent cash flow, utilizing
free cash flow generated from operations and approximately $5.1 million
from a minor asset disposition to reduce bank debt and working capital
deficit by $17.1 million in the fourth quarter. During the second half
of 2015, Bellatrix reduced its bank debt and working capital deficit by
$31.8 million compared with June 30, 2015 balances, while efficaciously
sustaining total corporate production. Fourth quarter 2015 average
production of 40,705 boe/d represented a 1% increase over third quarter
2015 production levels which was achieved despite drilling only 2.3 net
wells during the fourth quarter, demonstrating the robust capital
efficiencies of the Company's Spirit River liquids-rich natural gas
play.
Bellatrix exited 2015 with a strong liquidity position, with
approximately $200 million of undrawn capacity (excluding letters of
credit) on the Company's $540 million bank Credit Facilities. In
addition, the Company maintains an active risk management program with
approximately 50% of forecast gross natural gas volumes (approximately
55% of forecast natural gas volumes net of royalties) hedged at an
average fixed price of approximately $3.08/mcf in calendar 2016, based
on the mid-point of first half 2016 average production guidance of
39,000 boe/d.
Bellatrix strives to ensure our business practices are conducted safely
and responsibly, and strong fourth quarter results were achieved with
zero reportable lost time incidents. Our provincial compliance rating
with the Alberta Energy Regulator ("AER") in the fourth quarter was
100% satisfactory, compared to the industry compliance level of 78%.
Also in the fourth quarter we seamlessly went live with a new Health,
Safety and Environmental inspection and audit system which has been
fully integrated into the business and will be a powerful tool for
continuous improvement into the future. Safe and responsible
development and continuous process improvement are guiding principles
of Bellatrix's business.
STRONG FOURTH QUARTER PERFORMANCE
Bellatrix is pleased to have delivered on all key operational
performance metrics in 2015 relative to guidance. Full year 2015
average production of 41,441 boe/d met the high end of the Company's
guidance range with full year net capital spending of $158.6 million.
Bellatrix delivered full year average operating costs of $7.86/boe,
representing a 9% improvement over 2014 full year average operating
costs and 5% better than full year guidance. Net G&A costs of $1.55/boe
in 2015 represented a 15% improvement over 2014 average net G&A costs
and 6% below guidance.
2015 Actual Performance versus Guidance
|
|
|
|
2015 Results
|
2015 Guidance
|
Actual Versus
Guidance
|
Average daily production (boe/d)
|
|
|
|
|
Low range
|
41,441
|
40,500
|
+2%
|
|
High range
|
41,441
|
41,500
|
-
|
Average product mix
|
|
|
|
|
Crude oil, condensate and NGLs (%)
|
29
|
30
|
-1%
|
|
Natural gas (%)
|
71
|
70
|
+1%
|
Capital spending ($ millions) (1)
|
159
|
160
|
-1%
|
Expenses ($/boe)
|
|
|
|
|
Production
|
7.86
|
8.25
|
-5%
|
|
General and administrative ("G&A") (2)
|
1.55
|
1.65
|
-6%
|
(1)
|
Capital spending includes exploration and development capital projects
and corporate
assets, and excludes property acquisitions and dispositions.
|
(2)
|
G&A expenses are after capitalized G&A and recoveries.
|
ALDER FLATS PLANT ACHIEVES 103% CAPACITY UTILIZATION IN THE FOURTH
QUARTER
The Alder Flats Plant averaged 103% capacity utilization in the fourth
quarter of 2015. Through its first two full quarters of operation, the
Alder Flats Plant has averaged 101% capacity utilization, establishing
the Alder Flats Plant as an efficient and reliable addition to the
Company's strategic infrastructure within our greater Ferrier core
area. The Alder Flats Plant provides Bellatrix with a competitive
advantage, not only from an operating cost perspective, but by
providing Bellatrix the capability to re-direct additional volumes
through the Alder Flats Plant during periods of third party facility
downtime thus mitigating potential adverse effects on the Company's
production volumes.
CONTINUED CAPITAL AND OPERATING COST REDUCTIONS AND ENDURED EFFICIENCY
GAINS
Capital cost reductions and operational optimization efforts in the
fourth quarter of 2015 continued to build on the positive momentum
established through the first nine months of the year. Capital cost
reduction initiatives across drilling, completion, equipping and tie-in
activities such as redesigned drilling parameters that have reduced
average days on lease location, using monobore well configurations
where practical, reduced temporary production tie-ins, minimized lease
sizes, plus the impact from competitive pricing of services have all
combined to reduce total well costs through 2015 and into 2016.
Average drill, complete, equip and tie-in costs for the Spirit River
program in the second half of 2015 averaged less than $4.0 million per
well, and average well productivity in the fourth quarter met the
Company's type curve expectations, further validating Bellatrix's
estimated average IP365 capital efficiency for production additions of
under $8,000/boe/d during the year. The current inventory of 382 net
drilling locations in the Spirit River play is expected to provide over
20 years of future development drilling opportunities from this low
supply cost and highly profitable liquids-rich natural gas play based
on the current pace of development.
Bellatrix reduced operating costs to $6.87/boe in the fourth quarter of
2015 as a result of continued cost reduction efforts in the field, and
anchored by optimized throughput at the Alder Flats Plant. The Company
plans to invest in the Phase 2 expansion of the Alder Flats Plant over
the next two years, doubling the gross sales capacity of the Alder
Flats Plant to 220 MMcf/d, which is expected to be completed in the
first half of 2018. Upon completion of Phase 2, Bellatrix anticipates
further structural reductions to its operating cost profile.
Continued reductions in net G&A costs (after capitalized costs and
recoveries) were achieved in the fourth quarter, down 12% to $1.18/boe
compared with $1.34/boe in the third quarter of 2015. The G&A
reduction is more apparent on a year over year basis as fourth quarter
2015 net G&A costs represent an approximate 50% reduction compared to
the $2.33/boe costs in the fourth quarter of 2014, and was attained
despite lower capital activity levels year over year and the resulting
lower G&A recoveries from partners. On a gross basis, full year G&A
costs were reduced by 22% or $12.2 million compared with the same
period in 2014.
Royalty rates compressed materially in the fourth quarter of 2015,
averaging 5% due to a combination of lower commodity prices and
increased gas cost allowance ("GCA") credits associated with
infrastructure and facilities investments made by Bellatrix.
Transportation costs in the fourth quarter averaged $0.72/boe, a
reduction of 46% from third quarter 2015 levels. Reduced
transportation expenditures incorporate lower trucking fees as
infrastructure investments in pipelines have provided a lower cost
transportation route for natural gas liquids and condensate produced
and processed at the Alder Flats Plant.
Fourth quarter total cash costs from operating costs, royalties, net
G&A, and transportation expenses totaled $9.63/boe, representing a
sequential 18% improvement over comparable third quarter 2015 total
cash costs, and a 47% improvement compared with fourth quarter 2014
levels.
OPERATIONAL AND FINANCIAL HIGHLIGHTS
-
The Company delivered a 100% success rate through the drill bit in 2015
demonstrating another strong year of consistent operational results and
technical work. See the March 16, 2016 news release entitled
"Bellatrix Announces 2015 Year End Reserves" for additional information
on the Company's year-end reserves information.
-
Production volumes in the fourth quarter of 2015 averaged 40,705 boe/d
(71% natural gas weighted) an increase of 1% from production volumes of
40,277 boe/d averaged in the third quarter of 2015. The Company was
able to proactively manage system wide interruptible and firm takeaway
constraints through the utilization of the Alder Flats Plant which
averaged 103% capacity utilization in the fourth quarter of 2015.
-
Net cash capital expenditures of $12.1 million in the fourth quarter of
2015 included $16.8 million on exploration and development spending,
offset by a minor asset disposition of $5.1 million.
-
The fourth quarter of 2015 marked the second consecutive quarter
Bellatrix underspent cash flow. Free cash flow and proceeds from a
minor asset disposition reduced bank debt and the working capital
deficit by approximately $17.1 million (4%) in the fourth quarter of
2015. During the second half of 2015, Bellatrix reduced its bank debt
and working capital deficiency by $31.8 million (representing an 8%
reduction) compared with June 30, 2015 balances while maintaining
average production levels greater than 40,000 boe/d.
-
Operating costs in the fourth quarter 2015 averaged $6.87/boe,
representing a 7% sequential decline from third quarter 2015 levels and
a 28% decline compared to the fourth quarter 2014 operating costs of
$9.57/boe. These reductions demonstrate the strength of Bellatrix's
infrastructure, including optimized utilization of volumes through the
Alder Flats Plant, and a continued focus by our employees on cost
containment and process improvement efforts. On a comparative basis,
operating costs in the fourth quarter of 2015 inclusive of processing
and third party income, averaged $6.46/boe.
-
The corporate royalty rate in the three months ended December 31, 2015
averaged 5% of sales (after transportation), compared with 17% in the
fourth quarter of 2014. Lower average royalty rates year over year
were mainly the result of lower commodity prices as well as increased
GCA credits associated with prior period infrastructure and facilities
investments by Bellatrix.
-
Net G&A expenses (after capitalized costs and recoveries) for the three
months and year ended December 31, 2015 were $4.4 million ($1.18/boe)
and $23.4 million ($1.55/boe), compared to $9.2 million ($2.33/boe) and
$25.4 million ($1.83/boe) in the comparative 2014 periods,
respectively. Net G&A costs have improved in 2015 as a result of cost
reduction initiatives implemented by the Company including workforce
reductions. These initiatives have more than offset reduced cost
recoveries from partners associated with lower capital spending,
compared with 2014.
-
The corporate operating netback realized (after risk management) for the
three months ended December 31, 2015 was $12.21/boe. Before risk
management, the fourth quarter 2015 operating netback was $10.80/boe,
consistent with the $10.84/boe netback realized in the first nine
months of 2015, despite a 15% drop in realized prices in the respective
periods. The Company's netback before risk management was maintained
despite the drop in realized commodity pricing principally due to the
aforementioned reductions in total cash costs.
-
In the fourth quarter of 2015, Bellatrix drilled and/or participated in
5 gross (2.3 net) Spirit River liquids-rich gas wells. All of the
operated Spirit River liquids-rich gas wells were drilled leveraging
capital under our joint venture with Grafton Energy Co I Ltd.
-
Total net debt of $717.6 million at December 31, 2015 decreased by $5.8
million compared with net debt at September 30, 2015. The reduction in
total net debt reflects a decrease in bank debt and working capital
deficit by $17.1 million, offset by an increase in unrealized foreign
exchange loss of approximately $10.4 million recognized in the fourth
quarter as the United States dollar denominated Senior Notes (as
defined below) were marked-to-market at December 31, 2015.
-
During the 2015 year, Bellatrix proactively negotiated the removal of
two major financial covenants governing its Credit Facilities providing
additional financial flexibility. At December 31, 2015, Bellatrix had
$199.3 million of undrawn capacity on its Credit Facilities, excluding
outstanding letters of credit of $6.4 million that reduce the amount
otherwise available to be drawn on the facilities.
-
For the year ended December 31, 2015, Bellatrix's Senior Debt to EBITDA
(as defined below) ratio was 2.75 times, within the financial covenant
of 3.5 times as permitted by the Credit Facilities.
-
Adjusted net loss for the three months and year ended December 31, 2015
were $8.6 million and $53.2 million, respectively. The adjusted net
loss of $53.2 million incurred in 2015, as compared to an adjusted net
profit of $158.5 million realized in 2014, was primarily due to the
continued weak commodity price environment throughout 2015. Realized
prices in 2015 decreased by 41% in crude oil and condensate, 67% in
natural gas liquids ("NGLs"), and 38% in natural gas from 2014.
-
Funds flow from operations generated in the three months ended December
31, 2015 was $29.7 million ($0.15 per basic and diluted share), a
decrease of 52% from $61.8 million ($0.32 per basic share) in the
fourth quarter of 2014. Funds flow from operations generated in the
year ended December 31, 2015 was $109.5 million ($0.57 per basic and
diluted share), a decrease of 60% from $270.8 million ($1.48 per basic
and $1.46 per diluted share) in the comparative 2014 period.
-
Total revenue decreased by 45% to $72.1 million for the three months
ended December 31, 2015, compared to $130.2 million realized in the
fourth quarter of 2014 mainly attributable to crude oil realized prices
decreasing 32%, natural gas decreasing 34% and NGLs decreasing 58% in
the comparable periods. Total revenue from crude oil, condensate, and
NGLs contributed 39% of total revenue realized in the fourth quarter of
2015, compared to 47% in the fourth quarter of 2014.
-
As at December 31, 2015, Bellatrix had approximately 326,235 net
undeveloped acres of land in Alberta, British Columbia, and
Saskatchewan.
-
At December 31, 2015, Bellatrix performed an assessment for indicators
of non-cash impairment on all of the Company's cash generating units
("CGU") and determined that a non-cash impairment loss of $346.4
million after taxes was incurred in the fourth quarter of 2015, mainly
a result of the depressed crude oil and natural gas forward commodity
prices.
-
At December 31, 2015, Bellatrix had approximately $1.69 billion in tax
pools available for deduction against future income.
OUTLOOK
The operational reliability and competitive cost structure of the
Company has never been stronger. The strategic investment in
infrastructure including the Alder Flats Plant has structurally
improved the operational reliability and cost structure of our
business, evidenced by the 28% reduction in fourth quarter 2015
operating costs to $6.87/boe relative to the comparable period in
2014. The investment in infrastructure has structurally reduced
transportation costs and royalty rates, enhanced natural gas liquids
recoveries, and improved overall reliability of processed production
volumes.
Commodity prices for both oil and natural gas currently remain at what
we believe are unsustainably low levels. As market supply and demand
forces naturally realign, we anticipate this will drive commodity
prices to higher levels. Bellatrix remains focused on development of
the Spirit River formation, which is one of the lowest supply cost
natural gas plays in North America. The Company is favourably
positioned with a deep inventory of high rate of return well locations,
supported by infrastructure and firm takeaway capacity, to profitably
grow when commodity prices improve. Our acreage position in the Spirit
River play is expected to provide the value enhancing growth platform
for our Company as we move through the commodity price cycle.
Bellatrix has maintained an active two rig drilling program leveraging
joint venture capital through the majority of the first quarter of 2016
focused on development drilling in the Spirit River play.
Approximately 70% of the Company's first half 2016 capital budget will
be invested within the first quarter, which is expected to provide
average corporate production in the first six months of 2016 at
approximately 39,000 boe/d (midpoint of guidance +/- 500 boe/d).
|
|
|
|
First Half 2016 Guidance
|
Average daily production (boe/d)
|
|
|
Low range
|
38,500
|
|
High range
|
39,500
|
Average product mix
|
|
|
Crude oil, condensate and NGLs (%)
|
28
|
|
Natural gas (%)
|
72
|
Net capital spending ($ millions) (1)
|
$46
|
Expenses ($/boe)
|
|
|
Production (2)
|
$7.25
|
(1)
|
Capital spending includes exploration and development capital
projects and corporate assets, and excludes property acquisitions
and dispositions.
|
(2)
|
Operating costs before net processing revenue/fees
|
Bellatrix has set a six month budget in order to preserve optionality
and additional flexibility for the Company in the second half of the
2016 year.
Bellatrix maintains an active risk management program with approximately
50% of forecast gross natural gas volumes hedged at an average fixed
price of approximately $3.08/mcf in calendar 2016 (based on first half
2016 average gross production guidance of 39,000 boe/d). In addition,
approximately 35% of forecast natural gas volumes are hedged in 2017 at
an average fixed price of approximately $3.35/mcf. Bellatrix's hedging
program is part of its overall risk management strategy focused on
providing reduced commodity price volatility and greater assurance over
future revenue and cash flows which help drive the capital and
reinvestment decisions within our business.
Bellatrix's low cost operations and strategy provide a competitive
advantage during low points in the commodity price cycle, and position
the Company for long-term profitability. Our people remain core to
Bellatrix's success and have demonstrated a commitment to the sedulous
pursuit of improvement in all areas of our business. I wish to thank
our employees for their tireless efforts, and thank our shareholders
for their ongoing commitment and recognition of the achievements
Bellatrix has made through 2015 which position the Company to deliver
enhanced value through the full commodity price cycle.
("Raymond G. Smith")
Raymond G. Smith, P.Eng.
President and CEO
March 16, 2016
OPERATIONAL REVIEW
Sales Volumes
|
|
|
|
|
|
Three months ended
December 31,
|
Year ended
December 31,
|
|
|
2015
|
2014
|
2015
|
2014
|
|
|
Crude oil and condensate
|
(bbl/d)
|
4,281
|
6,139
|
4,853
|
6,336
|
|
|
NGLs (excluding condensate)
|
(bbl/d)
|
7,603
|
7,065
|
7,145
|
6,133
|
|
Total crude oil, condensate, and NGLs
|
(bbl/d)
|
11,884
|
13,204
|
11,998
|
12,469
|
|
|
Natural gas
|
(mcf/d)
|
172,923
|
178,443
|
176,658
|
153,575
|
|
Total sales volumes (6:1 conversion)
|
(boe/d)
|
40,705
|
42,945
|
41,441
|
38,065
|
Sales volumes for the three months ended December 31, 2015 averaged
40,705 boe/d, a decrease of 5% from an average of 42,945 boe/d realized
in the fourth quarter of 2014. The weighting towards crude oil,
condensate and NGLs for the three months ended December 31, 2015 was
29%, compared to 31% in the fourth quarter of 2014. Sales volumes for
the year ended December 31, 2015 increased by 9% to average 41,441
boe/d compared to 38,065 boe/d in 2014. Total crude oil, condensate
and NGLs averaged approximately 29% of sales volumes for 2015, compared
to 33% in 2014.
During 2015, the industry experienced system-wide curtailment of
interruptible and firm service transportation on the primary Alberta
gas transmission system due to ongoing pipeline integrity management
work and maintenance. There were also more specific curtailments at
certain facilities utilized by Bellatrix. In spite of these system
constraints, Bellatrix has been able to maintain production levels in
line with guidance through proactive management of Bellatrix's firm
capacity on the Alberta NGTL system and through utilization of
Bellatrix's infrastructure that provided flexibility to redirect
volumes to facilities and delivery points which had not been affected.
Drilling Activity - 2015
|
|
|
|
|
|
|
|
Three months ended
December 31, 2015
|
Year ended
December 31, 2015
|
|
Gross
|
Net
|
Success
Rate
|
Gross
|
Net
|
Success
Rate
|
Cardium oil
|
-
|
-
|
-
|
3
|
1.3
|
100%
|
Spirit River liquids-rich natural gas
|
5
|
2.3
|
100%
|
24
|
12.4
|
100%
|
Cardium natural gas
|
-
|
-
|
-
|
-
|
-
|
-
|
Total
|
5
|
2.3
|
100%
|
27
|
13.7
|
100%
|
|
|
|
|
|
|
|
|
Drilling Activity - 2014
|
|
|
|
|
|
|
|
Three months ended
December 31, 2014
|
Year ended
December 31, 2014
|
|
|
Gross
|
Net
|
Success
Rate
|
Gross
|
Net
|
Success
Rate
|
Cardium oil
|
3
|
2.0
|
100%
|
63
|
36.4
|
100%
|
Spirit River liquids-rich natural gas
|
7
|
3.8
|
100%
|
34
|
16.2
|
100%
|
Cardium natural gas
|
2
|
1.3
|
100%
|
13
|
6.5
|
100%
|
Total
|
12
|
7.1
|
100%
|
110
|
59.1
|
100%
|
During the fourth quarter of 2015, Bellatrix drilled and/or participated
in 5 gross (2.3 net) Spirit River liquids-rich gas wells. Drilling
activity was curtailed in the fourth quarter of 2015 in response to the
volatile and challenging commodity price environment as the Company
continued to focus on balance sheet preservation as well as long term
value creation. In the year ended December 31, 2015, Bellatrix posted
a 100% success rate, drilling and/or participating in 27 gross (13.7
net) wells, consisting of 3 gross (1.3 net) Cardium oil wells and 24
gross (12.4 net) Spirit River liquids-rich gas wells. Bellatrix's
drilling activity in 2015 was weighted 11% towards oil wells, and 89%
towards liquids-rich natural gas wells. The Company continues to focus
capital investment and leverage joint venture capital in its low-cost
Spirit River natural gas play, which continues to deliver strong
returns at current natural gas and liquids prices.
During the fourth quarter of 2014, Bellatrix drilled and/or participated
in 12 gross (7.1 net) wells, consisting of 3 gross (2.0 net) Cardium
light oil horizontal wells, 7 gross (3.8 net) Spirit River liquids-rich
gas wells, and 2 gross (1.3 net) Cardium gas wells. Bellatrix's
drilling activity in the fourth quarter of 2014 was weighted 25%
towards oil wells and 75% towards natural gas wells. During the year
ended December 31, 2014, Bellatrix drilled and/or participated in 110
gross (59.1 net) wells, consisting of 63 gross (36.4 net) Cardium light
oil horizontal wells, 34 gross (16.2 net) Spirit River liquids-rich gas
wells, and 13 gross (6.5 net) Cardium gas wells. Bellatrix's drilling
activity in 2014 was weighted 57% towards oil wells and 43% towards
natural gas wells.
Capital Expenditures
During the three months ended December 31, 2015, Bellatrix invested
$16.8 million in exploration and development capital projects,
excluding property acquisitions and dispositions, compared to $81.9
million in the same period in 2014. Bellatrix invested $155.2 million
in exploration and development projects, excluding property
acquisitions and dispositions during the year ended December 31, 2015,
compared to $504.5 million in 2014.
Capital Expenditures
|
|
|
|
|
|
Three months ended
December 31,
|
Year ended
December 31,
|
($000s)
|
2015
|
2014
|
2015
|
2014
|
Lease acquisitions and retention
|
1,736
|
2,878
|
5,317
|
16,701
|
Geological and geophysical
|
14
|
(103)
|
661
|
1,601
|
Drilling and completion costs
|
5,626
|
70,980
|
61,454
|
298,313
|
Facilities and equipment
|
9,399
|
41,039
|
96,358
|
220,773
|
Property transfers - cash
|
-
|
(32,921)
|
(8,639)
|
(32,921)
|
|
Capital - exploration and development (1)
|
16,775
|
81,873
|
155,151
|
504,467
|
Capital - corporate assets (2)
|
153
|
3,346
|
3,440
|
11,163
|
Property acquisitions
|
287
|
148,857
|
1,036
|
176,428
|
|
Total capital expenditures - cash
|
17,215
|
234,076
|
159,627
|
692,058
|
Property dispositions - cash
|
(5,129)
|
(1,435)
|
(15,436)
|
(9,809)
|
|
Total net capital expenditures - cash
|
12,086
|
232,641
|
144,191
|
682,249
|
Property acquisitions - non-cash
|
-
|
56,845
|
-
|
68,616
|
Other - non-cash (3)
|
2,594
|
7,767
|
8,613
|
20,000
|
Total non-cash
|
2,594
|
64,612
|
8,613
|
88,616
|
Total capital expenditures - net (4)
|
14,680
|
297,253
|
152,804
|
770,865
|
(1)
|
Excludes capitalized costs related to decommissioning liabilities
expenditures incurred
during the period.
|
(2)
|
Capital - corporate assets includes office leasehold improvements,
furniture, fixtures
and equipment before recoveries realized from landlord lease
inducements.
|
(3)
|
Other includes non-cash adjustments for the current period's
decommissioning liabilities
and share based compensation.
|
(4)
|
Total capital expenditures - net is considered to be a non-GAAP
measure. Total capital
expenditures - net includes the cash impact of capital expenditures and
property dispositions,
as well as the non-cash capital impacts of corporate acquisitions,
property acquisitions,
adjustments to the Company's decommissioning liabilities, and share
based compensation.
|
The Alder Flats Plant has been developed in two phases with a combined
sales capacity of 220 MMcf/d.The Company completed construction of
Phase 1 of the Alder Flats Plant on time and budget in the second
quarter of 2015. Total net spending on the Alder Flats Plant
(including Phase 1, Phase 2 and related pipelines) in 2015 was $63.6
million. With significant pre-build and flexibility for Phase 2 already
incorporated into the design and footprint at Alder Flats, Bellatrix
remains committed to construction of Phase 2 with an expected on-stream
date being deferred to the first half of 2018 in response to the
current depressed commodity price environment. Remaining capital
spending over the next two fiscal years for Phase 2 of the Alder Flats
Plant net to Bellatrix's interest is estimated at approximately $50
million.
Non-Cash Impairment
As a result of the continued weakness in oil and natural gas prices, and
the depressed outlook for commodity prices, Bellatrix recognized $346.4
million non-cash after tax impairment for the quarter ended December
31, 2015. These non-cash charges did not affect the Company's cash
flows. Additional details regarding the non-cash impairment charges
are available in the Company's 2015 Year End Management Discussion &
Analysis.
Undeveloped land
At December 31, 2015, Bellatrix had approximately 326,235 undeveloped
acres of land in Alberta, British Columbia, and Saskatchewan.
FINANCIAL REVIEW
Cash Flow from Operating Activities, Funds Flow from Operations,
Adjusted Net Profit (Loss) and Net Profit (Loss)
|
|
Three months ended
December 31,
|
Year ended
December 31,
|
($000s, except per share amounts)
|
2015
|
2014
|
2015
|
2014
|
Funds flow from operations
|
29,653
|
61,757
|
109,485
|
270,753
|
|
Basic ($/share)
|
0.15
|
0.32
|
0.57
|
1.48
|
|
Diluted ($/share)
|
0.15
|
0.32
|
0.57
|
1.46
|
Cash flow from operating activities
|
42,033
|
90,459
|
103,075
|
294,828
|
|
Basic ($/share)
|
0.22
|
0.47
|
0.54
|
1.61
|
|
Diluted ($/share)
|
0.22
|
0.47
|
0.54
|
1.59
|
Adjusted net profit (loss)
|
(8,587)
|
58,982
|
(53,244)
|
158,533
|
|
Basic ($/share)
|
(0.04)
|
0.31
|
(0.28)
|
0.87
|
|
Diluted ($/share)
|
(0.04)
|
0.31
|
(0.28)
|
0.86
|
Net profit (loss)
|
(356,631)
|
54,830
|
(444,208)
|
163,123
|
|
Basic ($/share)
|
(1.86)
|
0.29
|
(2.31)
|
0.89
|
|
Diluted ($/share)
|
(1.86)
|
0.29
|
(2.31)
|
0.88
|
The overall weak global commodity price environment continued through
the fourth quarter of 2015 significantly impacting funds flow from
operations and the adjusted net profit (loss) of the Company.
Management believes that, in addition to cash flow from operating
activities, funds flow from operations is a useful supplemental measure
as it demonstrates the Company's ability to generate the cash necessary
to fund future capital investments and to repay debt. Funds flow from
operations is calculated as cash flow from operating activities,
excluding decommissioning costs incurred and changes in non-cash
working capital incurred.
Bellatrix generated funds flow from operations of $29.7 million ($0.15
per basic and diluted share) in the fourth quarter of 2015, a decrease
of 52% from $61.8 million ($0.32 per basic and diluted share) generated
in the comparative 2014 period. Bellatrix's cash flow from operating
activities for the three months ended December 31, 2015 decreased by
54% to $42.0 million ($0.22 per basic and diluted share) from $90.5
million ($0.47 per basic and diluted share) generated in the fourth
quarter of 2014.
Bellatrix generated funds flow from operations of $109.5 million ($0.57
per basic and diluted share) in the year ended December 31, 2015, a
decrease of 60% from $270.8 million ($1.48 per basic share and $1.46
per diluted share) generated in 2014. Bellatrix's cash flow from
operating activities for the year ended December 31, 2015 decreased by
65% to $103.1 million ($0.54 per basic and diluted share) from $294.8
million ($1.61 per basic share and $1.59 per diluted share) generated
during the 2014 year.
Management believes that, in addition to net profit (loss), adjusted net
profit (loss) is a useful supplemental measure as it reflects the
underlying performance of Bellatrix's business activities by excluding
the after tax effect of non-cash commodity contracts mark-to-market
gains and losses, unrealized foreign exchange gains and losses,
non-cash impairment charges and non-cash one time charges, as
applicable, that may significantly impact net profit (loss) from period
to period.
Adjusted Net Profit (Loss)
|
|
|
|
|
|
Three months ended
December 31,
|
Year ended
December 31,
|
($/boe)
|
2015
|
2014
|
2015
|
2014
|
Net profit (loss)
|
(356,631)
|
54,830
|
(444,208)
|
163,123
|
Add (deduct) non-operating items:
|
|
|
|
|
Unrealized (gain) loss on commodity contracts
|
(6,522)
|
(5,277)
|
(12,942)
|
(16,933)
|
|
Unrealized (gain) loss on foreign exchange
|
8,753
|
-
|
36,556
|
-
|
|
Impairment
|
474,542
|
10,813
|
511,954
|
10,813
|
|
Tax impact on non-operating items
|
(128,728)
|
(1,384)
|
(144,604)
|
1,530
|
Adjusted net profit (loss)
|
(8,587)
|
58,982
|
(53,244)
|
158,533
|
For the three months ended December 31, 2015, Bellatrix recognized an
adjusted net loss of $8.6 million ($0.04 per basic and diluted share),
compared to an adjusted net profit of $59.0 ($0.31 per basic and
diluted share) in the comparative 2014 period. Bellatrix recognized
net loss of $356.6 million ($1.86 per basic share and diluted share) in
the fourth quarter of 2015, compared to a net profit of $54.8 million
($0.29 per basic share and diluted share) in the fourth quarter of
2014.
For the year ended December 31, 2015, Bellatrix recognized an adjusted
net loss of $53.2 million ($0.28 per basic and diluted share), compared
to an adjusted net profit of $158.5 ($0.87 per basic and $0.86 per
diluted share) in 2014. Bellatrix recognized net loss of $444.2
million ($2.31 per basic share and diluted share) for the year ended
December 31, 2015, compared to a net profit of $163.1 million ($0.89
per basic share and $0.88 per diluted share) in 2014.
Operating Netback - Corporate
|
|
|
|
|
|
Three months ended
December 31,
|
Year ended
December 31,
|
($/boe)
|
2015
|
2014
|
2015
|
2014
|
Sales (1)
|
19.25
|
32.95
|
22.03
|
41.99
|
Production
|
(6.87)
|
(9.57)
|
(7.86)
|
(8.64)
|
Transportation
|
(0.72)
|
(1.05)
|
(1.13)
|
(1.17)
|
Royalties
|
(0.86)
|
(5.33)
|
(2.21)
|
(7.18)
|
Operating netback before risk management
|
10.80
|
17.00
|
10.83
|
25.00
|
Risk management gain (loss)
|
1.41
|
2.43
|
0.47
|
(2.30)
|
Operating netback after risk management
|
12.21
|
19.43
|
11.30
|
22.70
|
(1)
|
Sales includes other income
|
Operating netback before commodity price risk management contracts for
crude oil, condensate, NGLs, and natural gas during the fourth quarter
of 2015 averaged $10.80/boe, a decrease of 36% from the $17.00/boe
realized during the same period in 2014. For the year ended December
31, 2015, the corporate operating netback (before commodity risk
management contracts) was $10.83/boe, a decrease of 57% compared to
$25.00/boe in the 2014 year.
Total revenue decreased by 45% to $72.1 million for the three months
ended December 31, 2015, compared to $130.2 million realized in the
fourth quarter of 2014. Total revenue from crude oil, condensate, and
NGLs contributed 40% of total fourth quarter 2015 revenue before other
income, royalties, and commodity price risk management contracts,
compared to 48% in the three months ended December 31, 2014.
In the three months ended December 31, 2015, production expenses totaled
$25.7 million ($6.87/boe), compared to $37.8 million ($9.57/boe)
recorded in the same period of 2014. Production expenses totaled
$118.9 million ($7.86/boe) for the year ended December 31, 2015,
compared to $120.1 million ($8.64/boe) in the 2014 year. The reduction
in production expenses between the three months and year ending
December 31, 2015 from December 31, 2014, was primarily attributable to
cost reductions realized through the operation of the Alder Flats Plant
and continued field optimization work. Increased facility operatorship
and optimization work have allowed the Company to exceed production
expense guidance in 2015.
For the three months ended December 31, 2015, Bellatrix incurred
royalties of $3.2 million, compared to $21.0 million in the fourth
quarter of 2014. Overall royalties as a percentage of revenue (after
transportation costs) in the fourth quarter of 2015 were 5% compared to
17% in the comparative 2014 period. Lower average corporate royalty
rates period over period include the impact from lower commodity prices
as well as increased GCA credits associated with significant
infrastructure and facilities investments by Bellatrix. In the fourth
quarter of 2015 adjustments to Crown royalty credits of $0.43/boe were
recorded.
In the year ended December 31, 2015, royalties incurred totaled $33.5
million, compared to $99.8 million incurred in the 2014 year. Overall
royalties as a percentage of revenue (after transportation costs) in
2015 were 11% compared with 18% in 2014. Lower average corporate
royalty rates period over period include the impact from lower
commodity prices as well as increased GCA credits associated with
significant infrastructure and facilities investments by Bellatrix.
Subsequent to year end the Government of Alberta completed its oil and
gas royalty review, and announced a new Modernization Royalty Framework
("MRF") which included, for conventional activity, no changes to the
royalty structure of wells drilled prior to 2017 for a 10-year period
from the MRF implementation date and improved transparency concerning
disclosure of royalty information. Further information from the
Government of Alberta is scheduled to be provided by March 31, 2016.
While the new MRF appears constructive, the impact on future investment
decisions cannot be fully understood until the details are released.
Commodity Prices
Average Commodity Prices
|
|
|
|
|
|
|
|
Three months ended
December 31,
|
Year ended
December 31,
|
|
2015
|
2014
|
% Change
|
2015
|
2014
|
% Change
|
|
|
|
|
|
|
|
Exchange rate (CDN$/US$1.00)
|
1.3347
|
1.1361
|
17
|
1.2764
|
1.1045
|
16
|
|
|
|
|
|
|
|
Crude oil:
|
|
|
|
|
|
|
|
WTI (US$/bbl)
|
42.16
|
73.20
|
(42)
|
48.76
|
92.21
|
(47)
|
|
Canadian Light crude blend ($/bbl)
|
52.55
|
74.37
|
(29)
|
57.45
|
93.99
|
(39)
|
Bellatrix's average prices ($/bbl)
|
|
|
|
|
|
|
|
Crude oil and condensate
|
48.76
|
71.92
|
(32)
|
54.34
|
91.41
|
(41)
|
|
NGLs (excluding condensate)
|
12.99
|
31.26
|
(58)
|
14.16
|
42.74
|
(67)
|
|
Total crude oil and NGLs
|
25.88
|
50.17
|
(48)
|
30.41
|
67.47
|
(55)
|
|
Crude oil and condensate (including risk management (1))
|
58.67
|
86.96
|
(33)
|
58.76
|
86.81
|
(32)
|
|
|
|
|
|
|
|
Natural gas:
|
|
|
|
|
|
|
NYMEX (US$/mmbtu)
|
2.23
|
3.83
|
(42)
|
2.63
|
4.26
|
(38)
|
AECO daily index ($/mcf)
|
2.46
|
3.60
|
(32)
|
2.69
|
4.50
|
(40)
|
AECO monthly index ($/mcf)
|
2.65
|
4.01
|
(34)
|
2.77
|
4.41
|
(37)
|
|
Bellatrix's average price ($/mcf)
|
2.66
|
4.01
|
(34)
|
2.95
|
4.77
|
(38)
|
|
Bellatrix's average price (including risk management (1)) ($/mcf)
|
2.75
|
4.08
|
(33)
|
2.94
|
4.39
|
(33)
|
(1)
|
Per unit metrics including risk management include realized gains or
losses on commodity contracts and exclude
unrealized gains or losses on commodity contracts.
|
Continuing through 2015, record global oil production from the
Organization of the Petroleum Exporting Countries ("OPEC") and non-OPEC
countries continued to climb, reaching approximately 97 million barrels
per day in December 2015. This increased production has oversupplied
the market and led to a supply-demand imbalance in the global
marketplace, which has resulted in the price deterioration for crude
oil. Shale production in Canada and the United States has pushed
United States oil inventories to record levels despite higher levels of
refinery utilization which has put additional downward pressure on oil
pricing. This pricing impact has been in part offset by the relative
weakness in the Canadian dollar compared to the United States dollar
and a slight narrowing of the WTI/Canadian light crude oil
differential. Production of natural gas in North America has also
reached record levels. This record production has more than offset
higher Mexican exports and natural gas demand for power in the United
States which had increased year over year as a result of a number of
coal-fired power plant retirements. Further impacting pricing has been
a continued increase in natural gas storage levels in both Canada and
the United States near capacity at the end of the injection season.
For crude oil and condensate, Bellatrix realized an average price of
$48.76/bbl before commodity price risk management contracts during the
three months ended December 31, 2015, a decrease of 32% from the
average price of $71.92/bbl received in the fourth quarter of 2014. By
comparison, the Canadian Light crude blend price decreased by 29% and
the average WTI crude oil benchmark price decreased by 42% between the
fourth quarters of 2014 and 2015. Bellatrix's realized average price
before commodity price risk management contracts for the year ended
December 31, 2015 was $54.34/bbl, a decrease of 41% from $91.41/bbl
realized in 2014.
Bellatrix's average realized price for NGLs (excluding condensate)
decreased by 58% to $12.99/bbl during the fourth quarter of 2015,
compared to $31.26/bbl received in the three months ended December 31,
2014. NGLs pricing in Western Canada continues to remain challenged
given individual market conditions for products such as propane and
butane. Butane and propane pricing has been impacted by higher product
supply from key United States natural gas plays which has negatively
impacted the overall supply-demand balance. Propane has also been
impacted by logistical issues in Western Canada which has curtailed
deliveries to major demand markets. Propane inventories continue to
remain at record levels across North America. Late in 2015, realized
propane prices improved as winter seasonal demand had risen in key
markets. Bellatrix's average realized price for NGLs (excluding
condensate) decreased by 67% to $14.16/bbl during 2015, compared to
$42.74/bbl received in 2014.
Bellatrix's natural gas sales are priced with reference to the daily or
monthly AECO indices. Bellatrix's natural gas sold has higher heat
content than the industry average, which results in slightly higher
realized prices per mcf than the daily AECO index. During the three
months ended December 31, 2015, the AECO daily reference price
decreased by 32% and the AECO monthly reference price decreased by 34%
compared to the fourth quarter of 2014. Bellatrix's natural gas
average sales price before commodity price risk management contracts
for the three months ended December 31, 2015 decreased by 34% to
$2.66/mcf compared to $4.01/mcf in the fourth quarter of 2014.
As at March 15, 2016, Bellatrix was party to a series of commodity price
risk management contracts for 2016 and 2017 as summarized below:
|
|
|
|
|
Product
|
Financial Contract
|
Period
|
Volume
|
Average Price (1)
|
Natural gas
|
Fixed price swap
|
January 1, 2016 to December 31, 2016
|
80 MMcf/d
|
$3.08/mcf
|
Natural gas
|
Fixed price swap
|
January 1, 2017 to December 31, 2017
|
55 MMcf/d
|
$3.35/mcf
|
Natural gas
|
AECO basis swap
|
January 1, 2016 to March 31, 2016
|
44 MMcf/d
|
US$0.76/mcf
|
Natural gas
|
AECO basis swap
|
November 1, 2016 to December 31, 2016
|
44 MMcf/d
|
US$0.76/mcf
|
Natural gas
|
AECO basis swap
|
January 1, 2017 to December 31, 2017
|
40 MMcf/d
|
US$0.77/mcf
|
Crude oil
|
WTI basis swap (2)
|
January 1, 2016 to September 30, 2016
|
2,000 bbl/d
|
US$4.05/bbl
|
Crude oil
|
WTI basis swap (2)
|
October 1, 2016 to December 31, 2016
|
1,500 bbl/d
|
US$4.05/bbl
|
(1)
|
The conversion of $/GJ to $/mcf is based on an average corporate heat
content rate of 40.4Mj/m3 in
2016 & 2017.
|
(2)
|
Settled on the monthly average Mixed Sweet Blend ("MSW") Differential to
WTI. The MSW differential
refers to the discount between WTI and the mixed sweet crude grade at
Edmonton, calculated on a
monthly weighted average basis.
|
Additionally, Bellatrix entered into United States dollar foreign
exchange forward contracts for US$62.5 million with a value date of May
2020, at $1.3078 CDN/USD.
Long Term Debt
Senior Notes
At December 31, 2015, the Company has US$250 million of 8.50% senior
unsecured notes maturing on May 15, 2020 (the "Senior Notes")
outstanding. Interest on the Senior Notes is payable semi-annually and
the Senior Notes are redeemable at the Company's option, in whole or in
part, commencing on May 15, 2017 at specified redemption prices.
Bank Debt
Bellatrix maintains extendible revolving reserves-based credit
facilities with a syndicate of lenders, which is currently comprised of
a $65 million operating facility provided by a Canadian chartered bank
and a $475 million syndicated facility provided by nine financial
institutions (the "Credit Facilities"). The Credit Facilities currently
mature on May 30, 2017, but the Company is permitted to request, and
has requested, an extension to May 30, 2019. Availability under the
Credit Facilities is governed by a borrowing base, which is
re-determined by the lenders, in their sole discretion, on a
semi-annual basis on or before May 31 and November 30 of each year,
taking into consideration the estimated value of the Company's oil and
natural gas properties in accordance with the lenders' customary
practices for oil and gas loans. The semi-annual review of the
borrowing base under the Company's revolving Credit Facilities was most
recently approved at $540 million in November 2015. The next borrowing
based redetermination is scheduled to occur on or before May 31, 2016.
At December 31, 2015, the Credit Facilities include a single financial
covenant that being the Company's Senior Debt to EBITDA ratio must not
exceed 3.5 times for the fiscal quarters ending on or before March 31,
2017. Commencing with the second quarter of 2017, the maximum Senior
Debt to EBITDA ratio will return to 3.0 times (3.5 times for the two
fiscal quarters immediately following a material acquisition). As at
December 31, 2015, the Senior Debt to EBITDA ratio was 2.75 times which
would have allowed the Company to incur $109.8 million of additional
Senior Debt while maintaining compliance with the Senior Debt to EBITDA
covenant.
Notes:
(1) "EBITDA" refers to earnings before interest, taxes, depreciation and
amortization. EBITDA is calculated based on terms and definitions set
out in the agreement governing the Credit Facilities which adjusts net
income for financing costs, certain specific unrealized and non-cash
transactions, and acquisition and disposition activity and is
calculated based on a trailing twelve month basis. EBITDA for the
trailing twelve months ended December 31, 2015 was $147.0 million.
(2) "Senior Debt" is defined as Consolidated Total Debt, excluding any
unsecured or subordinated debt (Senior Notes). "Consolidated Total
Debt" is defined as determined on a consolidated basis in accordance
with GAAP and without duplication, all Debt of the Borrower. The
Company's calculation of Consolidated Total Debt excludes
decommissioning liabilities and deferred tax liability. The calculation
includes outstanding letters of credit, bank debt, Senior Notes,
finance lease obligations, deferred lease inducements and net working
capital deficiency (excess), calculated as working capital deficiency
excluding current commodity contract assets and liabilities.
CONFERENCE CALL INFORMATION
A conference call to discuss Bellatrix's annual financial and reserves
results and address investor questions will be held on March 16, 2016
at 9:00 am MT / 11:00 am ET. To participate, please call toll-free
1-888-231-8191 or 647-427-7450. The conference call will also be
recorded and available until March 23, 2016 by calling 1-855-859-2056
or 403-451-9481 and entering passcode 48923171 followed by the pound
sign.
Bellatrix Exploration Ltd. is a Western Canadian based growth oriented
oil and gas company engaged in the exploration for, and the
acquisition, development, and production of oil and natural gas
reserves in the provinces of Alberta, British Columbia, and
Saskatchewan.
Common shares of Bellatrix trade on the Toronto Stock Exchange and on
the New York Stock Exchange under the symbol "BXE".
NON-GAAP measures
This press release 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
GAAP as an indicator of the Company's performance. Therefore reference
to the non-GAAP measures of funds flow from operations, or funds flow
from operations per share may not be comparable with the calculation of
similar measures for other entities. Management uses funds flow from
operations to analyze operating performance and leverage and considers
funds flow from operations to be a key measure as it demonstrates the
Company's ability to generate the cash necessary to fund future capital
investments and to repay debt. Funds flow from operations is
calculated as cash flow from operating activities, excluding
decommissioning costs incurred and changes in non-cash working capital
incurred. 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.
"Total net debt" and "adjusted working capital deficiency (excess)" are
considered to be non-GAAP measures. Therefore reference to the
non-GAAP measures of total net debt or adjusted working capital
deficiency (excess) may not be comparable with the calculation of
similar measures for other entities. The Company's calculation of
total net debt excludes deferred lease inducements, decommissioning
liabilities, the long-term finance lease obligation, and the deferred
tax liability. Total net debt includes the adjusted working capital
deficiency (excess). The adjusted working capital deficiency (excess)
is a non-GAAP measure calculated as net working capital deficiency
(excess) excluding short-term commodity contract assets and
liabilities, current finance lease obligation, and current deferred
lease inducements. Management believes these measures are useful
supplementary measures of the total amount of current and long-term
debt. A reconciliation between total liabilities under GAAP and total
net debt as calculated by the Company is found in the MD&A.
"Total revenue" is considered to be a non-GAAP measure. Therefore
reference to the non-GAAP measure of total revenue may not be
comparable with the calculation of similar measures for other
entities. The Company's calculation of total revenue includes
petroleum and natural gas sales and other income, and excludes
commodity price risk management.
"Operating netbacks", "adjusted net profit (loss)", and "total capital
expenditures - net" are considered to be non-GAAP measures. Operating
netbacks are calculated by subtracting royalties, transportation, and
operating costs from total revenue. Adjusted net profit (loss) is
calculated by removing unrealized gains and losses on commodity
contracts, net of associated tax impacts, unrealized gains and losses
on foreign exchange, non-cash impairment charges and non-cash one time
charges, net of associated tax impacts, from net profit (loss). Total
capital expenditures - net includes the cash impact of capital
expenditures and property dispositions, as well as the non-cash capital
impacts of corporate acquisitions, adjustments to the Company's
decommissioning liabilities, and share based compensation. The detailed
calculations of operating netbacks are found in the MD&A.
These measures have been described and presented in this news release in
order to provide shareholders and potential investors with additional
information regarding Bellatrix's liquidity and its ability to generate
funds to finance its operations.
FORWARD LOOKING STATEMENTS
Certain information contained in this press release may contain forward
looking statements within the meaning of applicable securities laws.
The use of any of the words "position", "continue", "opportunity",
"expect", "plan", "maintain", "estimate", "assume", "target", "believe"
"forecast", "intend", "strategy", "anticipate", "enhance" and similar
expressions are intended to identify forward-looking statements. More
particularly and without limitation, this document contains
forward-looking statements concerning management's assessment of future
plans, ability to take advantage of future opportunities, drilling
plans and the timing thereof, future development drilling
opportunities, expected timing of completion of Phase II of the Alder
Flats Plant, expected reductions in operating costs as a result of
completion of Phase II of the Alder Flats Plant, Bellatrix's ability to
direct additional production volumes to the Alder Flats Plant during
periods of third party downtime, Bellatrix's continued ability to
redirect volumes to facilities and delivery point unaffected by
curtailments, ability to access additional partner capital under its
joint venture arrangement with Grafton in 2016, Bellatrix's 2016
strategic priorities, 2016 capital expenditure budget, the expectation
that Bellatrix's capital budget will sustain 2016 production estimates,
commodity price risk management strategies, the expectation of
management to revisit its capital budget on a continuous basis, the
nature of expenditures and the method of financing thereof, anticipated
liquidity of the Company and various matters that may impact such
liquidity, expected 2016 production expenses, general and
administrative expenses, royalty rates and operating costs, expected
costs to satisfy drilling commitments and method of funding drilling
commitments, commodity prices and expected volatility thereof,
estimated capital expenditures and wells to be drilled under joint
venture agreements, the ability to fund the 2016 capital expenditure
program utilizing various available sources of capital, expected 2016
production growth, average daily production and exit rate, Bellatrix's
expected share of capital cost for Phase II of the Alder Flats Plant,
expectation that reduced service costs may provide further benefits in
2016, may constitute forward-looking statements under applicable
securities laws. To the extent that any forward-looking information
contained herein constitute a financial outlook, they were approved by
management on March 15, 2016 and are included herein to provide readers
with an understanding of the anticipated funds available to Bellatrix
to fund its operations and readers are cautioned that the information
may not be appropriate for other purposes. Forward-looking statements
necessarily involve risks, including, without limitation, risks
associated with oil and gas exploration, development, exploitation,
production, marketing and transportation, loss of markets, volatility
of commodity prices, currency fluctuations, imprecision of reserve
estimates, environmental risks, competition from other producers,
inability to retain drilling rigs and other services, incorrect
assessment of the value of acquisitions, failure to realize the
anticipated benefits of acquisitions, delays resulting from or
inability to obtain required regulatory approvals, actions taken by the
Company's lenders that reduce the Company's available credit 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 affect Bellatrix's operations and
financial results are included in reports on file with Canadian and
United States 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.
DRILLING LOCATIONS
In this press release, the Company has disclosed certain drilling
locations associated with Bellatrix's interest in the Spirit River
play. Of the 382 drilling locations identified herein, 62 are proved
locations, 28 are probable locations and 292 are unbooked locations.
Proved locations and probable locations are derived from the Sproule
Report (as defined below) and account for drilling locations that have
associated proved and/or probable reserves, as applicable. Unbooked
locations are internal estimates based on the Corporation's prospective
acreage and an assumption as to the number of wells that can be drilled
per section based on industry practice and internal review. Unbooked
locations do not have attributed reserves or resources. Unbooked
locations as disclosed herein have been identified by management as an
estimation of the Company's multi-year drilling activities using
information including applicable geologic, seismic, engineering,
production, pricing assumptions and reserves information. There is no
certainty that Bellatrix will drill all unbooked drilling locations and
if drilled there is no certainty that such locations will result in
additional oil and gas reserves, resources or production. The drilling
locations on which Bellatrix actually drill wells will ultimately
depend upon the availability of capital, regulatory approvals, seasonal
restrictions, oil and natural gas prices, costs, actual drilling
results, additional reservoir information that is obtained and other
factors. While the majority of Bellatrix's unbooked locations are
extensions or infills of the drilling patterns already recognized by
the Company's independent qualified reserves evaluator, other unbooked
drilling locations are farther away from existing wells where
management may have less information about the characteristics of the
reservoir and therefore there may be more uncertainty whether wells
will be drilled in such locations and if drilled there may be more
uncertainty that such wells will result in additional oil and gas
reserves, resources or production.
BARRELS OF OIL EQUIVALENT
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. All boe conversions in this press release are derived
from converting gas to oil in the ratio of six thousand cubic feet of
gas to one barrel of oil. 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.
TYPE CURVE, HALF CYCLE ECONOMICS AND CAPITAL EFFICIENCY
In this press release information relating to the type curve, half cycle
economics and capital efficiency for Bellatrix's Spirit River wells
have been presented. The type curve set forth herein is based on all
Bellatrix operated, Notikewin and Falher B wells drilled between
October 2012 and September 2015, and represents the mean (P50)
performance curve. Half cycle economics are based on Bellatrix's
current expectations of drill, complete, equip and tie-in costs per
well (and excluding land, seismic and related costs). Capital
efficiency is a measure of expected capital expenditures per well based
on half cycle economics divided by average first year production
results (IP365) based on the type curve presented. The type curve and
capital efficiency numbers have been presented to provide readers with
information on the assumptions used for management's budgeting process
and future planning. The half cycle economics and capital efficiencies
may not be achieved on future wells as a result of a number of factors
including the risks identified above under "Forward Looking Statements"
and as such are not reliable indicators of future performance. In
addition, there is no certainty that future wells will generate results
to match historic type curves presented herein. Half cycle economics
and capital efficiencies are not terms that have standardized meanings
and therefore such calculations may not be comparable with the
calculation of similar measures for other entities.
SOURCE Bellatrix Exploration Ltd.
Steve Toth, CFA, Vice President, Investor Relations (403) 750-1270 or Troy Winsor, Investor Relations (800) 663-8072 Copyright CNW Group 2016
Source: Canada Newswire
(March 16, 2016 - 2:05 AM EDT)
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