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Bellatrix Exploration Ltd. Announces Second Quarter 2019 Financial and Operating Results


CALGARY, Alberta, Aug. 07, 2019 (GLOBE NEWSWIRE) — Bellatrix Exploration Ltd. (“Bellatrix”, “we”, “us”, “our” or the “Company”) (TSX: BXE) announces its financial and operating results for the three and six months ended June 30, 2019. This press release contains forward-looking statements. Please refer to our cautionary language on forward-looking statements and the other matters set forth at the end of this press release and the beginning of the Management’s Discussion and Analysis (the “MD&A”) for the three and six months ended June 30, 2019 and 2018. Bellatrix’s unaudited interim condensed financial statements and notes, and the MD&A for the three and six months ended June 30, 2019 and 2018 are available on our website at www.bxe.com, and are filed on SEDAR at www.sedar.com.

Three months ended
June 30,

Six months ended
June 30,

2019 2018 2019 2018
SELECTED FINANCIAL RESULTS
(CDN$000s except share and per share amounts)
Cash flow from operating activities 26,653 12,004 34,179 26,619
Per diluted share (1) $1.58 $2.61 $2.89 $6.11
Adjusted funds flow (2) 11,209 10,142 32,445 24,812
Per diluted share (1) $0.66 $2.21 $2.74 $5.70
Net profit (loss) 3,728 (34,768 ) (15,381 ) (47,669 )
Per diluted share (1) $0.22 ($7.57 ) ($1.30 ) ($10.95 )
Capital – exploration and development 4,908 5,402 25,454 29,634
Total capital expenditures – net (2) 5,114 6,641 29,827 28,715
Credit Facilities 60,459 71,432 60,459 71,432
Second Lien Notes 197,166 197,166
Third Lien Notes 71,847 71,847
Senior Notes 301,435 301,435
Convertible Debentures (liability component) 40,530 40,530
Adjusted working capital deficiency (2) 28,134 16,829 28,134 16,829
Total net debt (2) 357,606 430,226 357,606 430,226
SELECTED OPERATING RESULTS
Total revenue 42,160 54,022 110,643 120,237
Average daily sales volumes
Crude oil, condensate and NGLs (bbl/d) 10,310 10,467 10,492 9,975
Natural gas (mcf/d) 153,640 161,052 155,747 162,309
Total oil equivalent (3) (boe/d) 35,917 37,309 36,450 37,027
Average realized prices
Crude oil and condensate ($/bbl) 71.95 83.93 70.60 80.31
NGLs (excluding condensate) ($/bbl) 13.31 24.70 15.99 25.49
Natural gas ($/mcf) 1.33 1.30 2.09 1.73
Total oil equivalent ($/boe) 12.29 15.71 16.20 17.58
Total oil equivalent (including risk management (4)) ($/boe) 12.76 18.77 16.89 19.71
Selected Key Operating Statistics
Commodity sales ($/boe) 12.29 15.71 16.20 17.58
Other income ($/boe) 0.61 0.20 0.57 0.36
Royalties ($/boe) (0.42 ) (1.80 ) (1.30 ) (1.90 )
Production expenses ($/boe) (6.75 ) (7.55 ) (6.29 ) (7.84 )
Transportation ($/boe) (2.18 ) (2.03 ) (2.29 ) (2.01 )
Operating netback (2) ($/boe) 3.55 4.53 6.89 6.19
Realized gain (loss) on risk management contracts ($/boe) 0.47 3.05 0.69 2.13
Operating netback (2) (including risk management (4)) ($/boe) 4.02 7.58 7.58 8.32

 

Three months ended
June 30,

Six months ended
June 30,

SHARE STATISTICS 2019 2018 2019 2018
COMMON SHARES
Common shares outstanding (5) 40,863,009 5,146,915 40,863,009 5,146,915
Weighted average shares (1) 16,865,988 4,590,528 11,832,082 4,353,996
SHARE TRADING STATISTICS
TSX and Other (6) (7)
(CDN$, except volumes) based on intra-day trading
High 4.50 26.04 8.88 26.64
Low 0.88 15.36 0.88 14.88
Close 0.90 15.84 0.90 15.84
Average daily volume 122,562 73,280 88,015 58,643

(1) On June 4, 2019, Bellatrix completed a 12 for 1 common share consolidation (the “Consolidation”), which has been reflected in the calculation of cash flow from operating activities per share, funds flow from operations per share, and net profit (loss) per share for the three and six month periods ended June 30, 2019 and 2018.  After giving effect to the Consolidation, basic weighted average shares for the three and six months ended June 30, 2019 were 16,865,988 (2018: 4,590,528) and 11,832,082 (2018: 4,353,996), respectively. In computing weighted average diluted profit (loss) per share, weighted average diluted cash flow from operating activities per share, and weighted average diluted adjusted funds flow per share for the three and six months ended June 30, 2019, after giving effect to the Consolidation, a total of nil (2018: nil) common shares were added to the denominator as a consequence of applying the treasury stock method to the Company’s outstanding share options, a total of nil (2018: nil) common shares issuable on conversion of the Company’s outstanding 6.75% convertible unsecured subordinated debentures (the “Convertible Debentures”) were added to the denominator, and a total of nil (2018: nil) common shares issuable on exercise of the Company’s outstanding warrants were added to the denominator for the three and six month period resulting in diluted weighted average common shares outstanding of 16,865,988 (2018: 4,590,528) and 11,832,082 (2018: 4,353,996), respectively.

(2) The terms “adjusted funds flow”, “adjusted funds flow per share”, “total net debt”, “adjusted working capital deficiency”, “operating netbacks”, and “total capital expenditures – net” do not have standard meanings under generally accepted accounting principles (“GAAP”). Refer to “Non-GAAP measures” disclosed at the end of this Press Release.

(3) See “Barrels of Oil Equivalent” at the end of this Press Release.

(4) The Company has entered into various commodity price risk management contracts which are considered 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 the 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.

 (5) After giving effect to the Consolidation, fully diluted common shares outstanding for the three and six months ended June 30, 2019 were 42,984,531 (2018: 5,797,462) and 42,984,531 (2018: 5,797,462), respectively. This includes 78,360 (2018: 136,144) and 78,360 (2018: 136,144), respectively, of share options outstanding, nil (2018: 514,403) and nil (2018: 514,403), respectively, of shares issuable on conversion of the Convertible Debentures, and 2,043,162 (2018: nil) and 2,043,162 (2018: nil), respectively, of warrants outstanding. Shares issuable on conversion of the Convertible Debentures are calculated by dividing the $50 million principal amount of the Convertible Debentures by the post-Consolidation conversion price of $97.20 per share.

(6) TSX and Other includes the trading statistics for the Toronto Stock Exchange (“TSX”) and other Canadian trading markets.

(7) Bellatrix voluntarily delisted the Company’s common shares from the New York Stock Exchange (the “NYSE”) effective February 12, 2019. On May 8, 2019, Bellatrix filed a Form 15F with the United States Securities and Exchange Commission to voluntarily terminate the registration of its securities and its reporting obligations under Section 13(a) and Section 15(d) of the United States Securities Exchange Act of 1934, as amended (“Exchange Act”). Bellatrix’s Exchange Act reporting obligations were immediately suspended upon filing the Form 15F. The termination of Bellatrix’s registration and reporting obligations under Section 13(a) and Section 15(d) of the Exchange Act was effective 90 days after filing. Bellatrix will continue to comply with its Canadian continuous disclosure obligations and its common shares will continue to trade on the TSX.

FINANCIAL & OPERATIONAL HIGHLIGHTS

Bellatrix’s second quarter 2019 operational and financial performance included the following achievements:

  • Production volumes in the second quarter of 2019 averaged 35,917 boe/d (71% natural gas weighted). Average production volumes in the first six months of 2019 represented 4% outperformance compared with the mid-point of Bellatrix’s 2019 full year daily average production guidance range (34,000 to 36,000 boe/d).
  • Production expenses in the second quarter of 2019 were $22.1 million ($6.75/boe), compared with first quarter 2019 production expenses of $19.4 million ($5.83/boe). Second quarter production expenditures of $22.1 million ($6.75/boe) included $2.3 million ($0.71/boe) of turnaround costs at Bellatrix operated facilities during the quarter.
  • Total net debt at June 30, 2019 of $357.6 million declined by $90.7 million from March 31, 2019 balances following the completion of the recapitalization transaction (the “Recapitalization Transaction”) on June 4, 2019. At June 30, 2019, borrowings under our syndicated revolving credit facilities (the “Credit Facilities”) were $60.5 million, with approximately $29.5 million of undrawn capacity (approximately 33% undrawn) against total commitments of $90 million, before deducting outstanding letters of credit of $13.5 million that reduce the amount otherwise available to be drawn on the Credit Facilities.

In summary, Bellatrix delivered the following operational performance in the first half of 2019 relative to guidance expectations:

First Half 2019
Results
2019 Annual
Guidance (1)
Actual Results
Versus Guidance
Average daily production (boe/d) 36,450 35,000 4  %
Average product mix
Natural gas (%) 71 72 (1 )%
Crude oil, condensate and NGLs (%) 29 28 4  %
Capital Expenditures ($000’s)
Total net capital expenditures(2) 25,454 45,000 n/a

(1) 2019 Annual guidance metrics represent the mid-point of the previously set guidance range (January 15, 2019) where applicable.

(2) Excludes corporate asset additions and property acquisitions and dispositions.

RECAPITALIZATION TRANSACTION COMPLETED

As previously announced, Bellatrix completed a recapitalization transaction (collectively, the “Recapitalization Transaction”) on June 4, 2019, designed to improve and strengthen the Company’s overall financial position, which included among others, the following key elements:

  • Bellatrix’s total debt was reduced by approximately $110 million.
  • The Company’s previously outstanding 8.5% senior unsecured notes due 2020 (the “Senior Notes”) in the aggregate principal amount of approximately US$145.8 million, plus all accrued and unpaid interest, were exchanged for, (i) US$50 million of new second lien notes due September 2023 (the “Second Lien Notes”), (ii) US$54.9 million of new third lien notes due December 2023 (the “Third Lien Notes”) and (iii) new common shares of Bellatrix representing approximately 51% of the common shares of Bellatrix outstanding following the implementation of the Recapitalization Transaction.
  • The Company’s previously outstanding 6.75% Convertible Debentures in the aggregate principal amount of $50 million, plus all accrued and unpaid interest, were exchanged for new common shares of Bellatrix representing approximately 32.5% of the common shares of Bellatrix outstanding following the implementation of the Recapitalization Transaction.
  • As a result of the extinguishment of the Senior Notes and Convertible Debentures, the Company has no maturity dates in respect of any non-revolving debt until 2023. The indenture governing the Third Lien Notes provides for a special repayment of principal in the amount of US$4.9 million on December 2, 2019.
  • The Company’s common shareholders prior to the implementation of the Recapitalization Transaction retained their common shares, subject to the 12 for 1 Consolidation, with such common shares representing approximately 16.5% of the common shares of Bellatrix outstanding following the implementation of the Recapitalization Transaction.
  • In connection with the implementation of the Recapitalization Transaction, Bellatrix extended the revolving period under its Credit Facilities by one year with the term-out period expiring one year after the end of the revolving period, such that the revolving period now expires on May 30, 2020, and is extendible annually thereafter at the option of the Company, subject to lender approval. As part of the renewal of the Credit Facilities, the borrowing base under the Credit Facilities was reconfirmed at $100 million (unchanged), with total commitments set at $90 million. The next semi-annual redetermination is scheduled for November 2019.
  • Concurrently with the implementation of the Recapitalization Transaction, Bellatrix continued from the Business Corporations Act (Alberta) to the Canada Business Corporations Act.

FIRST HALF 2019 OPERATIONAL ACTIVITIES AND PERFORMANCE

Bellatrix completed the majority of its first half capital program during the first three months of the year, in advance of the seasonal spring break up period that curtails activity in the second quarter. During the first quarter, Bellatrix drilled five gross (5.0 net) operated wells, including four Spirit River wells and one Cardium well.  No wells were drilled during the second quarter of 2019.

Bellatrix continues to focus on improving capital efficiencies from its invested capital through the combination of reduced capital costs and improved well performance.  All five operated wells drilled in 2019 were drilled off existing pad sites. The ability to utilize existing above ground infrastructure, access roads, and gathering systems provides a competitive advantage for the Company as it seeks to maximize long term returns from its development program. All-in average Spirit River well costs (drill, complete, equip and tie-in) in 2019 have averaged approximately $3.4 million, consistent with the cost performance achieved in 2018. Average well performance from the Company’s 2019 Spirit River well program to date have outperformed expected results by approximately 15% on an IP150 basis.

The Company’s 2019 Spirit River drilling program has delivered the following initial production rates:

  • 102/04-02-045-11W5 Spirit River well (100% working interest) well IP160: 5.2 MMcf/d
  • 100/01-13-044-10W5 Spirit River well (100% working interest) well IP115: 8.1 MMcf/d
  • 102/04-35-044-10W5 Spirit River well (100% working interest) well IP130: 6.2 MMcf/d
  • 103/02-35-044-10W5 Spirit River well (100% working interest) well IP125: 7.2 MMcf/d

Total natural gas liquid (“NGL”) recoveries (including plant condensate) at the Bellatrix O’Chiese Nees-Ohpawganu’ck deep-cut plant at Alder Flats (the “Alder Flats Plant”) remain strong, with NGL sales yields of approximately 66 bbl/MMcf in the first half of 2019, compared to first half 2018 total sales yields of approximately 55 bbl/MMcf. Given continued strong liquids recoveries, Bellatrix’s corporate liquids weighting has averaged 29% year to date, resulting in a commensurate improvement in our 2019 full year average guidance expectation to 29%, up from 28% previously. During the second quarter, Bellatrix completed a planned five-day turnaround at the Alder Flats Plant, which was completed safely, on-time, and on-budget.

Exploration and development capital expenditures invested during the second quarter were $4.9 million. First half 2019 exploration and development capital expenditures were $25.5 million.

COMMODITY PRICE RISK MANAGEMENT PROTECTION AND MARKET DIVERSIFICATION INITIATIVES

Bellatrix maintains strong commodity price risk management and market diversification coverage through 2020, which is expected to reduce the impact of commodity price volatility on our business. Bellatrix has approximately 65 MMcf/d of natural gas volumes hedged in the last six months of 2019 at an average fixed price of approximately $1.75/mcf, representing approximately 50% of 2019 daily average natural gas volumes (based on the mid-point of 2019 full year daily average production guidance). Bellatrix has diversified its natural gas price exposure through physical sales contracts that give the Company exposure to the Dawn, Chicago, and Malin natural gas pricing hubs. This long-term diversification strategy reduces Bellatrix’s exposure to AECO pricing on approximately 50% of the Company’s natural gas volumes.

In combination, market diversification sales and fixed price hedges cover approximately 50% to 70% of natural gas volumes through October 2020 (based on the mid-point of 2019 full year daily average production guidance). A summary of Bellatrix’s commodity price risk management contracts as at July 31, 2019 include:

Product Financial Contract Period Volume Average Price (1)
Natural gas Fixed price swap July 1, 2019 to October 31, 2019 62 MMcf/d $1.77/mcf (2)
Natural gas Fixed price swap July 1, 2019 to October 31, 2019 18 MMcf/d $2.01/mcf
Natural gas Fixed price swap July 1, 2019 to September 30, 2019 9 MMcf/d $1.15/mcf
Natural gas Fixed price swap July 1, 2019 to October 31, 2019 9 MMcf/d $1.18/mcf
Natural gas Fixed price swap November 1, 2019 to March 31, 2020 9 MMcf/d $2.33/mcf
Natural gas AECO/NYMEX basis swap November 1, 2019 to March 31, 2020 20,000 MMBtu/d -US$1.05/MMBtu
Crude oil Sold C$WTI call July 1, 2019 to December 31, 2019 500 bbl/d $80.00/bbl
Crude oil Sold C$WTI call July 1, 2019 to December 31, 2019 500 bbl/d $95.00/bbl
Crude oil Sold C$WTI call January 1, 2020 to December 31, 2020 1,000 bbl/d $77.90/bbl

(1) Prices for natural gas fixed price swap contracts assume a conversion of $/GJ to $/mcf based on an average corporate heat content rate of 40.0Mj/m3.

(2) Net Canadian equivalent price is calculated as the US$ fixed price, less the contracted differential, adjusted to Canadian dollars at an assumed exchange rate of $1.33 USD/CAD.

In summary, Bellatrix’s market diversification contracts include a total of 75,000 MMBtu/d of market exposure as follows:

Product Market End Date Volume
Natural gas Chicago October 31, 2020 30,000 MMBtu/d
Natural gas Dawn October 31, 2020 30,000 MMBtu/d
Natural gas Malin October 31, 2020 15,000 MMBtu/d

 

OPERATIONAL AND FINANCIAL SUMMARY

  • Production volumes in the second quarter of 2019 averaged 35,917 boe/d (71% natural gas weighted), down modestly from first quarter 2019 volumes of 36,991 boe/d. First half 2019 average production volumes of 36,450 boe/d represent 4% outperformance compared with the mid-point of Bellatrix’s full year average production guidance range (34,000 to 36,000 boe/d).
  • Adjusted funds flow generated in the three months ended June 30, 2019 was $11.2 million ($0.66 per basic and diluted share) compared to $21.2 million ($3.12 per basic and diluted share) generated in the first quarter of 2019.
  • Exploration and development capital expenditures were $4.9 million in the second quarter of 2019. Total exploration and development capital expenditures for the first six months of 2019 were $25.5 million, in line with budget expectations and the full year guidance range of $40 to $50 million. The majority of first quarter of 2019 capital expenditures were allocated to drilling, completion and equipping activity.
  • Bellatrix’s borrowings under its Credit Facilities were $60.5 million, and total net debt was $357.6 million at June 30, 2019. At June 30, 2019, Bellatrix had approximately $29.5 million of undrawn capacity (approximately 33% undrawn) against total commitments of $90 million, before deducting outstanding letters of credit of $13.5 million that reduce the amount otherwise available to be drawn on the Credit Facilities.
  • For the quarter ended June 30, 2019, Bellatrix’s Senior Debt to EBITDA (as defined in the MD&A) ratio was 4.34 times, below the financial covenant of 5.0 times as permitted by the agreement governing the Credit Facilities and the indenture governing the Second Lien Notes due 2023, and Bellatrix’s First Lien Debt to EBITDA (as defined in the MD&A) ratio was 1.52 times, below the financial covenant of 3.0 times as permitted by the agreement governing the Credit Facilities.
  • Total revenue was $42.2 million for the second quarter of 2019, down 38% compared to $68.5 million in the first quarter of 2019, as lower NGL and natural gas prices and decreased sales volumes more than offset higher oil prices over the comparative periods.
  • The corporate royalty rate in the three months ended June 30, 2019 averaged 4% of sales (after transportation), a decrease from the 12% average rate in the first quarter of 2019 due to additional gas cost allowance (“GCA”) credits received.
  • Production expenses in the second quarter of 2019 were $22.1 million ($6.75/boe) compared with first quarter 2019 production expenses of $19.4 million ($5.83/boe). Second quarter production expenditures included $2.3 million ($0.71/boe) of turnaround expenses at Bellatrix operated facilities during the second quarter of 2019.
  • Our corporate operating netback (including risk management) realized for the three months ended June 30, 2019 was $4.02/boe, down 64% compared with $11.07/boe realized in the first quarter of 2019. This change reflects predominantly lower average commodity sales prices and lower volumes over the comparable periods.
  • Net general and administrative (“G&A”) expenses (after capitalized costs and recoveries) for the three months ended June 30, 2019 were $3.8 million ($1.15/boe) compared with the $5.1 million ($1.52/boe) in the first quarter of 2019. Net G&A expenses in the second quarter of 2019 included the reclassification of $1.3 million of previously accrued G&A expenses to transaction costs, which were related to the Recapitalization Transaction that closed June 4, 2019.
  • Bellatrix recorded net income for the three months ended June 30, 2019 of $3.7 million compared to a net loss of $19.1 million for the three months ended March 31, 2019. The decrease in loss period over period is primarily due to the gain on closing of the Recapitalization Transaction recorded in the second quarter of 2019.
  • As at June 30, 2019, Bellatrix had approximately 130,243 net undeveloped acres of land principally in Alberta.
  • As at June 30, 2019, Bellatrix had approximately $1.37 billion in tax pools available for deduction against future income.
  • Bellatrix maintained a strong Liability Management Rating of 8.48 in Alberta versus an industry average of 4.84 as at July 6, 2019.

OUTLOOK & 2019 CORPORATE GUIDANCE

First half 2019 average production volumes of 36,450 boe/d are in line with the high end of the 2019 full year average daily production guidance range and within management expectations given the front end weighted capital program for the year. Bellatrix is announcing today a minor update to its full year 2019 guidance metrics as outlined below, which relates to a higher average corporate liquids weighting realized to date and anticipated through the back half of the year. The full year weighting for crude oil, condensate and NGLs is expected to average 29% of total corporate volumes, up from a 28% weighting expectation within our initial 2019 announced guidance. The average daily production volume and total net capital expenditure guidance ranges for 2019 remain unchanged.

Revised 2019
Annual Guidance
(August 7, 2019)
Previously Set 2019
Annual Guidance
(January 5, 2019)
Production
2019 Average daily production (boe/d) 34,000 – 36,000 34,000 – 36,000
Average product mix
Natural gas (%) 71 72
Crude oil, condensate and NGLs (%) 29 28
Net capital expenditures
Total net capital expenditures ($000) (1) 40,000 – 50,000 40,000 – 50,000

(1) Excludes property acquisitions and dispositions.

Bellatrix plans to fund its second half 2019 capital budget through adjusted funds flow, and will remain flexible and focused on optimizing return on invested capital through focused development of the Company’s Spirit River liquids rich natural gas play. However, management is monitoring available liquidity in light of strip pricing as at June 30, 2019 and may adjust the Company’s operating and capital budgets in response to liquidity constraints. For additional information, see “Future Operations” and “Liquidity and Capital Resources” in the MD&A.

CONFERENCE CALL INFORMATION

A conference call to discuss Bellatrix’s second quarter results will be held on August 8, 2019 at 9:00 am MT / 11:00 am ET. To participate, please call toll-free 1-800-319-4610 or 403-351-0324 or 416-915-3239. The call can also be heard live through an internet webcast accessible via the investors section of Bellatrix’s website at http://www.bxe.com/investors/presentations-events.cfm and will be archived on the website for approximately 30 days following the call.

Bellatrix Exploration Ltd. is a publicly traded Western Canadian based growth oriented oil and gas company engaged in the exploration for, and the acquisition, development and production of oil and natural gas reserves, with highly concentrated operations in west central Alberta, principally focused on profitable development of the Spirit River liquids rich natural gas play.

Common shares of Bellatrix trade on the Toronto Stock Exchange under the symbol “BXE”.



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