BELLATRIX EXPLORATION LTD.
ANNOUNCES THIRD QUARTER 2011 FINANCIAL RESULTS
Bellatrix Exploration Ltd.
has release its financial and operating results for the three and nine months
ended September 30, 2011.
Effective January 1, 2011,
Bellatrix began reporting its financial results in accordance with
International Financial Reporting Standards ("IFRS"). Prior year
comparative amounts have been restated to reflect results as if Bellatrix had
always prepared its financial results using IFRS. Please see additional
discussion regarding IFRS later in this press release.
HIGHLIGHTS
Three months ended September 30,Nine months ended September 30,
2011 2010 2011 2010
FINANCIAL (unaudited)
(CDN$000s except share and per share amounts)
Revenue (before royalties and risk management(1)) 49,145 27,344 143,124 79,847
Funds flow from operations (2) 23,964 16,342 64,117 37,150
Per basic share(5) $0.22 $0.17 $0.62 $0.39
Per diluted share(5) $0.21 $0.17 $0.58 $0.39
Cash flow from operating activities 28,023 13,466 67,566 32,987
Per basic share(5) $0.26 $0.14 $0.66 $0.35
Per diluted share(5) $0.24 $0.14 $0.61 $0.35
Net profit (loss)(7) 820 (2,546) 7,648 (4,928)
Per basic share(5) $0. 01 $(0.03) $0. 07 $(0.05)
Per diluted share (5) $0. 01 $(0.03) $0. 07 $(0.05)
Exploration and development 44,093 30,096 128,354 63,503
Corporate and property acquisitions 134 327 3,945 3,549
Capital expenditures - cash 44,227 30,423 132,299 67,052
Property dispositions - cash (4,140) (7) (4,181) (587)
Non-cash items 3,457 1,113 4,410 2,694
Total capital expenditures - net 43,544 31,529 132,528 69,159
Long-term debt 37,379 28,522 37,379 28,522
Convertible debentures(3) 48,692 47,246 48,692 47,246
Working capital deficiency 15,265 1,369 15,265 1,369
Total net debt (3) 101,336 77,137 101,336 77,137
Total assets(7) 546,309 452,633 546,309 452,633
Shareholders' equity(7) 360,846 296,651 360,846 296,651
OPERATING Three months ended September 30,Nine months ended September 30,
2011 2010 2011 2010
Average daily sales volumes
Crude oil, condensate and NGL (bbl/d) 4,413 2,377 4,242 2,211
Natural gas (mcf/d) 44,546 40,452 41,710 35,386
Total oil equivalent (boe/d) 11,837 9,119 11,194 8,020
Average prices
Light crude oil and condensate ($/bbl) 88.91 72.30 91.42 75.30
NGL ($/bbl) 51.74 31.37 53.10 38.63
Heavy oil ($/bbl) 64.19 57.89 66.13 61.60
Crude oil, condensate and NGL ($/bbl) 80.78 58.32 83.37 63.20
Crude oil, condensate and
NGL (including risk management(1)) ($/bbl) 82.38 60.98 80.85 64.55
Natural gas ($/mcf) 3.91 3.81 3.97 4.33
Natural gas (including
risk management (1))($/mcf) 4.33 5.95 4.23 5.81
Total oil equivalent ($/boe) 44.82 32.11 46.39 35.81
Total oil equivalent
(including risk management (1)) ($/boe) 47.02 42.28 46.41 42.72
Statistics
Operating netback(4) ($/boe) 23.89 13.22 24.71 15.05
Operating netback(4)
(including risk management (1))($/boe) 26.09 23.39 24.72 21.96
Transportation ($/boe) 1.34 1.13 1.35 1.20
Production expenses ($/boe) 11.71 11.63 11.85 12.59
General and administrative ($/boe) 3.14 2.86 2.81 3.49
Royalties as a % of sales after transportation 18% 20% 19% 20%
(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 includes 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 share metrics
calculations disclosed.(2)The highlights section
contains the term "funds flow from operations" which should not be
considered an alternative to, or more meaningful than cash flow from operating
activities as determined in accordance with generally accepted accounting
principles ("GAAP") as an indicator of the Company's performance.
Therefore reference to diluted funds flow from operations or funds flow from
operations per share may not be comparable with the calculation of similar
measures for other entities. Management uses funds flow from operations to
analyze operating performance and leverage and considers funds flow from
operations to be a key measure as it demonstrates the Company's ability to
generate the cash necessary to fund future capital investments and to repay
debt. The reconciliation between cash flow from operating activities and funds
flow from operations can be found in the MD&A. Funds flow from operations per
share is calculated using the weighted average number of common shares for the
period.(3) Net debt and total net debt are considered non-GAAP terms. The
Company's calculation of total net debt includes the liability component of
convertible debentures and excludes deferred liabilities, long-term commodity
contract liabilities, decommissioning liabilities, long-term finance lease
obligation and the deferred tax liability. Net debt and total net debt include
the net working capital deficiency (excess) before short-term commodity
contract assets and liabilities and current finance lease obligation. Net debt
also excludes the liability component of convertible debentures. A
reconciliation between total liabilities under GAAP and total net debt and net
debt as calculated by the Company is found in the MD&A.(4)
Operating netbacks is considered a non-GAAP term. Operating netbacks are
calculated by subtracting royalties, transportation, and operating costs from
revenues before other income.(5) Basic weighted average shares for the three
and nine months ended September 30, 2011 were 107,391,070 (2010: 94,999,409)
and 102,664,721 (2010: 93,586,167), respectively. In computing weighted average
diluted earnings per share for the three and nine months ended September 30, 2011
a total of 2,001,690 (2010: nil) and 2,450,285 (2010: nil) share options,
respectively, were added to the denominator as a consequence of applying the
treasury stock method to the Company's outstanding share options and 9,821,429
(2010: 9,821,429) common shares issuable on conversion of convertible
debentures were excluded from the three and nine month calculations as they
were not dilutive. This results in diluted weighted average common shares of
109,392,760 and 105,115,006 for the three and nine months ended September 30,
2011, respectively. In computing weighted average diluted cash flow from
operating activities and funds flow from operations for the three months ended
September 30, 2011 a total of 2,001,690 (2010: nil) common shares were added to
the denominator as a consequence of applying the treasury stock method to the
Company's outstanding share options and a total of 9,821,429 (2010: nil) common
shares issuable on conversion of convertible debentures were also added to the
denominator as they were dilutive, resulting in diluted weighted average common
shares of 119,214,189. As a consequence, a total of $0.7 million for interest
accretion expense (net of income tax effect) was added to the numerator.In computing weighted average diluted cash flow from
operating activities and funds flow from operations for the nine months ended
September 30, 2011 a total of 2,450,285 (2010: nil) shares were added to the
denominator as a consequence of applying the treasury stock method to the
Company's outstanding share options and a total of 9,821,429 (2010: nil) common
shares issuable on conversion of convertible debentures were also added to the
denominator as they were dilutive, resulting in diluted weighted average common
shares of 114,936,435. As a consequence, a total of $2.2 million for interest
accretion expense (net of income tax effect) was added to the numerator.
(6)Shares issuable on conversion of convertible debentures are calculated by
dividing the $55.0 million principal amount of the convertible debentures by
the conversion price of $5.60 per share.(7) As of January 1, 2011, Bellatrix
prepares its consolidated financial statements in accordance with IFRS, IFRS 1
- First-time adoption of International Financial Reporting Standards
("IFRS 1") and International Accounting Standard 34 - Interim
Financial Reporting, as issued by the International Accounting Standards Board.
Previously, Bellatrix's financial statements were prepared in accordance with
Canadian generally accepted accounting principles ("previous GAAP").
Reconciliations between previous GAAP and IFRS financial information can be
found in the consolidated financial statements for the three and nine months
ended September 30, 2011.
REPORT TO SHAREHOLDERS
Bellatrix demonstrates
inveterate behaviour posting its 8th consecutive quarter of growth in
production and cash flow following its reorganization in 2009. Despite a
protracted wet spring breakup (road bans into mid-August in West Central
Alberta) that resulted in delays to the second half of the 2011 drilling
program, Bellatrix sales volumes for the third quarter of 2011 improved to
11,837 boe/d up 30% from the third quarter 2010 sales volumes of 9,119 boe/d
and 2% from the second quarter 2011 sales volumes of 11,643 boe/d. In the third
quarter Bellatrix posted a 100% success rate participating in 19 gross (13.41
net) wells resulting in 14 gross (10.97 net) Cardium oil wells and 5 gross
(2.44 net) Notikewin/Falher gas wells. In the Fourth Quarter 2011 the Company
plans to drill 12 gross (7.99 net) wells consisting of 9 gross (7.04 net)
Cardium oil wells and 3 gross (0.95 net) Notikewin condensate rich gas wells.
Including two second
quarter 2011 Cardium wells completed in the third quarter 2011 and eight of the
third quarter 2011 Cardium wells that are on production, the Company continues
to post above industry average initial production ("IP") rates for
Cardium wells. The following initial flow rates were achieved:
Average IP for first 7 days of production (10 wells) 566 Boe/d
Average IP for first 15 days of production (10 wells)462 Boe/d
Average IP for first 30 days of production (7 wells) 425 Boe/d
In addition, at Ferrier,
Bellatrix recently completed two (gross and net) Cardium wells that produced
condensate rich gas on two fault related blocks that occur along trend of the
Company's earlier Cardium oil discoveries. The new wells tested over a five day
period at 6 mmcf/d and 10 mmcf/d with 70 bbl/d of
associated liquids yielding a total of 1,420 boe/d and 2.367 boe/d,
respectively. The wells will be tied in during Q4 2011 and placed on production
initially at 5 mmcf/d each.
OPERATIONS
Operational highlights for
the three and nine months ended September 30, 2011 include:
The Company established
100% drill bit success for the first nine months of 2011 by drilling 42 gross
(27.19 net) wells consisting of 31 gross (22.35 net) oil wells and 11 gross
(4.84 net) liquids rich gas wells.
Q3 2011 sales volumes
averaged 11,837 boe/d (weighted 37% to oil, condensate and
NGLs and 63% to natural gas). This represents a 30% increase from the
third quarter 2010 average sales volumes of 9,119 boe/d
and a 2% increase from second quarter 2011 average sales volumes of 11,643
boe/d.
For the month of October
2011, field production volumes have averaged approximately
12,700 boe/d (weighted 40% to oil and natural gas liquids). In addition,
the Company has completed and tested 4 gross (2.7 net) wells which are
currently being tied in with an expected total initial production rate of 2,150 boe/d.
Oil, condensate and NGLs
have increased to 37% of total sales volumes in Q3 2011 from 26% in Q3 2010.
For the year to date,
Bellatrix has added 40 gross and net contiguous sections in the Ferrier area
which includes highly prospective Cardium and Duvernay mineral rights. During
the first quarter of 2011, Bellatrix entered into an agreement to acquire 20
net sections. In August 2011, Bellatrix added an additional 20 gross and net
contiguous sections in the Ferrier area.
The Company has expanded
its drilling inventory in our two key resource plays to 400 net locations in
the Cardium light gravity oil play and 174 locations in the Notikewin
condensate rich gas resource play yielding over $2.2 billion in future
development expenditures based on current costs of drilling.
In addition the Company now
controls 44 gross (43 net) sections of Duvernay rights in West Central Alberta.
As at September 30, 2011
Bellatrix had approximately 226,977 net undeveloped acres of land in Alberta,
British Columbia and Saskatchewan.
Effective September 22,
2011, Bellatrix sold a minor property in the Meekwap area of Alberta for $4.2
million, after purchase adjustments and closing costs. The property sold included
approximately 65 boe/d of
production.
FINANCIAL
Financial highlights for
the three and nine months ended September 30, 2011 include:
Q3 2011 revenue soared to
$49.1 million, 80% higher than the $27.3 million posted in Q3 2010. Revenue for
the first nine months of 2011 was $143.1 million up from $80.0 million in the
same period in 2010. The increase in revenues is a result of higher sales
volumes in conjunction with higher light crude oil, condensate and NGL prices
for 2011 compared to 2010.
Crude oil, condensate and
NGLs produced 67% and 68% of revenue for the three and nine month periods ended
September 30, 2011, respectively.
Funds flow from operations
for Q3 2011 increased to $24.0 million, up 47% from $16.3 million in Q3 2010
and up 4% when compared to $23.1 million generated in Q2 2011. Funds flow from
operations for the first nine months of 2011 climbed to $64.1 million, up 72%
from $37.2 million in the same period in 2010.
Net profit for the first
nine months of 2011 was $7.6 million, compared to a net loss of $4.9 million in
the same period in 2010. Bellatrix had a net profit of $0.8 million for Q3
2011, compared to a net loss of $2.5 million for Q3 2010. The net profit for
the three and nine month periods of 2011 is reflective
of higher operating netbacks and cash flows as a result of improved pricing for
crude oil, condensate, and NGLs and increased sales volumes. In addition, the
net profit for Q3 2011 includes a non-cash impairment loss of $14.6 million on
certain non-core oil and gas properties, $3.1 million of higher depletion and
depreciation charges and a $2.5 million increase in deferred tax expense,
partially offset by non-cash unrealized gains on commodity risk management
contracts of $8.6 million.
Bellatrix spent $132.3
million on capital projects in the first nine months of 2011 compared to $67.1
million in the same period in 2010. During the third quarter of 2011, Bellatrix
spent $44.2 million on capital projects compared to $30.4 million in Q3 2010.
Production expenses for Q3
2011 were $11.71/boe ($12.7 million), compared to $11.63/boe ($9.8 million) for
Q3 2010. Production expenses for the first nine months of 2011 were $11.85/boe
($36.2 million), compared to $12.59/boe ($27.6 million) for the same period in
2010. Production expenses in Q3 2011 were slightly higher than Q2 2011, due to
operating under the continuing weather conditions in West Central Alberta.
Operating netbacks before
risk management continue to grow in response to the Company's improved liquids
mix to $23.89/boe in Q3 2011, up 78% from $13.22/boe in Q3 2010. This was
slightly reduced from Q2 2011 operating netbacks before risk management of
$26.70 due primarily to lower realized commodity prices during Q3 2011.
Total net debt as of
September 30, 2011 was $101.3 million, including the liability component of
convertible debentures drawn against the Company's credit capacity of $195
million.
As at September 30, 2011,
Bellatrix had $37.4 million drawn on its total $140.0 million credit facility.
COMMODITY PRICE RISK
MANAGEMENT
In September 2011,
Bellatrix entered into two additional price risk management contracts
consisting of crude oil fixed price swaps for 1,000 bbl/d each for the period January 1, 2012 to
December 31, 2012 at a price of CDN $90/bbl and CDN
$90.49/bbl respectively. In November 2011, Bellatrix
entered into an additional crude oil fixed price swap for
1,000 bbl/d for the period of January 1, 2012
to December 31, 2012 at a price of CDN $96.40/bbl.
As at November 9, 2011, the
Company has entered into commodity price risk management arrangements as
follows:
Type Period Volume Price Floor Price CeilingIndex
Oil fixed January 1, 2011 to Dec. 31, 20111,000 bbl/d $ 88.18 CDN $ 88.18 CDN WTI
Oil fixed January 1, 2011 to Dec. 31, 2011 500 bbl/d $ 89.00 CDN $ 89.00 CDN WTI
Oil fixed January 1, 2011 to Dec. 31, 2011 500 bbl/d$ 89.10 US $ 89.10 US WTI
Oil fixed February 1, 2011 to Dec. 31, 2011 500 bbl/d$ 95.00 US$ 95.00 US WTI
Oil fixed March 1, 2011 to Dec. 31, 2011 500 bbl/d$ 97.50 US$ 97.50 US WTI
Oil fixed January 1, 2012 to Dec. 31, 20121,000 bbl/d $ 90.00 CDN $ 90.00 CDN WTI
Oil fixed January 1, 2012 to Dec. 31, 20121,000 bbl/d $ 90.49 CDN $ 90.49 CDN WTI
Oil fixed January 1, 2012 to Dec. 31, 20121,000 bbl/d$ 96.40 CDN $ 96.40 CDN WTI
Oil call option January 1, 2012 to Dec. 31, 2012 833 bbl/d - $ 110.00 US WTI
Natural gas fixed April 1, 2011 to Oct. 31, 2011 5,000 GJ/d $ 3.87 CDN $ 3.87 CDN AECO
Natural gas fixed April 1, 2011 to Oct. 31, 2011 5,000 GJ/d $ 3.65 CDN $ 3.65 CDN AECO
Natural gas fixed April 1, 2011 to Oct. 31, 2011 5,000 GJ/d $ 3.805 CDN $ 3.805 CDN AECO
Natural gas fixed April 1, 2011 to Oct. 31, 2011 5,000 GJ/d $ 3.80 CDN $ 3.80 CDN AECO
Natural gas fixed May 1, 2011 to Dec. 31, 2011 5,000 GJ/d $ 6.30 CDN $ 6.30 CDN AECO
Outlook
The Company is anticipating
the successful achievement of exiting 2011 in line with our production guidance
of 15,000 boe/d, spending a capital budget of
approximately $170 million.
As a key component of the
Company's strategy, Bellatrix has developed a company-wide infrastructure plan
designed to position the company as a leader for production growth in the core
West Central Alberta area. Starting 18 months ago Bellatrix committed to
ownership in critical infrastructure that services Ferrier, Brazeau, Alder
Flats, Willesden Green, and Greater Lodgepole areas.
Brazeau infrastructure
includes a 100% ownership of the 02-10-045-11 W5M compressor station and sales
line to the Keyera Nordegg gas plant.
Bellatrix has also secured
a strategic partnership with the two largest players in the Ferrier, Alder
Flats, and Willesden Green areas. Joint projects in these areas led to the
construction of 20 km of 8 inch and 10 inch gathering infrastructure across the
Brazeau river to the Conoco O'Chiese Plant, and a plant expansion at Conoco Alder Flats
to secure 9.8% and 20% working interest respectively in both plants. As a
result, Bellatrix now owns 23 mmcf/d of capacity at these key gas plants. The
additional infrastructure also provides access to large capacity at the major
Keyera plants at Strachan, Nordegg, and Brazeau.
More recently Bellatrix has
enhanced this partnership with an 18.8 km dual 10 inch and 9 inch pipeline
crossing of the North Saskatchewan river to access
Conoco Alder Flats as well as important deep cut infrastructure in the area to
be completed very early in 2012.
Bellatrix also recognized
the need for 3 key major oil batteries in Lodgepole,
Willesden Green and North Brazeau, as well as, direct
pipeline connections to oil sales. These connections secure the movement of
high volumes of oil to sales reliably year round while positioning Bellatrix
for significant reductions in operating costs throughout its oil operations.
Combined, the
aforementioned projects have set the stage for unprecedented opportunities for
growth in Bellatrix oil and gas production, as well as, reducing overall
operating costs. These strategic accomplishments leave Bellatrix in a position
of control in a highly competitive high growth area. Bellatrix has worked
diligently on intelligent infrastructure planning that will allow the Company
significant development at greatly reduced future development capital
significantly enhancing growth prospects.
For 2012, Bellatrix will
continue to be active in drilling its two core resource plays, the Cardium oil and Notikewin
condensate rich gas, utilizing horizontal drilling multi-fracturing technology.
In addition, Bellatrix currently plans to drill its first horizontal well in
the emerging Duvernay play in the first quarter of
2012. An initial capital budget of $180 million has been set for fiscal 2012.
Based on the timing of proposed expenditures, downtime for anticipated plant
turnarounds and normal production declines, execution of the 2012 budget is
anticipated to provide 2012 average daily production of
approximately 16,500 to 17,000 boe/d and an
exit rate of approximately 18,000 to 18,500 boe/d.
As at September 30, 2011,
Bellatrix has approximately 226,977 net undeveloped acres in Alberta, British
Columbia and Saskatchewan with current estimated inventory of 900 net low risk
development drilling locations not including Duvernay,
including 400 net horizontal Cardium locations and
174 net horizontal Notikewin locations.
As a result of Bellatrix's
perspicacious view of the resource plays within its bailiwick, the Company's
drilling operations continue to provide best decile
productivity. Our goal is to expand the oil side of our business while
achieving double digit growth in shareholder value.
We seek Safe Harbor.