TSX, NYSE MKT: BXE
CALGARY, Aug. 6, 2014 /CNW/ - Bellatrix Exploration Ltd. ("Bellatrix" or
the "Company") (TSX, NYSE MKT: BXE) announces its financial and
operating results for the three and six months ended June 30, 2014.
Forward-Looking Statements
This press release, including the report to shareholders, contains
forward-looking statements. Please refer to our cautionary language on
forward-looking statements and the other matters set forth at the
beginning of the management's discussion and analysis (the "MD&A")
attached to this press release.
HIGHLIGHTS
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Three months ended June 30,
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Six months ended June 30,
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2014
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2013
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2014
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2013
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FINANCIAL (unaudited)
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(CDN$000s except share and per share amounts)
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Revenue (before royalties and risk management (1))
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152,311
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74,564
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315,896
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140,107
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Funds flow from operations (2)
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71,014
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36,563
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148,656
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74,108
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Per basic share (5)
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$0.40
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$0.34
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$0.85
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$0.69
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Per diluted share (5)
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$0.39
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$0.31
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$0.84
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$0.63
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Cash flow from operating activities
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60,063
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29,611
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144,363
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65,138
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Per basic share (5)
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$0.34
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$0.27
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$0.83
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$0.60
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Per diluted share (5)
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$0.33
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$0.25
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$0.81
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$0.55
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Net profit
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38,252
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15,466
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63,419
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20,027
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Per basic share (5)
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$0.22
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$0.14
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$0.36
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$0.19
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Per diluted share (5)
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$0.21
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$0.13
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$0.36
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$0.18
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Exploration and development
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131,362
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46,172
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284,049
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137,632
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Corporate
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3,206
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543
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6,161
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682
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Capital expenditures - cash
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134,568
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46,715
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290,210
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138,314
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Property dispositions - cash
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(8,613)
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(16)
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(8,392)
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(1)
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Total net capital expenditures - cash
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125,955
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46,699
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281,818
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138,313
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Other non-cash items
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3,602
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(1,308)
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8,592
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(521)
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Total capital expenditures - net (4)
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129,557
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45,391
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290,410
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137,792
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Long-term debt
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323,007
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194,002
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323,007
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194,002
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Convertible debentures (6)
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51,536
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-
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51,536
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Adjusted working capital deficiency (3)
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40,426
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10,927
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40,426
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10,927
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Total net debt (3)
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363,433
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256,465
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363,433
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256,465
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Total assets
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1,837,242
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779,648
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1,837,242
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779,648
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Total shareholders' equity
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1,141,830
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402,904
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1,141,830
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402,904
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OPERATING
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Three months ended June 30,
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Six months ended June 30,
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2014
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2013
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2014
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2013
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Average daily sales volumes
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Crude oil, condensate and NGLs
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(bbls/d)
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12,640
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6,206
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12,524
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6,095
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Natural gas
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(mcf/d)
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142,214
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95,376
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139,051
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87,812
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Total oil equivalent
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(boe/d)
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36,342
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22,102
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35,699
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20,730
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Average prices
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Crude oil and condensate
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($/bbl)
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103.25
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93.48
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100.72
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91.83
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NGLs (excluding condensate)
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($/bbl)
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42.70
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36.20
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49.72
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39.05
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Crude oil, condensate and NGLs
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($/bbl)
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74.73
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71.84
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77.53
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72.70
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Crude oil, condensate and NGLs (including risk management (1))
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($/bbl)
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67.71
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73.10
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71.14
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73.26
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Natural gas
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($/mcf)
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5.04
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3.85
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5.45
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3.69
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Natural gas (including risk management (1))
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($/mcf)
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4.40
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3.68
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4.64
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4.01
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Total oil equivalent
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($/boe)
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45.72
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36.78
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48.43
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37.01
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Total oil equivalent (including risk management (1))
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($/boe)
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40.78
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36.39
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43.01
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38.54
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Statistics
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Operating netback (4)
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($/boe)
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28.93
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21.06
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30.85
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21.04
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Operating netback (4) (including risk management (1))
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($/boe)
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23.98
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20.68
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25.43
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22.58
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Transportation
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($/boe)
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0.82
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0.83
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1.20
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0.83
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Production expenses
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($/boe)
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7.80
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8.64
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7.96
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8.65
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General & administrative
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($/boe)
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1.37
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1.24
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1.56
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1.62
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Royalties as a % of sales after
transportation
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18%
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17%
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17%
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18%
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COMMON SHARES
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Common shares outstanding
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191,091,741
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107,919,329
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191,091,741
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107,919,329
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Share options outstanding
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11,576,839
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9,173,560
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11,576,839
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9,173,560
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Shares issuable on conversion of convertible debentures (6)
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9,821,429
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9,821,429
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Fully diluted common shares outstanding
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202,668,580
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126,914,318
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202,668,580
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126,914,318
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Diluted weighted average shares - net profit (5)
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180,975,410
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121,265,334
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177,408,647
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121,038,666
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Diluted weighted average shares - funds flow from
operations and cash flow from operating activities (2) (5)
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180,975,410
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121,265,334
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177,408,647
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121,038,666
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SHARE TRADING STATISTICS
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TSX and Other (7)
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(CDN$, except volumes) based on intra-day trading
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High
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11.65
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6.94
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11.65
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6.94
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Low
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8.88
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4.70
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7.64
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4.03
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Close
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9.26
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6.45
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9.26
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6.45
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Average daily volume
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3,266,310
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1,005,989
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2,563,117
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844,333
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NYSE MKT
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(US$, except volumes) based on intra-day trading
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High
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10.70
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6.85
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10.70
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6.85
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Low
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8.15
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4.55
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6.93
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4.03
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Close
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8.71
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6.08
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8.71
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6.08
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Average daily volume
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371,163
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67,541
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265,351
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70,189
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(1)
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The Company has entered into various commodity price risk management
contracts which are considered to be economic hedges. Per unit metrics
after risk management include only the realized portion of gains or
losses on commodity contracts.
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The Company does not apply hedge accounting to these contracts. As
such, these contracts are revalued to fair value at the end of each
reporting date. This results in recognition of unrealized gains or
losses over the term of these contracts which is reflected each
reporting period until these contracts are settled, at which time
realized gains or losses are recorded. These unrealized gains or
losses on commodity contracts are not included for purposes of per unit
metrics calculations disclosed.
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(2)
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The highlights section contains the term "funds flow from operations"
which should not be considered an alternative to, or more meaningful
than cash flow from operating activities as determined in accordance
with generally accepted accounting principles ("GAAP") as an indicator
of the Company's performance. Therefore reference to the non-GAAP
measures of funds flow from operations, or funds flow from operations
per share may not be comparable with the calculation of similar
measures for other entities. Management uses funds flow from operations
to analyze operating performance and leverage and considers funds flow
from operations to be a key measure as it demonstrates the Company's
ability to generate the cash necessary to fund future capital
investments and to repay debt. The reconciliation between cash flow
from operating activities and funds flow from operations can be found
in the MD&A. Funds flow from operations per share is calculated using
the weighted average number of common shares for the period.
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(3)
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Net debt and total net debt are considered non-GAAP measures. Therefore
reference to the non-GAAP measures of net debt or total net debt may
not be comparable with the calculation of similar measures for other
entities. The Company's 2014 calculation of total net debt excludes
deferred lease inducements, long-term commodity contract liabilities,
decommissioning liabilities, the long-term finance lease obligation,
deferred lease inducements, and the deferred tax liability. Net debt
and total net debt include the adjusted working capital deficiency
(excess). The adjusted working capital deficiency (excess) is a
non-GAAP measure calculated as net working capital deficiency (excess)
excluding short-term commodity contract assets and liabilities, current
finance lease obligation, and deferred lease inducements. For the
comparative 2013 calculation, net debt also excludes the liability
component of convertible debentures which were then outstanding. A
reconciliation between total liabilities under GAAP and total net debt
and net debt as calculated by the Company is found in the MD&A.
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(4)
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Operating netbacks and total capital expenditures - net are considered
non-GAAP measures. Operating netbacks are calculated by subtracting
royalties, transportation, and operating costs from revenues before
other income. Total capital expenditures - net includes the cash
impact of capital expenditures and property dispositions, as well as
the non-cash capital impacts of corporate acquisitions, adjustments to
the Company's decommissioning liabilities, and share based
compensation. The detailed calculations of operating netbacks are found
in the MD&A.
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(5)
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Basic weighted average shares for the three and six months ended June
30, 2014 were 177,847,190 (2013: 107,919,329), and 174,754,132 (2013:
107,900,781), respectively.
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In computing weighted average diluted earnings per share and weighted
average diluted cash flow from operating activities and funds flow from
operations per share for the three and six months ended June 30, 2014,
a total of 3,128,220 (2013: 3,524,576), and 2,654,515 (2013: 3,316,456)
common shares were added to the denominator as a consequence of
applying the treasury stock method to the Company's outstanding share
options and no common shares issuable (three and six months ended June
30, 2013: 9,821,429) on conversion of convertible debentures were added
to the denominator as they were dilutive, resulting in diluted weighted
average common shares of 180,975,410 (2013: 121,265,334), and
177,408,647 (2013: 121,038,666), respectively. As a consequence, a
total of nil (2013: $0.8 million) and nil (2013: $1.6 million) for
interest and accretion expense (net of income tax effect) was added to
the numerator for the three and six month calculations, respectively
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(6)
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During the year ended December 31, 2013, the Company announced a notice
of redemption of its then outstanding $55.0 million 4.75% convertible
debentures, with a redemption date set of October 21, 2013. During
September and October 2013, the $55.0 million principal amount of
remaining convertible debentures were converted or redeemed in exchange
for an aggregate of 9,794,848 common shares of the Company. For the
three and six months ended June 30, 2013, shares issuable on conversion
of convertible debentures were calculated by dividing the $55.0 million
principal amount of the convertible debentures by the conversion price
of $5.60 per share.
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(7)
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TSX and Other includes the trading statistics for the Toronto Stock
Exchange and other Canadian trading markets.
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REPORT TO SHAREHOLDERS
In spite of the significant production processing wantage experienced in
the first half of 2014 the Company continues to demonstrate accelerated
growth posting record earnings, revenue, cash flow and production while
continuing to drive down operating expenses. The wells drilled in the first half of 2014 are in line with our
published type curves, facilitating the Company's ability to meet its
published guidance of 2014 average daily production of +/-41,000 boe/d
and an exit rate of approximately +/-48,000 boe/d, assuming no future
unscheduled production constraints occur. Bellatrix's technical staff
were habile in redirecting gas production from plant to plant thereby
maximizing throughput in an active plant turnaround season.
Operational highlights for the three and six months ended June 30, 2014
include:
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Record sales of 36,342 boe/d (65% natural gas) up 64% from sales volumes of 22,102 boe/d registered in the second quarter of
2013.
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Funds flow from operations for the six months ending June 30, 2014 was
$148.7 million, doubling the same period in 2013 ($74.1 million) and furthermore,
exceeds the funds flow for all of 2013 ($143.5 million).
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Earnings for the second quarter 2014 of $38.3 million were 147% higher than the $15.5 million posted in Q2 2013.
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On a year to date basis the Company has posted earnings of $63.4 million up 217% over the same period in 2013 ($20.0 million).
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Operating costs reduced to a record $7.80/boe in the second quarter of 2014.
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During the first six months of 2014, Bellatrix posted a 100% success rate drilling and/or participating in 63 gross (34.56 net) wells, resulting
in 47 gross (27.38 net) Cardium oil wells, 14 gross (6.02 net)
Notikewin/Falher liquids-rich gas wells, and 2 gross (1.15 net) Cardium
gas wells. During the second quarter of 2014, Bellatrix drilled and/or
participated in 19 gross (9.00 net) wells, consisting of 11 gross (5.51
net) Cardium oil wells, 7 gross (2.99 net) Notikewin/Falher
liquids-rich gas wells, and 1 gross (0.50 net) Cardium gas well.
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During the second quarter of 2014, the Company successfully drilled and
completed a two mile Spirit River gas well in the Ferrier area which was placed on restricted production in
mid-July at 18 mmcf/d with 2,000 psi of back pressure. As more
production space comes available the well rate will be increased.
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On April 2, 2014, Bellatrix announced the completion of a 1.6 km river
bore and a 7 km pipeline in conjunction with Blaze Energy Ltd.
("Blaze"), completing a 55 km pipeline to tie-in Bellatrix natural gas
for processing in the Blaze gas plant located at 4-31-48-12W5.
Bellatrix has secured firm processing capacity of 100 mmcf/d in the
plant.
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During the second quarter of 2014, Bellatrix spent $134.6 million on
capital projects, compared to $46.7 million in Q2 2013. In the six
months ended June 30, 2014, Bellatrix spent $290.2 million on capital
projects, compared to $138.3 million in the first six months of 2013.
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As at June 30, 2014, Bellatrix had approximately 395,237 net undeveloped acres of land in Alberta, British Columbia and Saskatchewan.
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To facilitate moving our growing production base to the area third party
gas processing plants, Bellatrix has purchased 21 compressors in the field totaling 31,000 hp in the first half of 2014. In addition the Company completed 55km of
group pipelines. In the second quarter the Company completed construction of an oil battery at 5-5-46-12W5M with a treating capacity of 2,800 bbl/d.
To view Bellatrix's Gas Processing Infrastructure please click here.
Currently when all of the eleven third party plants are in full
operation Bellatrix has access to 213 mmcf/d of firm processing
capacity to process both the Company's and our joint operator (partner)
gas. There is a further 179 mmcf/d of interruptible processing
capacity available on a first come first serve basis. This
interruptible capacity has recently become congested due to both system
constraints and the influx of new reserves and production in the area
due to significant drilling with the application of new horizontal
drilling and muti-stage fracing technology by all of the area
operators. The area plant throughputs are further impacted by
fluctuations in the TransCanada system pressures which are forecasted
to be high through the summer to accommodate their maintenance
programs.
In the second quarter of 2014, Bellatrix processed an average of 142.2
mmcf/d along with approximately 95 mmcf/d of partner gas. In the third
quarter following completion of the various plant turnarounds, the
Company is forecasting net production of approximately 175 mmcf/d given
the area plants have the capacity to process these volumes.
The system tightness is expected to continue until the Bellatrix Plant
Phase 1 comes online. All major gas plant equipment has been ordered
and is undergoing fabrication. The surface lease has been built to
meet the required specifications. Process packages are on schedule for
Q3 and Q4 2014 delivery. To date the construction of the gas plant is
on budget and on schedule for plant start-up on or before July 1, 2015.
$750.0 Million Short Form Base Shelf Prospectus and $172.6 Million
Bought Deal Financing
In May 2014, Bellatrix filed a short form base shelf prospectus (the
"$750 million Shelf Prospectus") of up to $750.0 million, with the
securities regulatory authorities in each of the provinces of Canada
(other than Quebec) and a Registration Statement filed with the United
States Securities and Exchange Commission. The $750 million Shelf
Prospectus allows Bellatrix to offer and issue common shares,
subscription receipts, warrants and units (comprising any combination
of the foregoing securities), by way of one or more prospectus
supplements at any time during the 25-month period that the $750
million Shelf Prospectus remains in place.
Pursuant to a prospectus supplement to the $750 million Shelf
Prospectus, on June 5, 2014, Bellatrix closed a bought deal offering of
18,170,000 common shares of the Company (the "Common Shares") at a
price of $9.50 per Common Share for aggregate gross proceeds of $172.6
million (the "Offering"), through a syndicate of underwriters. Net
proceeds of $165.5 million received from the Offering were utilized to
temporarily reduce outstanding indebtedness under the Company's credit
facilities, thereby freeing up borrowing capacity that may be redrawn,
from time to time, to fund the Company's ongoing capital expenditure
program and for general corporate purposes.
As at June 30, 2014, there was $577.4 million available on the $750
million Shelf Prospectus.
Credit Facility Increased 25% to $625 million
Based upon the Company's semi-annual borrowing base review for May 31,
2014, Bellatrix increased its borrowing base and credit facilities to
$625 million from $500 million. This 25% increase of $125 million was
the result of Bellatrix's strong 2013 drilling results continuing into
the first quarter of 2014, combined with benefits derived from the
acquisition of Angle Energy Inc. ("Angle") in the fourth quarter of
2013, cumulatively delivering significant reserves and production
growth. The increased credit facilities will be available to finance
Bellatrix's ongoing capital expenditures, working capital requirements
and for general corporate purposes.
The bank syndicate lenders approved the Company's request to change the
term of the credit facilities to a 3 year facility, fully revolving
until maturity, and extendible annually at the Company's option
(subject to lender approval), provided that the term after any
extension would not be more than 3 years. Concurrently with such
changes, the credit facilities were also amended to include certain
ongoing financial covenants that will require quarterly compliance.
Grafton Joint Venture Capital Investment Increase
On April 10, 2014, Bellatrix announced that Grafton elected to exercise
an option to increase committed capital investment to the Grafton Joint
Venture established during 2013 by an additional $50 million, for a
total commitment of $250 million, on the same terms and conditions as
the previously announced Grafton Joint Venture. Grafton's increased
capital investment will continue to support the accelerated development
of a portion of Bellatrix's extensive undeveloped land holdings.
The Grafton Joint Venture properties are located in the Willesden Green
and Brazeau areas of West-Central Alberta. After giving effect to the
exercise by Grafton of its option, Grafton was committed to
contributing 82%, or $250 million, to the $305 million Joint Venture to
participate in a Notikewin/Falher and Cardium well program. Under the
agreement, Grafton will earn 54% of Bellatrix's working interest ("WI")
in each well drilled in the development program until payout (being
recovery of Grafton's capital investment plus an 8% return) on the
total program, reverting to 33% of Bellatrix's WI after payout. At any
time after payout of the entire program, Grafton shall have the option
to elect to convert all wells from the 33% WI to a 17.5% Gross
Overriding Royalty on Bellatrix's pre-Joint Venture WI. The effective
date of the initial agreement for the Joint Venture is July 1, 2013 and
had an initial term of 2 years. With the exercise of the $50 million
option, Bellatrix shall have until the end of the third anniversary of
the effective date to spend the additional capital.
Financial highlights for the three and six months ended June 30, 2014
include:
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Bellatrix's net profit for Q2 2014 was $38.3 million, compared to a net profit of $15.5 million in Q2 2013. For the first half of 2014, Bellatrix recognized a net profit of $63.4 million, compared to a net profit of $20.0 million in the same period of 2013.
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Q2 2014 revenue before royalties and risk management contracts was $152.3 million, 105% higher than the $74.6 million recognized in Q2 2013. The increase in revenues
between the periods was primarily due to significantly increased sales
volumes for all products, in conjunction with higher realized prices
for all commodities in Q2 2014 compared to Q2 2013. Revenue for the
first six months of 2014 was $315.9 million, an increase of 125% from $140.1 million in the same period in 2013.
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Funds flow from operations for Q2 2014 was $71.0 million ($0.40 per basic share), up 94% from $36.6 million ($0.34 per basic share) in Q2 2013, and down 9% from
$77.6 million ($0.45 per basic share) in Q1 2014. The decrease in
funds flow from operations between the first and second quarters of
2014 was due primarily to reduced natural gas and NGL prices impacting
revenues and netbacks and higher finance expenses, partially offset by
the impact of higher crude oil commodity prices, lower transportation
and general and administrative expenses, and a lower net realized loss
on commodity contracts. The increase in funds flow from operations
between the three months ended June 30, 2014 and the same period in
2013 was principally attributable to higher overall funds from
operating netbacks, partially offset by a greater net loss on realized
commodity contracts in the 2014 three month period, higher general and
administrative expenses, and increased financing expenses. Funds
flow from operations for the first half of 2014 was $148.7 million ($0.85 per basic share), up 101% from $74.1 million ($0.69 per basic share) in the first six months of 2013.
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Crude oil, condensate and NGLs produced 57% and 56% of petroleum and natural gas sales revenue for the three and
six month periods ended June 30, 2014, respectively.
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Production expenses for Q2 2014 were $7.80/boe ($25.8 million), compared to $8.64/boe ($17.4 million) for Q2 2013 and
$8.12/boe ($25.6 million) for Q1 2014. Production expenses for the six
months ended June 30, 2014 were $7.96/boe ($51.4 million), compared to
$8.65/boe ($32.4 million) for the same period in 2013.
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Operating netbacks after including risk management for the six months
ended June 30, 2014 were $25.43/boe, up from $22.58/boe in the first
half of 2013. Operating netbacks before risk management for the six
months ended June 30, 2014 were $30.85/boe, compared with $21.04/boe in
the same period in 2013. The netback increased between the periods as a
result of higher commodity prices and reduced production expenses,
partially offset by higher royalties and transportation expenses.|
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Operating netbacks after including risk management for Q2 2014 were
$23.98/boe, up from $20.68/boe in Q2 2013. Operating netbacks before
risk management for Q2 2014 were $28.93/boe, up from $21.06/boe in Q2
2013. The greater netback including risk management between the
periods was primarily the result of higher commodity prices, reduced
production expenses, partially offset by higher royalty expenses.
-
G&A expenses for Q2 2014 increased on a per boe basis to $1.37/boe ($4.5 million), compared to $1.24/boe ($2.5 million) for Q2 2013. G&A expenses for
the six months ended June 30, 2014 were $1.56/boe ($10.1 million),
compared to $1.62/boe ($6.1 million) in the same period in 2013.
-
As at June 30, 2014, Bellatrix had $301.5 million undrawn on its total
$625 million credit facilities.
-
Total net debt as of June 30, 2014 was $363.4 million.
Commodity Price Risk Management
As of August 5, 2014, the Company has entered into the following
commodity price risk management arrangements:
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Type
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Period
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Volume
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Price Floor
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Price Ceiling
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Index
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Crude oil fixed
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January 1, 2014 to Dec. 31, 2014
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500 bbl/d
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$
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93.30 US
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$
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93.30 US
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WTI
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Crude oil fixed
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January 1, 2014 to Dec. 31, 2014
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1,500 bbl/d
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$
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94.00 CDN
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$
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94.00 CDN
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WTI
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Crude oil fixed
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January 1, 2014 to Dec. 31, 2014
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500 bbl/d
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$
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95.00 US
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$
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95.00 US
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WTI
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Crude oil fixed
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January 1, 2014 to Dec. 31, 2014
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1,500 bbl/d
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$
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95.22 CDN
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$
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95.22 CDN
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WTI
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Crude oil fixed
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January 1, 2014 to Dec. 31, 2014
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500 bbl/d
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$
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98.30 CDN
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$
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98.30 CDN
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WTI
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Crude oil fixed
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January 1, 2014 to Dec. 31, 2014
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1,000 bbl/d
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$
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99.50 CDN
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$
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99.50 CDN
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WTI
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Crude oil fixed
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January 1, 2014 to Dec. 31, 2014
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500 bbl/d
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$
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99.60 CDN
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$
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99.60 CDN
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WTI
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Natural gas fixed
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January 1, 2014 to Dec. 31, 2014
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20,000 GJ/d
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$
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3.30 CDN
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$
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3.30 CDN
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AECO
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Natural gas fixed
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January 1, 2014 to Dec. 31, 2014
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20,000 GJ/d
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$
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3.60 CDN
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$
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3.60 CDN
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AECO
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Natural gas fixed
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July 1, 2014 to Dec. 31, 2014
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15,000 GJ/d
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$
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3.71 CDN
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$
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3.71 CDN
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AECO
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Natural gas fixed
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February 1, 2014 to Dec. 31, 2014
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10,000 GJ/d
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$
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3.79 CDN
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$
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3.79 CDN
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AECO
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Natural gas fixed
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February 1, 2014 to Dec. 31, 2014
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10,000 GJ/d
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$
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3.80 CDN
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$
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3.80 CDN
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AECO
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Natural gas fixed
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February 1, 2014 to Dec. 31, 2014
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15,000 GJ/d
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$
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3.85 CDN
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$
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3.85 CDN
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AECO
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Natural gas fixed
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February 1, 2014 to Dec. 31, 2014
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10,000 GJ/d
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$
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3.84 CDN
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|
$
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3.84 CDN
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AECO
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Natural gas fixed
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March 1, 2014 to Dec. 31, 2014
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10,000 GJ/d
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$
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4.14 CDN
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$
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4.14 CDN
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AECO
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Outlook
Bellatrix continues to develop its core assets and conduct exploration
programs utilizing its large inventory of geological prospects.
2014 cash flow forecasts for the year have been updated to reflect the
recent softening natural gas prices due to the current cooler summer
weather conditions. 2014 funds flow from operations expectations have
been lowered to approximately $350 million or $1.90 per basic share. This represents a 144% increase over 2013 funds flow from operations of $143.5 million or $1.27 per basic share.
Based on an assumed 2014 average Edmonton Light oil price of $96.85/bbl
and AECO $4.34/GJ, average 2014 royalty rates of 18% and estimated 2014
operating costs of $116.5 million or $7.75 boe/d, the Company expects
to exit 2014 with total net debt of approximately $390 million or
approximately 1.0 times total net debt to annualized estimated fourth
quarter 2014 funds flow from operations.
For the remainder of 2014, Bellatrix will be active in drilling with 10
to 12 rigs operating in its two core resource plays, the Cardium light
oil play (Bellatrix is the second largest land holder with 338 net
sections in the Cardium) and Mannville condensate rich gas play,
utilizing horizontal drilling multi-fracturing technology. A revised
net capital budget of $515 million has been set for fiscal 2014. Based
on the timing of proposed expenditures, downtime for anticipated plant
turnarounds and normal production declines, execution of the 2014
budget is anticipated to provide 2014 average daily production of
approximately 41,000 boe/d and an exit rate of approximately 48,000
boe/d.
Value is constantly created as we expand with a dominating control of
our core area and infrastructure thereby managing our destiny and
future growth.
Raymond G. Smith, P. Eng.
President and CEO
August 5, 2014
Note:
A conference call to discuss Bellatrix's 2014 second quarter financial
and operating results and address investor questions will be held on
August 6, 2014 at 9:00 am MDT/11:00 am EDT. To participate, please call
toll-free 1-888-390-0546 or 416-764-8688. The conference call will also
be recorded and available until August 13, 2014 by calling
1-888-390-0541 or 416-764-8677 and entering passcode 631737 followed by
the pound sign.
The Company's current corporate presentation is available at www.bellatrixexploration.com.
MANAGEMENT'S DISCUSSION AND ANALYSIS
August 5, 2014 - The following Management's Discussion and Analysis of
financial results ("MD&A") as provided by the management of Bellatrix
Exploration Ltd. ("Bellatrix" or the "Company") should be read in
conjunction with the unaudited interim condensed consolidated financial
statements of the Company for the three and six months ended June 30,
2014 and the audited consolidated financial statements of the Company
for the years ended December 31, 2013 and 2012, and the related
Management's Discussion and Analysis of financial results as disclosure
which is unchanged from such Management's Discussion and Analysis may
not be repeated herein. This commentary is based on information
available to, and is dated as of, August 5, 2014. The financial data
presented is in Canadian dollars, except where indicated otherwise.
CONVERSION: The term barrels of oil equivalent ("boe") may be
misleading, particularly if used in isolation. A boe conversion ratio
of six thousand cubic feet of natural gas to one barrel of oil
equivalent (6 mcf/bbl) is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead. Given that the value ratio based on
the current price of crude oil as compared to natural gas is
significantly different from the energy equivalency of 6:1, utilizing a
conversion on a 6:1 basis may be misleading as an indication of value.
All boe conversions in this report are derived from converting gas to
oil in the ratio of six thousand cubic feet of gas to one barrel of
oil.
INITIAL PRODUCTION RATES: Initial production rates disclosed herein may
not necessarily be indicative of long-term performance or ultimate
recovery.
NON-GAAP MEASURES: This Management's Discussion and Analysis and the
accompanying report to shareholders contains the terms of operating
netbacks and total capital expenditures - net, which are not recognized
measures under generally accepted accounting principles ("GAAP").
Operating netbacks are calculated by subtracting royalties,
transportation, and operating expenses from revenues before other
income. Management believes this measure is a useful supplemental
measure of the amount of revenues received after transportation,
royalties and operating expenses. Readers are cautioned, however, that
this measure should not be construed as an alternative to net profit or
loss determined in accordance with GAAP as a measure of performance.
Bellatrix's method of calculating this measure may differ from other
entities, and accordingly, may not be comparable to measures used by
other companies. Total capital expenditures- net includes the cash
impact of capital expenditures and property dispositions, as well as
the non-cash capital impacts of corporate acquisitions, adjustments to
the Company's decommissioning liabilities, and share based
compensation.
This Management's Discussion and Analysis and the accompanying report to
shareholders and financial statements also contain the terms total net
debt and net debt which also are not recognized measures under GAAP.
Therefore reference to the non-GAAP measures of net debt or total net
debt may not be comparable with the calculation of similar measures for
other entities. The Company's 2014 calculation of total net debt
excludes deferred lease inducements, long-term commodity contract
liabilities, decommissioning liabilities, the long-term finance lease
obligation, and the deferred tax liability. Net debt and total net
debt include the adjusted working capital deficiency (excess). The
adjusted working capital deficiency (excess) is a non-GAAP measure
calculated as net working capital deficiency (excess) excluding
short-term commodity contract assets and liabilities, current finance
lease obligation, and current deferred lease inducements. For the
comparative 2013 calculation, net debt also excludes the liability
component of convertible debentures which were then outstanding.
Management believes these measures are useful supplementary measures of
the total amount of current and long-term debt.
This Management's Discussion and Analysis and the accompanying report to
shareholders and financial statements also contain the term "funds flow
from operations" which should not be considered an alternative to, or
more meaningful than "cash flow from operating activities" as
determined in accordance with GAAP as an indicator of the Company's
performance. Therefore reference to funds flow from operations or funds
flow from operations per share may not be comparable with the
calculation of similar measures for other entities. Management uses
funds flow from operations to analyze operating performance and
leverage and considers funds flow from operations to be a key measure
as it demonstrates the Company's ability to generate the cash necessary
to fund future capital investments and to repay debt. The
reconciliation between cash flow from operating activities and funds
flow from operations can be found in this Management's Discussion and
Analysis. Funds flow from operations per share is calculated using the
weighted average number of shares for the period.
DISCLOSURES: Due to immateriality, The Company has combined the
previously separated disclosure of "Heavy Oil" revenue, volumes,
pricing, production expenses and royalties into "Crude Oil and
condensate" revenue, volumes, pricing, production expenses and
royalties for the three and six month periods ending June 30, 2014.
Prior periods have been adjusted for comparative purposes.
JOINT ARRANGEMENTS: Bellatrix is a partner of the following joint
arrangements, which have been classified under IFRS as joint
operations. This classification is on the basis that the arrangement
is not conducted through a separate legal entity and the partners are
legally obligated to pay their share of costs incurred and take their
share of output produced from the various production areas. For
purposes of disclosure throughout the MD&A and financial statements,
Bellatrix has referred to these arrangements by the common oil and gas
industry term of joint ventures.
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GRAFTON JOINT VENTURE - On April 10, 2014, Bellatrix announced that
Grafton Energy Co I Ltd. ("Grafton") elected to exercise an option to
increase committed capital investment to the joint venture (the
"Grafton Joint Venture") with Grafton established during 2013 by an
additional $50 million, for a total commitment of $250 million, on the
same terms and conditions as the previously announced Grafton Joint
Venture. The Grafton Joint Venture properties are in the Willesden
Green and Brazeau areas of West-Central Alberta, whereby Grafton will
contribute 82%, or $250 million, to the joint venture to participate in
a Notikewin/Falher and Cardium well program. Under the agreement,
Grafton will earn 54% of Bellatrix's working interest ("WI") in each
well drilled in the well program until payout (being recovery of
Grafton's capital investment plus an 8% internal rate of return) on the
total program, reverting to 33% of Bellatrix's WI after payout. At any
time after payout of the entire program, Grafton shall have the option
to elect to convert all wells from the 33% WI to a 17.5% Gross
Overriding Royalty ("GORR") on Bellatrix's pre-Grafton Joint Venture
WI.
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DAEWOO AND DEVONIAN PARTNERSHIP - Bellatrix has a joint venture
arrangement (the "Daewoo and Devonian Partnership") with Canadian
subsidiaries of two Korean entities, Daewoo International Corporation
("Daewoo") and Devonian Natural Resources Private Equity Fund
("Devonian") in the Baptiste area of West-Central Alberta, whereby
Daewoo and Devonian own a combined 50% of Bellatrix's WI share of
producing assets, an operated compressor station and gathering system
and related land acreage.
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TROIKA JOINT VENTURE - Bellatrix has a joint venture (the "Troika Joint
Venture") with TCA Energy Ltd. ("TCA") in the Ferrier Cardium area of
West-Central Alberta, whereby Troika will contribute 50% or $120
million towards a capital program for drilling of an expected 63 gross
wells and will receive a 35% WI until payout (being recovery of TCA's
capital investment plus a 15% internal rate of return) on the total
program, and thereafter reverting to 25% of Bellatrix's WI.
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Additional information relating to the Company, including the
Bellatrix's Annual Information Form, is available on SEDAR at www.sedar.com.
FORWARD LOOKING STATEMENTS: Certain information contained herein and in
the accompanying report to shareholders may contain forward looking
statements including management's assessment of future plans,
operations and strategy, drilling plans and the timing thereof,
commodity price risk management strategies, 2014 capital expenditure
budget, the nature of expenditures and the method of financing thereof,
anticipated liquidity of the Company and various matters that may
impact such liquidity, expected 2014 production expenses and general
and administrative expenses, expected costs to satisfy drilling
commitments and method of funding drilling commitments, commodity
prices and expected volatility thereof, estimated amount and timing of
incurring decommissioning liabilities, the Company's drilling inventory
and capital required therefor, estimated capital expenditures and wells
to be drilled under joint venture agreements, the ability to fund the
2014 capital expenditure program utilizing various available sources of
capital, expected 2014 average daily production and exit rate, plans to
continue commodity risk management strategies, timing of
redetermination of borrowing base, plans for additional facilities and
infrastructure and timing and effects thereof, expectation that well
rate will increase as production space becomes available, expectation
that TransCanada system pressures will continue to be high through the
summer, expected net production through processing infrastructure,
expected 2014 funds flow from operations and funds flow from operations
per share, exit 2014 net debt and ratio of total net debt to annualized
estimated fourth quarter 2014 funds flow from operations may constitute
forward-looking statements under applicable securities laws. Included
herein are estimates of Bellatrix's 2014 funds flow from operations and
funds flow from operations per share, exit 2014 net debt and ratio of
total net debt to annualized estimated fourth quarter 2014 funds flow
from operations based on the assumptions provided herein and other
assumptions utilized in arriving at Bellatrix's budget. To the extent
such estimates constitute a financial outlook, they were approved by
management on August 5, 2014 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 and ability to access
sufficient capital from internal and external sources. Events or
circumstances may cause actual results to differ materially from those
predicted, as a result of the risk factors set out and other known and
unknown risks, uncertainties, and other factors, many of which are
beyond the control of Bellatrix. In addition, forward-looking
statements or information are based on a number of factors and
assumptions which have been used to develop such statements and
information but which may prove to be incorrect and which have been
used to develop such statements and information in order to provide
shareholders with a more complete perspective on Bellatrix's future
operations. Such information may prove to be incorrect and readers are
cautioned that the information may not be appropriate for other
purposes. Although the Company believes that the expectations
reflected in such forward-looking statements or information are
reasonable, undue reliance should not be placed on forward-looking
statements because the Company can give no assurance that such
expectations will prove to be correct. In addition to other factors
and assumptions which may be identified herein, assumptions have been
made regarding, among other things: the impact of increasing
competition; the general stability of the economic and political
environment in which the Company operates; the timely receipt of any
required regulatory approvals; the ability of the Company to obtain
qualified staff, equipment and services in a timely and cost efficient
manner; drilling results; the ability of the operator of the projects
which the Company has an interest in to operate the field in a safe,
efficient and effective manner; the ability of the Company to obtain
financing on acceptable terms; field production rates and decline
rates; the ability to replace and expand oil and natural gas reserves
through acquisition, development of exploration; the timing and costs
of pipeline, storage and facility construction and expansion and the
ability of the Company to secure adequate product transportation;
future commodity prices; currency, exchange and interest rates; the
regulatory framework regarding royalties, taxes and environmental
matters in the jurisdictions in which the Company operates; and the
ability of the Company to successfully market its oil and natural gas
products. Readers are cautioned that the foregoing list is not
exhaustive of all factors and assumptions which have been used. As a
consequence, actual results may differ materially from those
anticipated in the forward-looking statements. Additional information
on these and other factors that could effect Bellatrix's operations and
financial results are included in reports on file with Canadian and US
securities regulatory authorities and may be accessed through the SEDAR
website (www.sedar.com), through the SEC website (www.sec.gov, and at Bellatrix's website www.bellatrixexploration.com). Furthermore, the forward-looking statements contained herein are
made as at the date hereof and Bellatrix does not undertake any
obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information,
future events or otherwise, except as may be required by applicable
securities laws.
The reader is further cautioned that the preparation of financial
statements in accordance with GAAP requires management to make certain
judgments and estimates that affect the reported amounts of assets,
liabilities, revenues and expenses. Estimating reserves is also
critical to several accounting estimates and requires judgments and
decisions based upon available geological, geophysical, engineering and
economic data. These estimates may change, having either a negative or
positive effect on net earnings as further information becomes
available, and as the economic environment changes.
Overview and Description of the Business
Bellatrix Exploration Ltd. ("Bellatrix" or the "Company") is a western
Canadian based growth oriented oil and gas company engaged in the
exploration for, and the acquisition, development and production of oil
and natural gas reserves in the provinces of Alberta, British Columbia
and Saskatchewan.
Common shares of Bellatrix trade on the Toronto Stock Exchange ("TSX")
and on the NYSE MKT under the symbol BXE.
$750.0 Million Short Form Base Shelf Prospectus and $172.6 Million
Bought Deal Financing
In May 2014, Bellatrix filed a short form base shelf prospectus (the
"$750 million Shelf Prospectus") of up to $750 million, with the
securities regulatory authorities in each of the provinces of Canada
(other than Quebec) and a Registration Statement filed with the United
States Securities and Exchange Commission. The $750 million Shelf
Prospectus allows Bellatrix to offer and issue common shares,
subscription receipts, warrants and units (comprising any combination
of the foregoing securities), by way of one or more prospectus
supplements at any time during the 25-month period that the $750
million Shelf Prospectus remains in place.
Pursuant to a prospectus supplement to the $750 million Shelf
Prospectus, on June 5, 2014, Bellatrix closed a bought deal offering of
18,170,000 common shares of the Company (the "Common Shares") at a
price of $9.50 per Common Share for aggregate gross proceeds of $172.6
million (the "Offering"), through a syndicate of underwriters. Net
proceeds of $165.5 million received from the Offering were utilized to
temporarily reduce outstanding indebtedness under the Company's credit
facilities, thereby freeing up borrowing capacity that may be redrawn,
from time to time, to fund the Company's ongoing capital expenditure
program and for general corporate purposes.
As at June 30, 2014, there was $577.4 million available on the $750
million Shelf Prospectus.
Credit Facility Increased 25% to $625 million
Based upon the Company's semi-annual borrowing base review for May 31,
2014, Bellatrix increased its borrowing base and credit facilities to
$625 million from $500 million. This 25% increase of $125 million was
the result of Bellatrix's strong 2013 drilling results continuing into
the first quarter of 2014, combined with benefits derived from the
acquisition of Angle Energy Inc. ("Angle") in the fourth quarter of
2013, cumulatively delivering significant reserves and production
growth. The increased credit facilities will be available to finance
Bellatrix's ongoing capital expenditures, working capital requirements
and for general corporate purposes.
The bank syndicate lenders approved the Company's request to change the
term of the credit facilities to a 3 year facility, fully revolving
until maturity, and extendible annually at the Company's option
(subject to lender approval), provided that the term after any
extension would not be more than 3 years. Concurrently with such
changes, the credit facilities were also amended to include certain
ongoing financial covenants that will require quarterly compliance.
Grafton Joint Venture Capital Investment Increase
On April 10, 2014, Bellatrix announced that Grafton elected to exercise
an option to increase committed capital investment to the Grafton Joint
Venture established during 2013 by an additional $50 million, for a
total commitment of $250 million, on the same terms and conditions as
the previously announced Grafton Joint Venture. Grafton's increased
capital investment will continue to support the accelerated development
of a portion of Bellatrix's extensive undeveloped land holdings.
The Grafton Joint Venture properties are located in the Willesden Green
and Brazeau areas of West-Central Alberta. After giving effect to the
exercise by Grafton of its option, Grafton was committed to
contributing 82%, or $250 million, to the $305 million Joint Venture to
participate in a Notikewin/Falher and Cardium well program. Under the
agreement, Grafton will earn 54% of Bellatrix's working interest ("WI")
in each well drilled in the development program until payout (being
recovery of Grafton's capital investment plus an 8% return) on the
total program, reverting to 33% of Bellatrix's WI after payout. At any
time after payout of the entire program, Grafton shall have the option
to elect to convert all wells from the 33% WI to a 17.5% Gross
Overriding Royalty on Bellatrix's pre-Joint Venture WI. The effective
date of the initial agreement for the Joint Venture is July 1, 2013 and
had an initial term of 2 years. With the exercise of the $50 million
option, Bellatrix shall have until the end of the third anniversary of
the effective date to spend the additional capital.
Blaze Pipeline
On April 2, 2014, Bellatrix announced the completion of a 1.6 km river
bore and a 7 km pipeline in conjunction with Blaze Energy Ltd.
("Blaze"), completing a 55 km pipeline to tie-in Bellatrix natural gas
for processing in the Blaze gas plant located at 4-31-48-12W5.
Bellatrix has secured firm processing capacity of 100 mmcf/d in the
plant. The pipeline was commissioned on April 1, 2014 reaching 35
mmcf/d on the first day of operations. Bellatrix was delivering up to
84 mmcf/d (including partner gas) at its peak to the Blaze plant during
the second quarter of 2014. As of August 1, 2014, the plant was
accepting up to 80 mmcf/d at the inlet of the facility.
Second Quarter 2014 Financial and Operational Results
Sales Volumes
Sales volumes for the three months ended June 30, 2014 averaged 36,342
boe/d compared to 22,102 boe/d in the same period of 2013, representing
a 65% increase. Total crude oil, condensate and NGLs averaged
approximately 35% of sales volumes for the 2014 second quarter,
compared to 28% in the corresponding period in 2013. Sales volumes for
the six months ended June 30, 2014 averaged 35,699 boe/d, compared to
20,730 boe/d for the same period in 2013, representing a 72% increase.
The increase in total sales volumes experienced in the three and six
month periods was primarily a result of a $151.9 million increase in
capital expenditures over the comparable six month period ending June
30, 2013, attributable in part to the Grafton Joint Venture, the Daewoo
and Devonian Partnership, and the Troika Joint Venture entered into
after the second quarter of 2013, Bellatrix's continued drilling
success achieved in the Cardium and Notikewin/Falher resource plays,
and additional sales volumes acquired through the acquisition of Angle
in December, 2013, offset partially by outages and delays due to
unscheduled temporary plant turnarounds. Capital expenditures for the
six months ended June 30, 2014 were $290.2 million, compared to $138.3
million during the same period of 2013.
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Sales Volumes
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
|
|
2014
|
2013
|
2014
|
2013
|
|
Crude oil and condensate
|
(bbls/d)
|
6,686
|
3,862
|
6,829
|
3,886
|
|
NGLs (excluding condensate)
|
(bbls/d)
|
5,954
|
2,344
|
5,695
|
2,209
|
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Total crude oil, condensate and NGLs
|
(bbls/d)
|
12,640
|
6,206
|
12,524
|
6,095
|
|
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|
|
|
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Natural gas
|
(mcf/d)
|
142,214
|
95,376
|
139,051
|
87,812
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Total (6:1)
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(boe/d)
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36,342
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22,102
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35,699
|
20,730
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In the first six months of 2014, Bellatrix posted a 100% success rate
drilling and/or participating in 63 gross (34.56 net) wells, resulting
in 47 gross (27.38 net) Cardium light oil horizontal oil wells, 14
gross (6.02 net) Notikewin/Falher liquids-rich gas wells, and 2 gross
(1.15 net) Cardium gas wells. During the second quarter of 2014,
Bellatrix drilled and/or participated in 19 gross (9.00 net) wells,
consisting of 11 gross (5.51 net) Cardium oil wells, 7 gross (2.99 net)
Notikewin/Falher liquids-rich gas wells, and 1 gross (0.50 net) Cardium
gas well.
By comparison, during the first half of 2013, Bellatrix drilled and/or
participated in 26 gross (22.08 net) wells, which included 23 gross
(15.98 net) Cardium light oil horizontal wells and 3 gross (2.10 net)
Notikewin/Falher liquids-rich gas horizontal wells. During the second
quarter of 2013, Bellatrix drilled and/or participated in 5 gross (5
net) Cardium oil wells.
For the three months ended June 30, 2014, crude oil, condensate and NGL
sales volumes increased by approximately 104%, averaging 12,640 bbls/d
compared to 6,206 bbls/d in the second quarter of 2013. During the
first six months of 2014, crude oil, condensate and NGL sales volumes
increased by approximately 106%, averaging 12,524 bbls/d compared to
6,095 bbls/d in the first half of 2013. The weighting towards crude
oil, condensate and NGLs for the three and six months ended June 30,
2014 was 35% for both periods, compared to 28% and 29% in the same
periods in 2013, respectively.
Sales of natural gas averaged 142.2 mmcf/d during the second quarter of
2014, compared to 95.4 mmcf/d in the same period in 2013, an increase
of 50%. Sales of natural gas increased by 59% during the first six
months of 2014 to 139.1 mmcf/d, compared to 87.8 mmcf/d in the same
period of 2013.
Bellatrix experienced significant outages and delays due to unscheduled
temporary plant turnarounds at some of Bellatrix's 3rd party operated gas processing plants during the months of May and June
2014.
For 2014, Bellatrix will continue to be active in drilling with 10 to 12
rigs operating in its two core resource plays, the Cardium oil and
Mannville condensate rich gas, utilizing horizontal drilling
multi-fracturing technology. A revised net capital budget of $515
million has been set for fiscal 2014. Based on the timing of proposed
expenditures, downtime for anticipated plant turnarounds and normal
production declines, execution of the revised $515 million 2014 budget
is anticipated to provide 2014 average daily production of
approximately 41,000 boe/d and an exit rate of approximately 48,000
boe/d.
Commodity Prices
Average Commodity Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
|
2014
|
|
2013
|
|
% Change
|
|
2014
|
|
2013
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate (US$/CDN$)
|
|
0.9164
|
|
0.9774
|
|
(7)
|
|
0.9115
|
|
0.9846
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WTI (US$/bbl)
|
|
102.99
|
|
94.17
|
|
10
|
|
100.84
|
|
94.26
|
|
7
|
|
|
Edmonton par - light oil ($/bbl)
|
|
106.67
|
|
92.94
|
|
15
|
|
103.42
|
|
90.77
|
|
14
|
|
Bellatrix's average prices ($/bbl)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil and condensate
|
|
103.25
|
|
93.48
|
|
10
|
|
100.72
|
|
91.83
|
|
10
|
|
|
|
NGLs (excluding condensate)
|
|
42.70
|
|
36.20
|
|
18
|
|
49.72
|
|
39.05
|
|
28
|
|
|
|
Total crude oil and NGLs
|
|
74.73
|
|
71.84
|
|
4
|
|
77.53
|
|
72.70
|
|
7
|
|
|
|
Total crude oil and NGLs (including risk management (1))
|
|
67.71
|
|
73.10
|
|
(8)
|
|
71.14
|
|
73.26
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX (US$/mmbtu)
|
|
4.58
|
|
4.02
|
|
14
|
|
4.65
|
|
3.76
|
|
24
|
|
AECO daily index (CDN$/mcf)
|
|
4.69
|
|
3.53
|
|
33
|
|
5.20
|
|
3.36
|
|
55
|
|
AECO monthly index (CDN$/mcf)
|
|
4.68
|
|
3.59
|
|
31
|
|
4.72
|
|
3.33
|
|
42
|
|
|
|
Bellatrix's average price ($/mcf)
|
|
5.04
|
|
3.85
|
|
31
|
|
5.45
|
|
3.69
|
|
48
|
|
|
|
Bellatrix's average price (including risk management(1)) ($/mcf)
|
|
4.40
|
|
3.68
|
|
20
|
|
4.64
|
|
4.01
|
|
16
|
|
(1)
|
Per unit metrics including risk management include realized gains or
losses on commodity contracts and exclude unrealized
gains or losses on commodity contracts.
|
For crude oil and condensate, Bellatrix recorded an average price of
$103.25/bbl before commodity price risk management contracts during the
three months ended June 30, 2014, 10% higher than the average price of
$93.48/bbl received in the second quarter of 2013. In comparison, the
Edmonton par price increased by 15%, and the average WTI crude oil
benchmark price increased by 10% between the 2014 and 2013 second
quarters. During the six months ended June 30, 2014, Bellatrix
recorded an average price of $100.72/bbl before commodity price risk
management contracts for crude oil and condensate, 10% higher than the
average price of $91.83/bbl received in the first six months of 2013.
In comparison, the Edmonton par price increased by 14%, and the average
WTI crude oil benchmark price increased by 7% between the first half of
2014 and 2013.
The average US$/CDN$ foreign exchange rate was 0.9115 for the six months
ended June 30, 2014, a decrease of 8% compared to an average rate of
0.9846 in the corresponding period in 2013.
For NGLs (excluding condensate), Bellatrix recorded an average price of
$42.70/bbl during the three months ended June 30, 2014, an increase of
18% from the $36.20/bbl received in the comparative 2013 period. For
the six months ended June 30, 2014, Bellatrix received an average NGL
price of $49.72/bbl, a 28% increase from the $39.05/bbl received in the
first half of 2013. The overall increase in NGL pricing between the
2014 and 2013 six-month periods is largely attributable to changes in
NGL market supply conditions between the periods.
Bellatrix's natural gas sales are priced with reference to the daily or
monthly AECO indices. Bellatrix's natural gas sold has a higher heat
content than the industry average, which results in slightly higher
prices per mcf than the daily AECO index. During the second quarter of
2014, the AECO daily reference price increased by 33% and the AECO
monthly reference price increased by approximately 31% compared to the
second quarter of 2013. Bellatrix's natural gas average sales price
before commodity price risk management contracts for the three months
ended June 30, 2014 increased by 31% to $5.04/mcf compared to $3.85/mcf
in the second quarter of 2013. During the six months ended June 30,
2014, the AECO daily reference price increased by 55% and the AECO
monthly reference price increased by 42% compared to the same period in
2013. Bellatrix's natural gas average sales price before commodity
price risk management contracts for the first six months of 2014
increased by 48% to $5.45/mcf compared to $3.69/mcf in the first half
of 2013. Bellatrix's natural gas average prices after including
commodity price risk management contracts for the three and six months
ended June 30, 2014 were $4.40/mcf and $4.64/mcf, compared to $3.68/mcf
and $4.01/mcf in the same periods in 2013, respectively.
Revenue
Revenue before other income, royalties and commodity price risk
management contracts for the three months ended June 30, 2014 was
$151.2 million, an increase of 104% from the $74.0 million realized in
the second quarter of 2013. Revenue before other income, royalties and
commodity price risk management contracts for the six months ended June
30, 2014 was $312.9 million, 125% higher than the $138.9 million
realized in the first half of 2013. In the first six months of 2014,
Bellatrix realized increased light oil, condensate, natural gas, and
NGL sales volumes due primarily to Bellatrix's ongoing drilling success
and additional sales volumes realized from the acquisition of Angle in
December of 2013. The higher revenue before other income between the
2014 and 2013 six month periods was attributable to these increases to
sales volumes for all products in conjunction with higher realized
prices for all commodities experienced in the first six months of 2014.
Crude oil and NGLs revenue before other income, royalties and commodity
price risk management contracts for the three months ended June 30,
2014 increased from the same period in 2013 by approximately 112%,
resulting from 104% higher sales volumes in conjunction with increased
realized prices for all products when compared to the second quarter of
2013. Revenue before other income, royalties and commodity price risk
management contracts for crude oil and NGLs for the six months ended
June 30, 2014 increased by 119% compared to the first six months of
2013, resulting from 106% higher sales volumes in conjunction with
increased realized prices for all products when compared to the first
half of 2013.
In the three and six month periods ending June 30, 2014, total crude
oil, condensate and NGL revenues contributed 57% and 56% of total
revenue (before other income), compared to 55% and 58% in the same
periods in 2013, respectively.
Natural gas revenue before other income, royalties and commodity price
risk management contracts for the three months ended June 30, 2014
increased by approximately 95% compared to the second quarter of 2013
as a result of a 31% increase in realized gas prices before risk
management in conjunction with a 50% increase in sales volumes between
the periods. For the six months ended June 30, 2014, natural gas
revenue before other income, royalties and commodity price risk
management contracts increased by approximately 134% compared to the
first half of 2013 as a result of a 48% increase in realized gas prices
before risk management in conjunction with a 59% increase in sales
volumes between the periods.
|
|
|
|
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
2014
|
2013
|
2014
|
2013
|
|
Crude oil and condensate
|
62,817
|
32,849
|
124,488
|
64,590
|
|
NGLs (excluding condensate)
|
23,138
|
7,724
|
51,249
|
15,613
|
|
Crude oil and NGLs
|
85,955
|
40,573
|
175,737
|
80,203
|
|
Natural gas
|
65,255
|
33,404
|
137,192
|
58,682
|
|
Total revenue (before other income)
|
151,210
|
73,977
|
312,929
|
138,885
|
|
Other income (1)
|
1,101
|
587
|
2,967
|
1,222
|
|
Total revenue (before royalties and risk management)
|
152,311
|
74,564
|
315,896
|
140,107
|
|
(1)
|
Other income primarily consists of processing and other third party
income.
|
Commodity Price Risk Management
The Company has a formal commodity price risk management policy which
permits management to use specified price risk management strategies
including fixed price contracts, collars and the purchase of floor
price options and other derivative financial instruments and physical
delivery sales contracts to reduce the impact of price volatility for a
maximum of eighteen months beyond the transaction date. The program is
designed to provide price protection on a portion of the Company's
future production in the event of adverse commodity price movement,
while retaining significant exposure to upside price movements. By
doing this, the Company seeks to provide a measure of stability to
funds flow from operations, as well as to ensure Bellatrix realizes
positive economic returns from its capital development and acquisition
activities. The Company plans to continue its commodity price risk
management strategies focusing on maintaining sufficient cash flow to
fund Bellatrix's capital expenditure program. Any remaining production
is realized at market prices.
A summary of the financial commodity price risk management volumes and
average prices by quarter outstanding as of August 5, 2014 is shown in
the following tables:
|
Natural gas
|
|
Average Volumes (GJ/d)
|
|
|
|
|
Q3 2014
|
Q4 2014
|
|
Fixed
|
|
|
110,000
|
110,000
|
|
|
|
|
|
|
|
Average Price ($/GJ AECO C)
|
|
|
|
|
Q3 2014
|
Q4 2014
|
|
Fixed price
|
|
|
3.70
|
3.70
|
|
|
|
|
|
|
|
Crude oil and liquids
|
|
Average Volumes (bbls/d)
|
|
|
|
|
Q3 2014
|
Q4 2014
|
|
Fixed (CDN$)
|
|
|
5,000
|
5,000
|
|
Fixed (US$)
|
|
|
1,000
|
1,000
|
|
|
|
|
|
|
|
Average Price ($/bbl WTI)
|
|
|
|
|
Q3 2014
|
Q4 2014
|
|
Fixed price (CDN$/bbl)
|
|
|
96.46
|
96.46
|
|
Fixed price (US$/bbl)
|
|
|
94.15
|
94.15
|
As at June 30, 2014, the fair value of Bellatrix's outstanding commodity
contracts was a net unrealized liability of $25.6 million as reflected
in the financial statements. The fair value or mark-to-market value of
these contracts is based on the estimated amount that would have been
received or paid to settle the contracts as at June 30, 2014 and will
differ from what will eventually be realized. Changes in the fair
value of the commodity contracts are recognized in the Condensed
Consolidated Statements of Comprehensive Income within the financial
statements.
The following is a summary of the gain (loss) on commodity contracts for
the three and six months ended June 30, 2014 and 2013 as reflected in
the Condensed Consolidated Statements of Comprehensive Income:
|
Commodity contracts
|
|
Three months ended June 30, 2014
|
|
($000s)
|
Crude Oil & Liquids
|
Natural Gas
|
Total
|
|
Realized cash loss on contracts
|
(8,074)
|
(8,287)
|
(16,361)
|
|
Unrealized gain on contracts (3)
|
2,952
|
12,044
|
14,996
|
|
Total gain (loss) on commodity contracts
|
(5,122)
|
3,757
|
(1,365)
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
Three months ended June 30, 2013
|
|
($000s)
|
Crude Oil & Liquids
|
Natural Gas
|
Total
|
|
Realized cash gain (loss) on contracts
|
709
|
(1,494)
|
(785)
|
|
Unrealized gain (loss) on contracts (3)
|
(490)
|
6,482
|
5,992
|
|
Total gain on commodity contracts
|
219
|
4,988
|
5,207
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
Six months ended June 30, 2014
|
|
($000s)
|
Crude Oil & Liquids
|
Natural Gas
|
Total
|
|
Realized cash loss on contracts (1)
|
(14,490)
|
(20,509)
|
(34,999)
|
|
Unrealized loss on contracts (3)
|
(3,113)
|
(5,567)
|
(8,680)
|
|
Total loss on commodity contracts
|
(17,603)
|
(26,076)
|
(43,679)
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
Six months ended June 30, 2013
|
|
($000s)
|
Crude Oil & Liquids
|
Natural Gas
|
Total
|
|
Realized cash gain on contracts (2)
|
621
|
5,096
|
5,717
|
|
Unrealized gain (loss) on contracts (3)
|
1,517
|
(7,824)
|
(6,307)
|
|
Total gain (loss) on commodity contracts
|
2,138
|
(2,728)
|
(590)
|
|
(1)
|
In January 2014, the Company settled a 1,500 bbl/d $105.00 US crude call
option for the term of February to December 31, 2014 for US $0.5
million.
|
|
(2)
|
In January 2013, the Company crystalized and realized $6.5 million in
cash
proceeds by resetting the fixed prices on natural gas commodity price
risk
management contracts for the period from April 1, 2013 through to
October
31, 2013.
|
|
(3)
|
Unrealized gain (loss) on commodity contracts represents non-cash
adjustments
for changes in the fair value of these contracts during the period.
|
Royalties
For the three months ended June 30, 2014, total royalties were $27.0
million compared to $12.6 million incurred in the second quarter of
2013. Overall royalties as a percentage of revenue (after
transportation costs) in the second quarter of 2014 were 18% compared
with 17% in the same period in 2013. For the six months ended June 30,
2014, total royalties were $54.4 million compared to $24.3 million
incurred in the first six months of 2013. Overall royalties as a
percentage of revenue (after transportation costs) in the first half of
2014 were 17%, compared with 18% in the same period in 2013.
Natural gas royalties in the three months ended June 30, 2014 were
increased by $1.3 million for annual gas cost allowance adjustments.
Excluding these adjustments, the average natural gas and overall
corporate royalty rate percentages for the second quarter of 2014 would
be 15% and 17%, respectively. Natural gas royalties in the three
months ended June 30, 2013 were reduced by $1.1 million for annual gas
cost allowance adjustments. Excluding these adjustments, the average
natural gas and overall corporate royalty rate percentages for the
second quarter of 2013 would be 9% and 19%, respectively.
Crude oil, condensate and NGL royalties, and total royalties recognized
in the second quarter of 2014 were increased by $2.3 million for
adjustments relating to prior period 2012 and 2013 estimates of
condensate and NGL royalties for Ferrier area wells paying Indian Oil
and Gas Canada ("IOGC") royalties with royalty incentive programs.
These adjustments arose as a result of clarification of the
interpretation of the allowable deductions in certain contracts.
Excluding these adjustments, the average crude oil, condensate and NGL
royalty and corporate royalty rate percentages were 16% and 17%,
respectively.
|
|
|
|
|
|
|
Royalties by Commodity Type
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s, except where noted)
|
2014
|
2013
|
2014
|
2013
|
|
Crude oil, condensate and NGLs
|
16,198
|
10,872
|
34,982
|
19,573
|
|
|
$/bbl
|
14.08
|
19.25
|
15.43
|
17.74
|
|
|
Average crude oil, condensate and
NGLs royalty rate (%)
|
19
|
27
|
20
|
25
|
|
|
|
|
|
|
|
Natural Gas
|
10,817
|
1,689
|
19,420
|
4,773
|
|
|
$/mcf
|
0.84
|
0.19
|
0.77
|
0.30
|
|
|
Average natural gas royalty rate (%)
|
17
|
5
|
14
|
8
|
|
|
|
|
|
|
|
Total
|
27,015
|
12,561
|
54,402
|
24,346
|
|
Total $/boe
|
8.17
|
6.25
|
8.42
|
6.49
|
|
Average total royalty rate (%)
|
18
|
17
|
17
|
18
|
|
Royalties by Type
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
|
2014
|
2013
|
2014
|
2013
|
|
Crown royalties
|
9,524
|
2,994
|
18,072
|
6,113
|
|
Indian Oil and Gas Canada royalties
|
6,419
|
4,438
|
10,587
|
7,160
|
|
Freehold & GORR
|
11,072
|
5,129
|
25,743
|
11,073
|
|
Total
|
27,015
|
12,561
|
54,402
|
24,346
|
The Company's light crude oil, condensate and NGLs, and natural gas
royalties are impacted by lower royalties on more recent wells in their
early years of production under the Alberta royalty incentive program.
This is offset by increased royalty rates on wells coming off initial
royalty incentive rates and wells drilled on Ferrier lands with higher
combined IOGC and GORR royalty rates.
|
EXPENSES
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
|
2014
|
2013
|
2014
|
2013
|
|
Production
|
25,799
|
17,383
|
51,428
|
32,441
|
|
Transportation
|
2,721
|
1,662
|
7,758
|
3,107
|
|
General and administrative
|
4,536
|
2,499
|
10,061
|
6,085
|
|
Interest and financing charges (1)
|
4,866
|
3,542
|
8,593
|
6,586
|
|
Share-based compensation
|
2,328
|
241
|
4,837
|
1,691
|
|
(1)
|
Does not include financing charges in relation to the Company's
accretion of
decommissioning liabilities.
|
|
Expenses per boe
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($ per boe)
|
|
2014
|
2013
|
2014
|
2013
|
|
Production
|
7.80
|
8.64
|
7.96
|
8.65
|
|
Transportation
|
0.82
|
0.83
|
1.20
|
0.83
|
|
General and administrative
|
1.37
|
1.24
|
1.56
|
1.62
|
|
Interest and financing charges
|
1.47
|
1.76
|
1.33
|
1.75
|
|
Share-based compensation
|
0.70
|
0.12
|
0.75
|
0.45
|
Production Expenses
For the three and six months ended June 30, 2014, production expenses
totaled $25.8 million ($7.80/boe) and $51.4 million ($7.96/boe),
compared to $17.4 million ($8.64/boe) and $32.4 million ($8.65/boe) in
the three and six months ended June 30, 2013, respectively. In the
three and six month periods ended June 30, 2014, production expenses
increased overall but decreased on a per boe basis when compared to the
same periods in 2013. The decrease in production expenses per boe
between the 2013 and 2014 periods is due to continued field
optimization projects and increased production in areas of Ferrier and
Harmattan with lower production expenses.
Bellatrix is targeting production expenses of approximately $116.5
million ($7.75/boe) in the 2014 year, which is a reduction from the
$8.74/boe production expenses incurred for the 2013 year. This is
based upon assumptions of estimated 2014 average production of
approximately 41,000 boe/d, continued field optimization work and
planned capital expenditures in producing areas which are anticipated
to lower production expenses.
|
Production Expenses by Commodity Type
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s, except where noted)
|
2014
|
2013
|
2014
|
2013
|
|
Crude oil, condensate and NGLs
|
8,675
|
7,621
|
17,799
|
14,748
|
|
$/bbl
|
7.54
|
13.50
|
7.85
|
13.37
|
|
|
|
|
|
|
|
Natural gas
|
17,124
|
9,762
|
33,629
|
17,693
|
|
$/mcf
|
1.32
|
1.12
|
1.34
|
1.11
|
|
|
|
|
|
|
|
Total Production Expenses
|
25,799
|
17,383
|
51,428
|
32,441
|
|
Total $/boe
|
7.80
|
8.64
|
7.96
|
8.65
|
|
|
|
|
|
|
|
Total Production Expenses
|
25,799
|
17,383
|
51,428
|
32,441
|
|
Processing and other third party income (1)
|
(1,101)
|
(587)
|
(2,967)
|
(1,222)
|
|
Total after deducting processing and other third party income
|
24,698
|
16,796
|
48,461
|
31,219
|
|
Total $/boe
|
7.47
|
8.35
|
7.50
|
8.32
|
|
(1)
|
Processing and other third party income is included within petroleum and
natural gas sales in the Condensed
Consolidated Statements of Comprehensive Income.
|
Transportation
Transportation expenses for the three and six months ended June 30, 2014
were $2.7 million ($0.82/boe) and $7.8 million ($1.20/boe), compared to
$1.7 million ($0.83/boe) and $3.1 million ($0.83/boe) in the same
periods in 2013, respectively. The increase in transportation costs per
boe between the six month periods of 2013 and 2014 was due to increased
fuel costs resulting from higher natural gas pricing realized during
the first quarter of 2014, as well as higher hauling costs which were
initially necessary for crude oil and associated products produced from
wells which began producing in the first six months of 2014.
Operating Netback
|
Operating Netback - Corporate (before risk management)
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($/boe)
|
|
2014
|
2013
|
2014
|
2013
|
|
Sales
|
45.72
|
36.78
|
48.43
|
37.01
|
|
Transportation
|
(0.82)
|
(0.83)
|
(1.20)
|
(0.83)
|
|
Royalties
|
(8.17)
|
(6.25)
|
(8.42)
|
(6.49)
|
|
Production expense
|
(7.80)
|
(8.64)
|
(7.96)
|
(8.65)
|
|
Operating netback
|
28.93
|
21.06
|
30.85
|
21.04
|
For the three months ended June 30, 2014, the corporate operating
netback (before commodity risk management contracts) was $28.93/boe
compared to $21.06/boe in the second quarter of 2013. The 37%
increased netback was primarily the result of higher commodity prices
and lower production and transportation expenses, partially offset by
increased royalty expenses. After including commodity risk management
contracts, the corporate operating netback for the second quarter of
2014 was $23.98/boe compared to $20.68/boe in the same period in 2013.
Per unit metrics including risk management include realized gains or
losses on commodity contracts and exclude unrealized gains or losses on
commodity contracts.
For the six months ended June 30, 2014, the corporate operating netback
(before commodity risk management contracts) was $30.85/boe compared to
$21.04/boe in the same period in 2013. The 47% increased netback was
primarily the result of higher commodity prices and lower production
expenses, partially offset by increased transportation and royalty
expenses. After including commodity risk management contracts, the
corporate operating netback for the first six months of 2014 was
$25.43/boe compared to $22.58/boe in the same period in 2013.
|
Operating Netback - Crude Oil, Condensate and NGLs (before risk
management)
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($/bbl)
|
|
2014
|
2013
|
2014
|
2013
|
|
Sales
|
74.73
|
71.84
|
77.53
|
72.70
|
|
Transportation
|
(0.52)
|
(0.85)
|
(1.20)
|
(0.89)
|
|
Royalties
|
(14.08)
|
(19.25)
|
(15.43)
|
(17.74)
|
|
Production expense
|
(7.54)
|
(13.49)
|
(7.85)
|
(13.37)
|
|
Operating netback
|
52.59
|
38.25
|
53.05
|
40.70
|
Operating netback for crude oil, condensate and NGLs averaged $52.59/bbl
for the three months ended June 30, 2014, a 37% increase from
$38.25/bbl realized in the second quarter of 2013. The increased
netback was primarily attributable to higher commodity prices as well
as reduced production, royalty and transportation expenses. After
including commodity price risk management contracts, operating netback
for crude oil, condensate, and NGLs for the second quarter of 2014
increased to $45.56/bbl compared to $39.50/bbl in the same period in
2013.
Operating netback for crude oil, condensate and NGLs increased by 30% to
$53.05/bbl for the six months ended June 30, 2014 from $40.70/bbl
realized in the second quarter of 2013. The increased netback was
primarily attributable to commodity prices and reduced production and
royalty expenses, partially offset by higher transportation expenses.
After including commodity price risk management contracts, operating
netback for crude oil, condensate, and NGLs for the first half of 2014
increased to $46.65/bbl compared to $41.26/bbl in the same period in
2013.
|
Operating Netback - Natural Gas (before risk management)
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($/mcf)
|
|
2014
|
2013
|
2014
|
2013
|
|
Sales
|
5.04
|
3.85
|
5.45
|
3.69
|
|
Transportation
|
(0.16)
|
(0.14)
|
(0.20)
|
(0.14)
|
|
Royalties
|
(0.84)
|
(0.19)
|
(0.77)
|
(0.30)
|
|
Production expense
|
(1.32)
|
(1.12)
|
(1.34)
|
(1.11)
|
|
Operating netback
|
2.72
|
2.40
|
3.14
|
2.14
|
For the three months ended June 30, 2014, operating netback for natural
gas was $2.72/mcf, an increase of 13% from $2.40/mcf realized in the
second quarter of 2013. The increase reflected increased natural gas
prices, partially offset by increased production, transportation, and
royalty expenses. After including commodity risk management contracts,
operating netback for natural gas for the three months ended June 30,
2014 decreased to $2.08/mcf, compared to $2.22/mcf in the same period
in 2013.
For the six months ended June 30, 2014, operating netback for natural
gas increased by 47% to $3.14/mcf, compared to $2.14/mcf realized in
the first six months of 2013. The increase reflected increased natural
gas prices, partially offset by increased production, transportation,
and royalty expenses. After including commodity risk management
contracts, operating netback for natural gas for the first half of 2014
decreased to $2.33/mcf, compared to $2.47/mcf in the first six months
of 2013.
General and Administrative
General and administrative ("G&A") expenses (after capitalized G&A and
recoveries) for the three and six months ended June 30, 2014 were $4.5
million ($1.37/boe) and $10.1 million ($1.56/boe), compared to $2.5
million ($1.24/boe) and $6.1 million ($1.62/boe) in the same periods of
2013, respectively. The higher G&A expenses in the second quarter of
2014 were primarily reflective of higher compensation costs and related
staffing costs as Bellatrix's headcount has increased by 67%, as well
as additional office rent, partially offset by increased recoveries and
capitalization. On a per boe basis, G&A for the three months ended June
30, 2014 increased by 10% when compared to the same period in 2013. The
increase was primarily a result of higher overall costs, which more
than offset the higher average sales volumes realized between the 2013
and 2014 periods.
For 2014, the Company is anticipating G&A expenses after capitalization
and recoveries to be approximately $25.0 million ($1.67/boe) based on
estimated 2014 average production volumes of approximately 41,000
boe/d.
|
General and Administrative Expenses
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s, except where noted)
|
2014
|
2013
|
2014
|
2013
|
|
Gross expenses
|
11,971
|
6,754
|
25,873
|
12,919
|
|
Capitalized
|
(1,499)
|
(1,307)
|
(5,386)
|
(2,458)
|
|
Recoveries
|
(5,936)
|
(2,948)
|
(10,426)
|
(4,376)
|
|
G&A expenses
|
4,536
|
2,499
|
10,061
|
6,085
|
|
G&A expenses, per unit ($/boe)
|
1.37
|
1.24
|
1.56
|
1.62
|
Interest and Financing Charges
For the three and six months ended June 30, 2014, Bellatrix recorded
$4.9 million ($1.47/boe) and $8.6 million ($1.33/boe) of interest and
financing charges related to bank debt, compared to $3.5 million
($1.76/boe) and $6.6 million ($1.76/boe) in the comparative periods in
2013, respectively, which included amounts relating to its then
outstanding $55.0 million 4.75% convertible debentures. Bellatrix's
convertible debentures were settled during September and October of
2013. The overall increase in interest and financing charges between
the second quarters of 2014 and 2013 was primarily due to higher
interest charges as the Company carried a higher average debt balance
in the second quarter of 2014 compared to the 2013 period. Bellatrix's
total net debt at June 30, 2014 of $363.4 million included $323.0
million of bank debt and the net balance being the working capital
deficiency.
|
Interest and Financing Charges (1)
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s, except where noted)
|
2014
|
2013
|
2014
|
2013
|
|
Interest and financing charges
|
4,866
|
3,542
|
8,593
|
6,586
|
|
Interest and financing charges ($/boe)
|
1.47
|
1.76
|
1.33
|
1.76
|
|
(1)
|
Does not include financing charges in relation to the Company's
accretion of decommissioning
liabilities.
|
|
Debt to Funds Flow from Operations Ratio
|
|
|
|
|
|
Three months
ended June 30,
|
|
Six months
ended June 30,
|
|
($000s, except where noted)
|
2014
|
2013
|
|
2014
|
2013
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
1,141,830
|
402,904
|
|
1,141,830
|
402,904
|
|
|
|
|
|
|
|
|
Long-term debt
|
323,007
|
194,002
|
|
323,007
|
194,002
|
|
Convertible debentures (liability component)
|
-
|
51,536
|
|
-
|
51,536
|
|
Working capital deficiency (2)
|
40,426
|
10,927
|
|
40,426
|
10,927
|
|
Total net debt (2) at period end
|
363,433
|
256,465
|
|
363,433
|
256,465
|
|
|
|
|
|
|
|
|
Debt to funds flow from operations (1) ratio (annualized) (3)
|
|
|
|
|
|
|
Funds flow from operations (1) (annualized)
|
284,052
|
146,252
|
|
297,310
|
148,216
|
|
Total net debt (2) at period end (5)
|
363,433
|
256,465
|
|
363,433
|
256,456
|
|
Total net debt to periods funds flow from operations ratio (annualized) (3) (5)
|
1.3x
|
1.8x
|
|
1.2x
|
1.7x
|
|
|
|
|
|
|
|
|
Debt to funds flow from operations (1) ratio (trailing) (4)
|
|
|
|
|
|
|
Funds flow from operations (1) (trailing) (4) (6)
|
243,172
|
130,586
|
|
243,172
|
130,586
|
|
Total net debt (2) to funds flow from operations ratio (1) (trailing) (4) (5) (6)
|
1.5x
|
2.0x
|
|
1.5x
|
2.0x
|
|
|
|
|
|
|
|
|
(1)
|
As detailed previously in this MD&A, funds flow from operations is a
term that does not have any standardized meaning
under GAAP. Funds flow from operations is calculated as cash flow from
operating activities, excluding decommissioning
costs incurred, changes in non-cash working capital incurred, and
transaction costs. Refer to the reconciliation of cash
flow from operating activities to funds flow from operations appearing
elsewhere herein.
|
|
(2)
|
Net debt and total net debt are considered non-GAAP measures. Therefore
reference to the non-GAAP
measures of net debt or total net debt may not be comparable with the
calculation of similar measures for other entities.
The Company's 2014 calculation of total net debt excludes deferred lease
inducements, long-term commodity contract
liabilities, decommissioning liabilities, the long-term finance lease
obligation, deferred lease inducements, and the
deferred tax liability. Net debt and total net debt include the
adjusted working capital deficiency (excess). The
adjusted working capital deficiency (excess) is a non-GAAP measure
calculated as net working capital deficiency
(excess) excluding short-term commodity contract assets and liabilities,
current finance lease obligation, and
deferred lease inducements. For the comparative 2013 calculation, net
debt also excludes the liability component
of convertible debentures which were then outstanding. A reconciliation
between total liabilities under GAAP and
total net debt and net debt as calculated by the Company is found in the
MD&A.
|
|
(3)
|
Total net debt and net debt to periods funds flow from operations ratio
(annualized) is calculated based upon second
quarter funds flow from operations annualized.
|
|
(4)
|
Trailing periods funds flow from operations ratio annualized is based
upon the twelve-month periods ended June 30,
2014 and June 30, 2013.
|
|
(5)
|
During part of the 2013 year, Bellatrix had outstanding $55.0 million
4.75% convertible unsecured subordinated
debentures (the "convertible debentures"). The convertible debentures
were converted or redeemed during
September and October of 2013. At June 30, 2013, net debt excluding
convertible debentures was $204.9
million, net debt excluding convertible debentures to funds flow from
operations ratio (trailing) was 1.6x, and
net debt excluding convertible debentures to periods funds flow from
operations ratio (annualized) was 1.4x.
|
|
(6)
|
The calculations of funds flow from operations (trailing) and total net
debt to funds flow from operations ratio
(trailing) for June 30, 2014 include Angle funds flow from operations
for the twelve-month period ending June
30, 2014.
|
|
Reconciliation of Total Liabilities to Total Net Debt and Net Debt
|
|
|
|
|
As at June 30,
|
|
($000s)
|
|
|
2014
|
|
2013
|
|
Total liabilities per financial statements
|
|
|
695,412
|
|
376,744
|
|
|
Current liabilities (included within working capital calculation below)
|
|
|
(237,099)
|
|
(68,069)
|
|
|
Commodity contract liability - long term
|
|
|
-
|
|
(1,539)
|
|
|
Decommissioning liabilities
|
|
|
(74,480)
|
|
(43,102)
|
|
|
Finance lease obligation
|
|
|
(10,873)
|
|
(12,406)
|
|
|
Deferred lease inducements
|
|
|
(2,836)
|
|
-
|
|
|
Deferred taxes
|
|
|
(47,117)
|
|
(6,090)
|
|
|
|
|
|
|
|
|
Working Capital
|
|
|
|
|
|
|
|
Current assets
|
|
|
(169,194)
|
|
(51,089)
|
|
|
Current liabilities
|
|
|
237,099
|
|
68,069
|
|
|
Current portion of finance lease
|
|
|
(1,534)
|
|
(1,459)
|
|
|
Current portion of deferred lease inducements
|
|
|
(333)
|
|
-
|
|
|
Net commodity contract liability
|
|
|
(25,612)
|
|
(4,594)
|
|
|
|
|
40,426
|
|
10,927
|
|
Total net debt
|
|
|
363,433
|
|
256,465
|
|
|
Convertible debentures
|
|
|
-
|
|
(51,536)
|
|
Net debt
|
|
|
363,433
|
|
204,929
|
Share-Based Compensation
For the three months ended June 30, 2014, non-cash share-based
compensation expense was $2.3 million compared to $0.2 million in the
same period in 2013. The increase in non-cash share-based compensation
expense was primarily a result of a higher expense net of forfeitures
for the Company's outstanding share options of $1.5 million (2013: $0.7
million), an expense of $1.0 million for Deferred Share Units ("DSUs")
(2013: recovery of $0.2 million), an expense of $0.5 million (2013:
nil) for Restricted Awards ("RAs"), and an expense of $0.4 million
(2013: nil) for Performance Awards ("PAs"). The increase was partially
offset by higher capitalized share-based compensation of $1.1 million
(2013: $0.3 million).
Non-cash share-based compensation expense for the six months ended June
30, 2014 was $4.8 million compared to $1.7 million in the first half of
2013. The increase in non-cash share-based compensation expense was
primarily a result of a higher expense net of forfeitures for the
Company's outstanding share options of $2.8 million (2013: $1.6
million), an expense of $1.8 million (2013: $0.8 million) for DSUs, an
expense of $1.5 million (2013: nil) for RAs, and an expense of $0.8
million (2013: nil) for PAs. The increase was partially offset by
higher capitalized share-based compensation of $2.1 million (2013: $0.7
million).
Depletion and Depreciation
Depletion and depreciation expense for the three and six month periods
ended June 30, 2014 was $41.0 million ($12.39/boe) and $77.4 million
($11.98/boe), compared to $20.9 million ($10.38/boe) and $38.0 million
($10.12/boe) recognized in the same periods in 2013, respectively. For
both the three and six month periods, the increase in depletion and
depreciation expense between the periods, on a per boe basis, was
primarily a result of a higher cost base and increased future
development costs, partially offset by an increase in the reserve base
used for the depletion calculation.
For the three months ended June 30, 2014, Bellatrix has included a total
of $1.1 billion (2013: $504.7 million) for future development costs in
the depletion calculation and excluded from the depletion calculation a
total of $70.2 million (2013: $39.3 million) for estimated salvage.
Facilities under construction associated capital of $28.7 million was
excluded from the depletable base for the depletion calculation for the
three months ended June 30, 2014.
|
Depletion and Depreciation
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s, except where noted)
|
2014
|
2013
|
2014
|
2013
|
|
Depletion and Depreciation
|
40,984
|
20,877
|
77,389
|
37,967
|
|
Per unit ($/boe)
|
12.39
|
10.38
|
11.98
|
10.12
|
In the three and six months ended June 30, 2014, a total net gain on
dispositions of $9.4 million and $28.5 million, respectively, was
recognized relating to gains on wells drilled under the Grafton Joint
Venture and the Troika Joint Venture which were completed during the
three and six month periods ended June 30, 2014.
Impairment of Assets
As at June 30, 2014, Bellatrix determined there were no impairment
indicators requiring an impairment test to be performed.
Income Taxes
Deferred income taxes arise from differences between the accounting and
tax basis of the Company's assets and liabilities. For the three and
six month periods ended June 30, 2014, the Company recognized a
deferred income tax expense of $13.4 million and $22.0 million,
compared to $5.3 million and $7.1 million in the same periods in 2013,
respectively.
At June 30, 2014, the Company had a total deferred tax liability balance
of $47.1 million.
At June 30, 2014, Bellatrix had approximately $1.4 billion in tax pools
available for deduction against future income as follows:
|
|
|
|
|
|
|
($000s)
|
Rate %
|
June 30,
2014
|
June 30,
2013
|
|
Intangible resource pools:
|
|
|
|
|
|
Canadian exploration expenses
|
100
|
101,000
|
42,600
|
|
|
Canadian development expenses
|
30
|
736,100
|
443,500
|
|
|
Canadian oil and gas property expenses
|
10
|
73,500
|
39,400
|
|
|
Foreign resource expenses
|
10
|
800
|
700
|
|
Attributed Canadian Royalty Income
|
(Alberta) 100
|
-
|
16,100
|
Alberta non-capital losses greater than
Federal non-capital losses
|
(Alberta) 100
|
16,100
|
-
|
|
Undepreciated capital cost (1)
|
6 - 55
|
265,600
|
94,900
|
|
Non-capital losses (expire through 2030)
|
100
|
157,100
|
10,000
|
|
Financing costs
|
20 S.L.
|
13,900
|
2,000
|
|
|
|
1,364,100
|
649,200
|
|
(1)
|
Approximately $236 million of undepreciated capital cost pools are class
41, which is claimed at a 25% rate.
|
Cash Flow from Operating Activities, Funds Flow from Operations and Net
Profit
As detailed previously in this MD&A, funds flow from operations is a
term that does not have any standardized meaning under GAAP.
Bellatrix's method of calculating funds flow from operations may differ
from that of other companies, and accordingly, may not be comparable to
measures used by other companies. Funds flow from operations is
calculated as cash flow from operating activities before
decommissioning costs incurred, changes in non-cash working capital
incurred, and transaction costs.
|
Reconciliation of Cash Flow from Operating Activities and Funds Flow
from Operations
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
2014
|
2013
|
2014
|
2013
|
|
Cash flow from operating activities
|
60,063
|
29,611
|
144,363
|
65,138
|
|
Decommissioning costs incurred
|
73
|
268
|
137
|
547
|
|
Change in non-cash working capital
|
10,878
|
6,684
|
4,156
|
8,423
|
|
Funds flow from operations
|
71,014
|
36,563
|
148,656
|
74,108
|
Bellatrix's cash flow from operating activities of $60.1 million ($0.34
per basic share and $0.33 per diluted share) for the three months ended
June 30, 2014 increased by 103% from $29.6 million ($0.27 per basic
share and $0.25 per diluted share) generated in the second quarter of
2013. Bellatrix generated funds flow from operations of $71.0 million
($0.40 per basic share and $0.39 per diluted share) in the second
quarter of 2014, an increase of 94% from $36.6 million ($0.34 per basic
share and $0.31 per diluted share) generated in the same period in
2013. The increase in funds flow from operations between the second
quarter of 2014 and 2013 was principally due to increased overall
production volumes and higher realized prices for all commodities,
partially offset by a higher net realized loss on commodity contracts,
and increased general and administrative, production, transportation,
and royalty expenses.
Bellatrix's cash flow from operating activities of $144.4 million ($0.83
per basic share and $0.81 per diluted share) for the six months ended
June 30, 2014 increased by 122% from $65.1 million ($0.60 per basic
share and $0.55 per diluted share) generated in the first half of
2013. Bellatrix generated funds flow from operations of $148.7 million
($0.85 per basic share and $0.84 per diluted share) in the first six
months of 2014, an increase of 101% from $74.1 million ($0.69 per basic
share and $0.63 per diluted share) generated in the first half of
2013. The increase in funds flow from operations between the 2014 and
2013 periods was principally due to increased overall production
volumes and higher realized prices for all commodities, partially
offset by a net realized loss on commodity contracts compared to a net
realized gain in the 2013 period, as well as increased general and
administrative, production, transportation, and royalty expenses.
Bellatrix maintains a commodity price risk management program to provide
a measure of stability to funds flow from operations. Unrealized
mark-to-market gains or losses are non-cash adjustments to the fair
market value of the contract over its entire term and are included in
the calculation of net profit.
Bellatrix recognized a net profit of $38.3 million ($0.22 per basic
share and $0.21 per diluted share) for the three months ended June 30,
2014, compared to a net profit of $15.5 million ($0.14 per basic share
and $0.13 per diluted share) in the second quarter of 2013. The higher
net profit recorded in the second quarter of 2014 compared to 2013 was
primarily the result of higher funds from operating activities as noted
above, a greater unrealized gain on commodity contracts, and a gain on
property dispositions recognized in the second quarter of 2014. These
positive impacts to net profit were partially offset by increased
depletion and depreciation, stock-based compensation, and deferred tax
expense and a higher realized loss on commodity contracts in the second
quarter of 2014 compared to the same period in 2013.
For the six months ended June 30, 2014, Bellatrix recognized a net
profit of $63.4 million ($0.36 per basic share and $0.36 per diluted
share), compared to a net profit of $20.0 million ($0.19 per basic
share and $0.18 per diluted share) in the first half of 2013. The
higher net profit recorded in the first six months of 2014 compared to
2013 was primarily the result of higher funds from operating activities
as noted above and a higher gain on property dispositions. These
positive impacts to net profit were partially offset by increased
depletion and depreciation, stock-based compensation, and deferred tax
expenses, a realized loss on commodity contracts in the first half of
2014 compared to a realized gain in the 2013 period, and a greater
unrealized loss on commodity contracts in the first six months of 2014
compared to the same period in 2013.
|
Cash Flow from Operating Activities, Funds Flow from Operations and Net
Profit
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s, except per share amounts)
|
2014
|
2013
|
2014
|
2013
|
|
Cash flow from operating activities
|
60,063
|
29,611
|
144,363
|
65,138
|
|
|
Basic ($/share)
|
0.34
|
0.27
|
0.83
|
0.60
|
|
|
Diluted ($/share)
|
0.33
|
0.25
|
0.81
|
0.55
|
|
|
|
|
|
|
|
|
Funds flow from operations
|
71,014
|
36,563
|
148,656
|
74,108
|
|
|
Basic ($/share)
|
0.40
|
0.34
|
0.85
|
0.69
|
|
|
Diluted ($/share)
|
0.39
|
0.31
|
0.84
|
0.63
|
|
|
|
|
|
|
|
|
Net profit
|
38,252
|
15,466
|
63,419
|
20,027
|
|
|
Basic ($/share)
|
0.22
|
0.14
|
0.36
|
0.19
|
|
|
Diluted ($/share)
|
0.21
|
0.13
|
0.36
|
0.18
|
Capital Expenditures
Bellatrix invested $134.6 million and $290.2 million in capital
expenditures during the three and six months ended June 30, 2014,
compared to $46.7 million and $138.3 million in the three and six
months ended June 30, 2013, respectively.
Capital Expenditures
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
2014
|
2013
|
2014
|
2013
|
|
Lease acquisitions and retention
|
4,264
|
1,235
|
6,737
|
6,841
|
|
Geological and geophysical
|
931
|
35
|
1,676
|
58
|
|
Drilling and completion costs
|
51,159
|
30,597
|
151,539
|
99,924
|
|
Facilities and equipment
|
75,008
|
14,305
|
124,097
|
30,809
|
|
|
Exploration and development (1)
|
131,362
|
46,172
|
284,049
|
137,632
|
|
Corporate (2)
|
3,206
|
543
|
6,161
|
682
|
|
|
Total capital expenditures - cash
|
134,568
|
46,715
|
290,210
|
138,314
|
|
Property dispositions - cash
|
(8,613)
|
(16)
|
(8,392)
|
(1)
|
|
|
Total net capital expenditures - cash
|
125,955
|
46,699
|
281,818
|
138,313
|
|
Other - non-cash (3)
|
3,602
|
(1,308)
|
8,592
|
(521)
|
|
Total capital expenditures - net
|
129,557
|
45,391
|
290,410
|
137,792
|
|
(1)
|
Excludes capitalized costs related to decommissioning liabilities
expenditures incurred during
the period.
|
|
(2)
|
Corporate includes office leasehold improvements, furniture, fixtures
and equipment before
recoveries realized from landlord lease inducements.
|
|
(3)
|
Other includes non-cash adjustments for the current period's
decommissioning liabilities and
share based compensation.
|
In the first six months of 2014, Bellatrix posted a 100% success rate
drilling and/or participating in 63 gross (34.56 net) wells, resulting
in 47 gross (27.38 net) Cardium light oil wells, 14 gross (6.02 net)
Notikewin/Falher liquids-rich gas wells, and 2 gross (1.15 net) Cardium
gas wells. During the second quarter of 2014, Bellatrix drilled and/or
participated in 19 gross (9.00 net) wells, consisting of 11 gross (5.51
net) Cardium oil wells, 7 gross (2.99 net) Notikewin/Falher
liquids-rich gas wells, and 1 gross (0.50 net) Cardium gas well.
By comparison, during the first half of 2013, Bellatrix drilled and/or
participated in 26 gross (22.08 net) wells, which included 23 gross
(15.98 net) Cardium light oil horizontal wells and 3 gross (2.10 net)
Notikewin/Falher liquids-rich gas horizontal wells. During the second
quarter of 2013, Bellatrix drilled and/or participated in 5 gross (5
net) Cardium oil wells.
The $134.6 million capital program for the three months ended June 30,
2014 was financed from a combination of proceeds from the June 2014
bought deal financing, funds flow from operations and bank debt.
Based on the current economic conditions and Bellatrix's operating
forecast for 2014, the Company budgets a revised net capital program of
$515 million funded from the Company's cash flows and to the extent
necessary, bank indebtedness. The 2014 capital budget is expected to
be directed primarily towards horizontal drilling and completions
activities in the Cardium and Mannville formations.
During the second quarter of 2014, the Company reduced its working
interests in certain Cardium and Notikewin/Falher lands and production
in the Willesden Green (Baptiste) area of Alberta through the sale of
working interests to two joint venture partners for a total net sales
price of $8.3 million.
Decommissioning Liabilities
At June 30, 2014, Bellatrix has recorded decommissioning liabilities of
$74.5 million, compared to $67.1 million at December 31, 2013, for
future abandonment and reclamation of the Company's properties. For
the six months ended June 30, 2014, decommissioning liabilities
increased by a net $7.4 million as a result of $1.9 million incurred on
development activities, $4.7 million resulting from changes in
estimates, and $0.9 million as a result of charges for the unwinding of
the discount rates used for assessing liability fair values, partially
offset by a $0.1 million decrease related to working interest
dispositions during the period. The $4.7 million increase as a result
of changes in estimates was primarily due to discount rate variations
between June 30, 2014 and December 31, 2013.
Liquidity and Capital Resources
As an oil and gas business, Bellatrix has a declining asset base and
therefore relies on ongoing development and acquisitions to replace
production and add additional reserves. Future oil and natural gas
production and reserves are highly dependent upon the success of
exploiting the Company's existing asset base and in acquiring
additional reserves. To the extent Bellatrix is successful or
unsuccessful in these activities, cash flow could be increased or
decreased.
Bellatrix is focused on growing oil and natural gas production from its
diversified portfolio of existing and emerging resource plays in
Western Canada. Bellatrix remains highly focused on key business
objectives of maintaining financial strength and optimizing capital
investments - which it seeks to attain through a disciplined approach
to capital spending, a flexible investment program and financial
stewardship. Natural gas prices are primarily driven by North American
supply and demand, with weather being the key factor in the short
term. Bellatrix believes that natural gas represents an abundant,
secure, long-term supply of energy to meet North American needs.
Bellatrix's results are affected by external market and risk factors,
such as fluctuations in the prices of crude oil and natural gas,
movements in foreign currency exchange rates and inflationary pressures
on service costs. Recent market conditions have resulted in Bellatrix
experiencing recent upward trends in natural gas, light oil and
condensate, and NGL pricing.
Liquidity risk is the risk that Bellatrix will not be able to meet its
financial obligations as they become due. Bellatrix actively manages
its liquidity through daily and longer-term cash, debt and equity
management strategies. Such strategies encompass, among other factors:
having adequate sources of financing available through its bank credit
facilities, estimating future cash generated from operations based on
reasonable production and pricing assumptions, analysis of economic
risk management opportunities, and maintaining sufficient cash flows
for compliance with operating debt covenants. Bellatrix is fully
compliant with all of its financing debt covenants.
Bellatrix generally relies upon its operating cash flows and its credit
facilities to fund capital requirements and provide liquidity. Future
liquidity depends primarily on cash flow generated from operations,
existing credit facilities and the ability to access debt and equity
markets. From time to time, the Company accesses capital markets to
meet its additional financing needs and to maintain flexibility in
funding its capital programs. There can be no assurance that future
debt or equity financing, or cash generated by operations will be
available or sufficient to meet these requirements or for other
corporate purposes or, if debt or equity financing is available, that
it will be on terms acceptable to Bellatrix.
Credit risk is the risk of financial loss to Bellatrix if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from Bellatrix's trade receivables
from joint venture partners, petroleum and natural gas marketers, and
financial derivative counterparties.
A substantial portion of Bellatrix's accounts receivable are with
customers and joint interest partners in the petroleum and natural gas
industry and are subject to normal industry credit risks. Bellatrix
currently sells substantially all of its production to nine primary
purchasers under standard industry sale and payment terms. The most
significant 60 day exposure to a single counterparty is approximately
$20.3 million. Purchasers of Bellatrix's natural gas, crude oil and
natural gas liquids are subject to a periodic internal credit review to
minimize the risk of non-payment. Bellatrix has continued to closely
monitor and reassess the creditworthiness of its counterparties,
including financial institutions. This has resulted in Bellatrix
reducing or mitigating its exposures to certain counterparties where it
is deemed warranted and permitted under contractual terms.
Bellatrix may be exposed to third party credit risk through its
contractual arrangements with its current or future partners and joint
venture partners, marketers of its petroleum and natural gas
production, derivative counterparties and other parties. In the event
such entities fail to meet their contractual obligations to Bellatrix,
such failures may have a material adverse effect on the Company's
business, financial condition, results of operations and prospects. In
addition, poor credit conditions in the industry and of joint venture
partners may impact a joint venture partner's willingness to
participate in Bellatrix's ongoing capital program, potentially
delaying the program and the results of such program until Bellatrix
finds a suitable alternative partner.
In May 2014, Bellatrix filed the $750 million Shelf Prospectus with the
securities regulatory authorities in each of the provinces of Canada
(other than Quebec) and a Registration Statement filed with the United
States Securities and Exchange Commission. The $750 million Shelf
Prospectus allows Bellatrix to offer and issue common shares,
subscription receipts, warrants and units (comprising any combination
of the foregoing securities), by way of one or more prospectus
supplements at any time during the 25-month period that the $750
million Shelf Prospectus remains in place.
Pursuant to a prospectus supplement to the $750 million Shelf
Prospectus, on June 5, 2014, Bellatrix closed a bought deal offering of
18,170,000 common shares of the Company at a price of $9.50 per Common
Share for aggregate gross proceeds of $172.6 million through a
syndicate of underwriters. Net proceeds of $165.5 million received
from the Offering were utilized to temporarily reduce outstanding
indebtedness under the Company's credit facilities, thereby freeing up
borrowing capacity that may be redrawn, from time to time, to fund the
Company's ongoing capital expenditure program and for general corporate
purposes.
As at June 30, 2014, there was $577.4 million available on the $750
million Shelf Prospectus.
Total net debt levels of $363.4 million at June 30, 2014 decreased by
$32.1 million from $395.5 million at December 31, 2013. The decrease to
net debt was primarily as a result of proceeds received from the June
2014 bought deal financing, which were partially offset by capital
expenditures made as the Company executed its $290.2 million 2014
capital program. Total net debt levels at June 30, 2014 include the net
balance of a working capital deficiency of $40.4 million, which
incorporated $66.9 million in advances from joint venture partners, the
majority of which represents drilling obligations predominantly under
the Company's joint venture obligations with TCA and Grafton, and under
the Daewoo and Devonian Partnership. Total net debt excludes
unrealized commodity contract assets and liabilities, deferred taxes,
finance lease obligations, deferred lease inducements and
decommissioning liabilities.
Funds flow from operations represents 51% of the funding requirements
for Bellatrix's capital expenditures for the six months ended June 30,
2014.
As of June 30, 2014, the Company's credit facilities are available on an
extendible revolving term basis and consist of a $75 million operating
facility provided by a Canadian bank and a $550 million syndicated
facility provided by nine financial institutions, subject to a
borrowing base test. On May 30, 2014, Bellatrix amended the credit
facility agreement.
Amounts borrowed under the credit facilities will bear interest at a
floating rate based on the applicable Canadian prime rate, U.S. base
rate, CDOR rate or LIBOR margin rate, plus between 0.8% to 3.75%,
depending on the type of borrowing and the Company's senior debt to
EBITDA ratio. A standby fee is charged of between 0.405% and 0.84375%
on the undrawn portion of the credit facilities, depending on the
Company's senior debt to EBITDA ratio. The credit facilities are
secured by a $1 billion debenture containing a first ranking charge and
security interest. Bellatrix has provided a negative pledge and
undertaking to provide fixed charges over its properties in certain
circumstances.
The revolving period for the revolving term credit facility will end on
May 30, 2017, unless extended for a further period of up to 3 years.
Should the facility not be extended, the outstanding balance is due
upon maturity. The borrowing base will be subject to re-determination
on May 31 and November 30 in each year prior to maturity, with the next
semi-annual redetermination occurring on November 30, 2014.
The Company's credit facilities contain market standard terms and
conditions, and include, for instance, restrictions on asset
dispositions and hedging. Generally speaking, dispositions of
properties to which the Company is given lending value in the
determination of the borrowing base are not permitted unless the NPV
10% value attributed to all properties sold in a fiscal year does not
exceed 5% of the borrowing base in effect at the time of such
disposition, or unless there would be no borrowing base shortfall as a
result of such properties being sold. Hedging transactions must not be
done for speculative purposes, and the term of any hedging contract
cannot exceed 3 years for commodity swaps, interest rate or exchange
rate swaps. The aggregate amount hedged under all oil and gas
commodity swaps cannot exceed 70% of the Company's average daily sales
volume for the first year of a rolling 3 year period, 60% for the
second year of such period or 50% for the third year of such period,
with the average daily sales volume being based on our production for
the previous fiscal quarter. The aggregate amount hedged under all
interest rate swaps cannot exceed 60% of the amount of the commitment
under the credit facilities, and the aggregate amount hedged under all
exchange rate swaps cannot exceed 60% of our US dollar revenue over the
previous 3 months.
Bellatrix's credit facilities are subject to a number of covenants, all
of which were met as at June 30, 2014. Bellatrix calculates its
covenants quarterly. The calculation for each financial covenant is
based on specific definitions, are not in accordance with IFRS and
cannot be readily replicated by referring to Bellatrix's Condensed
Consolidated Financial Statements. As at June 30, 2014, the major
financial covenants are:
|
|
|
|
|
Position at June 30, 2014
|
|
Total debt must not exceed 4.0(1) times EBITDA for the last four fiscal quarters
|
|
1.46x
|
|
Senior debt must not exceed 3.5(1) times EBITDA for the last four fiscal quarters
|
|
1.46x
|
|
EBITDA must not be less than 3.5 times interest expense for the last
four fiscal quarters
|
|
10.72x
|
|
(1)
|
This covenant reflects the adjustment to the ratio as a result of the
completion of a material acquisition.
|
In the absence of a material acquisition, total debt to trailing EBITDA
and senior debt to trailing EBITDA covenants must not exceed 3.5 and
3.0 times EBITDA, respectively. In the event of a material
acquisition, such covenants are relaxed for two fiscal quarters after
the close of the acquisition. Due to the material acquisition of Angle
in December 2013, total debt to trailing EBITDA and senior debt to
trailing EBITDA covenants were temporarily increased at June 30, 2014
to not exceed 4.0 and 3.5 times, respectively. Pending no material
acquisition, at September 30, 2014 total debt to trailing EBITDA and
senior debt to trailing EBITDA covenants will revert and must not
exceed 3.5 and 3.0 times EBITDA, respectively. Failing a financial
covenant may result in cancellation of the credit facilities and/or all
or any part of the outstanding loans with all accrued and unpaid
interest to be immediately due and payable. Including $0.5 million
of outstanding letters of credit that reduce the amount otherwise
available to be drawn on the syndicated facility, as at June 30, 2014,
approximately $301.5 million or 48% of unused and available bank credit
under its credit facilities was available to fund Bellatrix's ongoing
capital spending and operational requirements.
Bellatrix currently has commitments associated with its credit
facilities outlined above and the commitments outlined under the
"Commitments" section. Bellatrix continually monitors its capital
spending program in light of the recent volatility with respect to
commodity prices and Canadian dollar exchange rates with the aim of
ensuring the Company will be able to meet future anticipated
obligations incurred from normal ongoing operations with funds flow
from operations and draws on Bellatrix's credit facility, as
necessary. Bellatrix has the ability to fund its revised 2014 capital
program of $515 million by utilizing cash flow, proceeds from asset
dispositions, and to the extent necessary, bank indebtedness.
As at July 31, 2014, Bellatrix had outstanding a total of 11,367,503
options exercisable at an average exercise price of $6.39 per share and
191,364,910 common shares.
Commitments
As at June 30, 2014, Bellatrix committed to drill 2 gross (1.2 net)
wells pursuant to farm-in agreements. Bellatrix expects to satisfy
these drilling commitments at an estimated net cost of approximately
$4.5 million.
In addition, Bellatrix entered into two joint operating agreements
during the 2011 year and an additional joint operation agreement during
2012. The agreements include a minimum commitment for the Company to
drill a specified number of wells each year over the term of the
individual agreements. The details of these agreements are provided in
the table below:
|
|
|
|
|
|
Joint Operating Agreement
|
Feb. 1, 2011
|
Aug. 4, 2011
|
Dec. 14, 2012
|
|
Commitment Term
|
2011 to 2015
|
2011 to 2016
|
2014 to 2018
|
|
Minimum wells per year (gross and net)
|
3
|
5 to 10
|
2
|
|
Minimum total wells (gross and net)
|
15
|
40
|
10
|
|
Estimated total cost ($000s)
|
$ 56.3
|
$ 150.0
|
$ 37.5
|
|
Remaining wells to drill at June 30, 2014
|
3
|
9
|
7
|
|
Remaining estimated total cost ($000s)
|
$ 11.3
|
$ 33.8
|
$ 26.5
|
Bellatrix also has certain drilling commitments relating to the Grafton
Joint Venture, the Daewoo and Devonian Partnership, and the Troika
Joint Venture. In meeting the drilling commitments under these
agreements, Bellatrix will satisfy some of the drilling commitments
under the joint operating agreements described above.
|
|
|
|
|
|
Agreement
|
Grafton (2)
|
Daewoo and
Devonian
|
Troika
|
|
Commitment Term
|
2013 to 2015
|
2013 to 2016
|
2013 to 2014
|
|
Minimum total wells (gross) (1)
|
58
|
70
|
63
|
|
Minimum total wells (net) (1)
|
10.5
|
30.4
|
31.5
|
|
Estimated total cost ($000s) (gross) (1)
|
$ 244.0
|
$ 200.0
|
$ 240.0
|
|
Estimated total cost ($000s) (net) (1)
|
$ 44.0
|
$ 100.0
|
$ 120.0
|
|
Remaining wells to drill at June 30, 2014 (gross)
|
35
|
33
|
25
|
|
Remaining wells to drill at June 30, 2014 (net)
|
6.9
|
16.3
|
12.5
|
|
Remaining estimated total cost ($000s) (gross) (1)
|
$ 147.7
|
$ 131.6
|
$ 95.2
|
|
Remaining estimated total cost ($000s) (net) (1)
|
$ 29.0
|
$ 65.8
|
$ 47.6
|
|
(1)
|
Gross and net estimated total cost values and gross and net minimum
estimated
total wells for the Troika and Grafton Joint Ventures represent
Bellatrix's total
capital and well commitments pursuant to the Troika and Grafton joint
venture
agreements. Gross and net minimum total wells for the Daewoo and
Devonian
Partnership represent Bellatrix's total well commitments pursuant to the
Daewoo
and Devonian Partnership agreement. Gross and net estimated total cost
values
for the Daewoo and Devonian Partnership represent Bellatrix's estimated
cost
associated with its well commitments under the Daewoo and Devonian
Partnership
agreement. Remaining estimated total cost (gross) for the Daewoo and
Devonian
Partnership is based on initial Daewoo Devonian Partnership gross
capital divided
by initial total gross capital including third parties.
|
|
(2)
|
During April 2014, Grafton elected to exercise an option to increase
committed
capital investment to the Grafton Joint Venture established during 2013
by an
additional $50 million, for a total commitment of $250 million, on the
same terms
and conditions as the previously announced Grafton Joint Venture.
Specific well
commitments associated with the increase are under determination and
have
not been incorporated into the commitments table.
|
.
The Company had the following liabilities as at June 30, 2014:
|
|
|
|
|
|
|
|
Liabilities ($000s)
|
Total
|
1 Year
|
1-3 Years
|
3-5 Years
|
More than
5 years
|
|
Accounts payable and accrued liabilities (1)
|
$ 142,678
|
$ 142,678
|
$ -
|
$ -
|
$ -
|
|
Advances from joint venture partners
|
66,942
|
66,942
|
-
|
-
|
-
|
|
Long-term debt - principal (2)
|
323,007
|
-
|
323,007
|
-
|
-
|
|
Commodity contract liability
|
25,612
|
25,612
|
-
|
-
|
-
|
|
Decommissioning liabilities (3)
|
74,480
|
-
|
2,285
|
3,554
|
68,641
|
|
Finance lease obligation
|
12,407
|
1,534
|
3,206
|
2,178
|
5,489
|
|
Deferred lease inducements
|
3,169
|
333
|
666
|
666
|
1,504
|
|
Total
|
$ 648,295
|
$ 237,099
|
$ 329,164
|
$ 6,398
|
$ 75,634
|
|
(1)
|
Includes $0.8 million of accrued interest payable in relation to the
credit facilities is included in
Accounts Payable and Accrued Liabilities.
|
|
(2)
|
Bank debt is based on a three year facility, fully revolving until
maturity, and extendable annually
at the Company's option (subject to lender approval), provided that the
term after any extension
would not be more than three years. Interest due on the bank credit
facility is calculated based
upon floating rates.
|
|
(3)
|
Amounts represent the inflated, discounted future abandonment and
reclamation expenditures
anticipated to be incurred over the life of the Company's properties
(between 2017 and 2068).
|
Off-Balance Sheet Arrangements
The Company has certain fixed-term lease agreements, including primarily
office space leases, which were entered into in the normal course of
operations. All leases have been treated as operating leases whereby
the lease payments are included in operating expenses or G&A expenses
depending on the nature of the lease. The lease agreements do not
currently provide for early termination. No asset or liability value
has been assigned to these leases in the balance sheet as of June 30,
2014.
Business Prospects and 2014 Year Outlook
Bellatrix continues to develop its core assets and conduct exploration
programs utilizing its large inventory of geological prospects.
2014 cash flow forecasts for the year have been updated to reflect the
recent softening natural gas prices due to the current cooler summer
weather conditions. 2014 funds flow from operations expectations have
been lowered to approximately $350 million or $1.90 per basic share.
This represents a 144% increase over 2013 funds flow from operations of
$143.5 million or $1.27 per basic share.
Based on an assumed 2014 average Edmonton Light oil price of $96.85/bbl
and AECO $4.34/GJ, average 2014 royalty rates of 18% and estimated 2014
operating costs of $116.5 million or $7.75 boe/d, the Company expects
to exit 2014 with total net debt of approximately $390 million or
approximately 1.0 times total net debt to annualized estimated fourth
quarter 2014 funds flow from operations.
For the remainder of 2014, Bellatrix will be active in drilling with 10
to 12 rigs operating in its two core resource plays, the Cardium light
oil play (Bellatrix is the second largest land holder with 338 net
sections in the Cardium) and Mannville condensate rich gas play,
utilizing horizontal drilling multi-fracturing technology. A revised
net capital budget of $515 million has been set for fiscal 2014. Based
on the timing of proposed expenditures, downtime for anticipated plant
turnarounds and normal production declines, execution of the 2014
budget is anticipated to provide 2014 average daily production of
approximately 41,000 boe/d and an exit rate of approximately 48,000
boe/d.
Business Risks and Uncertainties
The reader is advised that Bellatrix continues to be subject to various
types of business risks and uncertainties as described in the Company's
Annual Information Form for the year ended December 31, 2013.
Critical Accounting Estimates and Accounting Policies
The reader is advised that the critical accounting estimates, policies,
and practices described in the Company's Management Discussion and
Analysis for the year ended December 31, 2013 continue to be critical
in determining Bellatrix's unaudited financial results as of June 30,
2014. There were no changes in accounting policies during the six
months ended June 30, 2014, except as noted below.
IFRIC 21 - "Levies", which establishes guidelines for the recognition
and accounting treatment of a liability relating to a levy imposed by a
government. This standard is effective for annual periods beginning on
or after January 1, 2014 and was adopted by Bellatrix effective January
1, 2014. The adoption of IFRIC 21 had no impact on Bellatrix.
Amendments to "Offsetting Financial Assets and Financial Liabilities"
addressed within IAS 32 - "Financial Instruments: Presentation", which
provides guidance regarding when it is appropriate and permissible for
an entity to disclose offsetting financial assets and financial
liabilities on a net basis. The amendments to this standard are
effective for annual periods beginning on or after January 1, 2014 and
were adopted by Bellatrix effective January 1, 2014. The adoption of
IAS 32 amendments had no impact on Bellatrix.
A summary of future accounting pronouncements is found in the Company's
Management Discussion and Analysis for the year ended December 31,
2013, available at www.sedar.com or as part of the Company's annual report on Form 40-F for the year
ended December 31, 2013, which may be found at www.sec.gov.
Legal, Environmental Remediation and Other Contingent Matters
The Company is involved in various claims and litigation arising in the
normal course of business. While the outcome of these matters is
uncertain and there can be no assurance that such matters will be
resolved in the Company's favor, the Company does not currently believe
that the outcome of adverse decisions in any pending or threatened
proceeding related to these and other matters or any amount which it
may be required to pay by reason thereof would have a material adverse
impact on its financial position or results of operations.
The Company reviews legal, environmental remediation and other
contingent matters to both determine whether a loss is probable based
on judgment and interpretation of laws and regulations and determine
that the loss can reasonably be estimated. When the loss is
determined, it is charged to earnings. The Company's management
monitor known and potential contingent matters and makes appropriate
provisions by charges to earnings when warranted by the circumstances.
With the above risks and uncertainties the reader is cautioned that
future events and results may vary substantially from that which
Bellatrix currently foresees.
Controls and Procedures
As a result of the Company's market capitalization at June 30, 2014
exceeding US $700 million, Bellatrix is no longer considered an
"emerging growth company" under the Jumpstart Our Business Act (the
"JOBS Act"), and will require auditor attestation of the Company's
internal controls over financial reporting at December 31, 2014.
Disclosure Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer have
designed, or caused to be designed under their supervision, disclosure
controls and procedures to provide reasonable assurance that: (i)
material information relating to the Company is made known to the
Company's Chief Executive Officer and Chief Financial Officer by
others, particularly during the period in which the annual and interim
filings are being prepared; and (ii) information required to be
disclosed by the Company in its annual filings, interim filings or
other reports filed or submitted by it under securities legislation is
recorded, processed, summarized and reported within the time period
specified in securities legislation.
Internal Control over Financial Reporting
The Company's Chief Executive Officer and Chief Financial Officer have
designed, or caused to be designed under their supervision, internal
control over financial reporting to provide reasonable assurance
regarding the reliability of the Company's financial reporting and the
preparation of financial statements for external purposes in accordance
with GAAP.
The Company is required to disclose herein any change in the Company's
internal control over financial reporting that occurred during the
period beginning on April 1, 2014 and ended on June 30, 2014 that has
materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting. No material
changes in the Company's internal control over financial reporting were
identified during such period that has materially affected, or are
reasonably likely to materially affect, the Company's internal control
over financial reporting.
It should be noted that a control system, including the Company's
disclosure and internal controls and procedures, no matter how well
conceived, can provide only reasonable, but not absolute, assurance
that the objectives of the control system will be met and it should not
be expected that the disclosure and internal controls and procedures
will prevent all errors or fraud.
Sensitivity Analysis
The table below shows sensitivities to funds flow from operations as a
result of product price, exchange rate, and interest rate changes.
This is based on actual average prices received for the second quarter
of 2014 and average production volumes of 36,342 boe/d during that
period, as well as the same level of debt outstanding as at June 30,
2014. Diluted weighted average shares are based upon the second
quarter of 2014. These sensitivities are approximations only, and not
necessarily valid under other significantly different production levels
or product mixes. Commodity price risk management activities can
significantly affect these sensitivities. Changes in any of these
parameters will affect funds flow as shown in the table below:
|
|
|
|
|
|
|
|
Funds Flow from Operations (1)
|
Funds Flow from Operations (1)
|
|
|
(annualized)
|
Per Diluted Share
|
|
Sensitivity Analysis
|
($000s)
|
($)
|
|
Change of US $1/bbl WTI
|
4,100
|
0.02
|
|
Change of $0.10/ mcf
|
4,300
|
0.02
|
|
Change of US $0.01 CDN/ US exchange rate
|
2,500
|
0.01
|
|
Change in prime of 1%
|
3,200
|
0.02
|
|
(1)
|
The term "funds flow from operations" should not be considered an
alternative to, or more meaningful
than cash flow from operating activities as determined in accordance
with GAAP as an indicator of the
Company's performance. Therefore reference to non-GAAP measures of
diluted funds flow from
operations or funds flow from operations per share may not be comparable
with the calculation of
similar measures for other entities. Management uses funds flow from
operations to analyze
operating performance and leverage and considers funds flow from
operations to be a key
measure as it demonstrates the Company's ability to generate the cash
necessary to fund
future capital investments and to repay debt. The reconciliation
between cash flow from
operating activities and funds flow from operations can be found
elsewhere herein.
Funds flow from operations per share is calculated using the weighted
average number
of common shares for the period.
|
Selected Quarterly Consolidated Information
The following table sets forth selected consolidated financial
information of the Company for the quarters in 2014, 2013 and 2012.
|
|
|
|
|
|
2014 - Quarter ended (unaudited)
($000s, except per share amounts)
|
March 31
|
June 30
|
|
|
|
Revenues before royalties and risk management
|
163,585
|
152,311
|
|
|
|
Cash flow from operating activities
|
84,300
|
60,063
|
|
|
|
Cash flow from operating activities per share
|
|
|
|
|
|
|
Basic
|
$0.49
|
$0.34
|
|
|
|
|
Diluted
|
$0.48
|
$0.33
|
|
|
|
Funds flow from operations (1)
|
77,642
|
71,014
|
|
|
|
Funds flow from operations per share (1)
|
|
|
|
|
|
|
Basic
|
$0.45
|
$0.40
|
|
|
|
|
Diluted
|
$0.45
|
$0.39
|
|
|
|
Net profit
|
25,167
|
38,252
|
|
|
|
Net profit per share
|
|
|
|
|
|
|
Basic
|
$0.15
|
$0.22
|
|
|
|
|
Diluted
|
$0.14
|
$0.21
|
|
|
|
Total net capital expenditures - cash
|
155,863
|
125,955
|
|
|
|
|
|
|
|
|
2013 - Quarter ended (unaudited)
($000s, except per share amounts)
|
March 31
|
June 30
|
Sept. 30
|
Dec. 31
|
|
Revenues before royalties and risk management
|
65,543
|
74,564
|
68,329
|
83,455
|
|
Cash flow from operating activities
|
35,527
|
29,611
|
25,069
|
38,025
|
|
Cash flow from operating activities per share
|
|
|
|
|
|
|
Basic
|
$0.33
|
$0.27
|
$0.23
|
$0.30
|
|
|
Diluted
|
$0.30
|
$0.25
|
$0.21
|
$0.29
|
|
Funds flow from operations (1)
|
37,545
|
36,563
|
30,002
|
39,349
|
|
Funds flow from operations per share (1)
|
|
|
|
|
|
|
Basic
|
$0.35
|
$0.34
|
$0.28
|
$0.31
|
|
|
Diluted
|
$0.32
|
$0.31
|
$0.25
|
$0.30
|
|
Net profit
|
4,561
|
15,466
|
29,453
|
22,195
|
|
Net profit per share
|
|
|
|
|
|
|
Basic
|
$0.04
|
$0.14
|
$0.27
|
$0.17
|
|
|
Diluted
|
$0.04
|
$0.13
|
$0.25
|
$0.17
|
|
Total net capital expenditures - cash
|
91,614
|
46,699
|
49,452
|
99,199
|
|
|
|
|
|
|
2012 - Quarter ended (unaudited)
($000s, except per share amounts)
|
March 31
|
June 30
|
Sept. 30
|
Dec. 31
|
|
Revenues before royalties and risk management
|
58,191
|
50,714
|
48,126
|
62,283
|
|
Cash flow from operating activities
|
24,056
|
28,458
|
24,807
|
32,007
|
|
Cash flow from operating activities per share
|
|
|
|
|
|
|
Basic
|
$0.22
|
$0.24
|
$0.23
|
$0.30
|
|
|
Diluted
|
$0.21
|
$0.22
|
$0.22
|
$0.28
|
|
Funds flow from operations (1)
|
29,194
|
25,366
|
26,613
|
29,865
|
|
Funds flow from operations per share (1)
|
|
|
|
|
|
|
Basic
|
$0.27
|
$0.24
|
$0.25
|
$0.28
|
|
|
Diluted
|
$0.25
|
$0.22
|
$0.23
|
$0.26
|
|
Net profit (loss)
|
9,172
|
9,963
|
(615)
|
9,251
|
|
Net profit (loss) per share
|
|
|
|
|
|
|
Basic
|
$0.09
|
$0.09
|
($0.01)
|
$0.09
|
|
|
Diluted
|
$0.08
|
$0.09
|
($0.01)
|
$0.08
|
|
Total net capital expenditures - cash
|
73,831
|
16,284
|
35,515
|
64,383
|
|
(1)
|
Refer to "Non-GAAP Measures" in respect of the term "funds flow from
operations" and "funds flow from operations per share".
|
|
BELLATRIX EXPLORATION LTD.
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, expressed in Canadian dollars)
|
|
|
|
|
June 30,
|
December 31,
|
|
($000s)
|
2014
|
2013
|
|
|
|
|
|
ASSETS
|
|
|
|
Current assets
|
|
|
|
|
Restricted cash
|
$ 24,428
|
$ 38,148
|
|
|
Accounts receivable (note 13)
|
134,955
|
80,306
|
|
|
Deposits and prepaid expenses
|
9,811
|
10,001
|
|
|
Commodity contract asset (note 13)
|
-
|
345
|
|
|
169,194
|
128,800
|
|
Exploration and evaluation assets (note 3)
|
121,610
|
132,971
|
|
Property, plant and equipment (note 4)
|
1,546,438
|
1,293,409
|
|
Total assets
|
$ 1,837,242
|
$ 1,555,180
|
|
|
|
|
|
LIABILITIES
|
|
|
|
Current liabilities
|
|
|
|
|
Accounts payable and accrued liabilities
|
$ 142,678
|
$ 137,465
|
|
|
Advances from joint venture partners
|
66,942
|
99,380
|
|
|
Current portion of finance lease obligation
|
1,534
|
1,495
|
|
|
Current portion of deferred lease inducements
|
333
|
285
|
|
|
Commodity contract liability (note 13)
|
25,612
|
17,278
|
|
|
237,099
|
255,903
|
|
|
|
|
|
Long-term debt (note 5)
|
323,007
|
287,092
|
|
Finance lease obligation
|
10,873
|
11,637
|
|
Deferred lease inducements
|
2,836
|
2,565
|
|
Decommissioning liabilities
|
74,480
|
67,075
|
|
Deferred taxes (note 9)
|
47,117
|
27,034
|
|
Total liabilities
|
695,412
|
651,306
|
|
|
|
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
Shareholders' capital
|
996,122
|
824,065
|
|
|
Contributed surplus
|
41,438
|
38,958
|
|
|
Retained earnings
|
104,270
|
40,851
|
|
Total shareholders' equity
|
1,141,830
|
903,874
|
|
Total liabilities and shareholders' equity
|
$ 1,837,242
|
$ 1,555,180
|
|
COMMITMENTS (note 12)
|
|
See accompanying notes to the condensed consolidated financial
statements.
|
|
BELLATRIX EXPLORATION LTD.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
(unaudited, expressed in Canadian dollars)
|
|
|
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
2014
|
2013
|
2014
|
2013
|
|
|
|
|
|
|
|
REVENUES
|
|
|
|
|
|
|
Petroleum and natural gas sales
|
$ 151,210
|
$ 73,977
|
$ 312,929
|
$ 138,885
|
|
|
Other income
|
1,101
|
587
|
2,967
|
1,222
|
|
|
Royalties
|
(27,015)
|
(12,561)
|
(54,402)
|
(24,346)
|
|
|
Total revenues
|
125,296
|
62,003
|
261,494
|
115,761
|
|
|
|
|
|
|
|
|
Realized gain (loss) on commodity contracts
|
(16,361)
|
(785)
|
(34,999)
|
5,717
|
|
|
Unrealized gain (loss) on commodity contracts
|
14,996
|
5,992
|
(8,680)
|
(6,307)
|
|
|
123,931
|
67,210
|
217,815
|
115,171
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
Production
|
25,799
|
17,383
|
51,428
|
32,441
|
|
|
Transportation
|
2,721
|
1,662
|
7,758
|
3,107
|
|
|
General and administrative
|
4,536
|
2,499
|
10,061
|
6,085
|
|
|
Share-based compensation (note 7)
|
2,328
|
241
|
4,837
|
1,691
|
|
|
Depletion and depreciation (note 4)
|
40,984
|
20,877
|
77,389
|
37,967
|
|
|
Gain on property dispositions and swaps (note 4)
|
(9,399)
|
-
|
(28,513)
|
(250)
|
|
|
66,969
|
42,662
|
122,960
|
81,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET PROFIT BEFORE FINANCE AND TAXES
|
56,962
|
24,548
|
94,855
|
34,130
|
|
|
|
|
|
|
|
|
Finance expenses (note 10)
|
5,300
|
3,758
|
9,457
|
6,975
|
|
|
|
|
|
|
|
NET PROFIT BEFORE TAXES
|
51,662
|
20,790
|
85,398
|
27,155
|
|
|
|
|
|
|
|
TAXES
|
|
|
|
|
|
|
Deferred tax expense (note 9)
|
13,410
|
5,324
|
21,979
|
7,128
|
|
|
|
|
|
|
|
NET PROFIT AND COMPREHENSIVE INCOME
|
38,252
|
15,466
|
63,419
|
20,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit per share (note 11)
|
|
|
|
|
|
|
Basic
|
$0.22
|
$0.14
|
$0.36
|
$0.19
|
|
|
Diluted
|
$0.21
|
$0.13
|
$0.36
|
$0.18
|
|
See accompanying notes to the condensed consolidated financial
statements.
|
|
BELLATRIX EXPLORATION LTD.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
|
(unaudited, expressed in Canadian dollars)
For the six months ended June 30,
|
|
|
|
($000s)
|
2014
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' CAPITAL
|
|
|
|
|
Common shares (note 6)
|
|
|
|
|
|
Balance, beginning of year
|
$ 824,065
|
$ 371,576
|
|
|
|
Issued for cash on exercise of share options
|
4,062
|
191
|
|
|
|
Issued for cash on equity issue, net of tax
|
172,615
|
-
|
|
|
|
Share issue costs on equity issue and shelf prospectus, net of tax
|
(5,667)
|
-
|
|
|
|
Contributed surplus transferred on exercised options
|
1,047
|
83
|
|
|
|
Balance, end of period
|
996,122
|
371,850
|
|
|
|
|
|
|
|
|
|
EQUITY COMPONENT OF CONVERTIBLE DEBENTURES
|
|
|
|
|
|
Balance, beginning and end of period
|
-
|
4,378
|
|
|
|
|
|
CONTRIBUTED SURPLUS (note 7)
|
|
|
|
|
|
Balance, beginning of year
|
38,958
|
37,284
|
|
|
|
Share-based compensation expense
|
3,003
|
1,726
|
|
|
|
Adjustment of share-based compensation expense
|
|
|
|
|
|
for forfeitures of unvested share options
|
(250)
|
(146)
|
|
|
|
Transfer to share capital for exercised options
|
(1,047)
|
(83)
|
|
|
|
Other
|
774
|
-
|
|
|
|
Balance, end of period
|
41,438
|
38,781
|
|
|
|
|
|
|
|
|
|
RETAINED EARNINGS (DEFICIT)
|
|
|
|
|
|
Balance, beginning of year
|
40,851
|
(32,132)
|
|
|
|
Net profit
|
63,419
|
20,027
|
|
|
|
Balance, end of period
|
104,270
|
(12,105)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL SHAREHOLDERS' EQUITY
|
$ 1,141,830
|
$ 402,904
|
See accompanying notes to the condensed consolidated financial
statements.
|
|
BELLATRIX EXPLORATION LTD.
|
|
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
(unaudited, expressed in Canadian dollars)
|
|
|
|
For the three and six months ended June 30,
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
($000s)
|
2014
|
2013
|
2014
|
2013
|
|
|
|
|
|
|
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM (USED IN) OPERATING ACTIVITIES
|
|
|
|
|
|
Net profit
|
$ 38,252
|
$ 15,466
|
$ 63,419
|
$ 20,027
|
|
Adjustments for:
|
|
|
|
|
|
|
Depletion and depreciation
|
40,984
|
20,877
|
77,389
|
37,967
|
|
|
Finance expenses (note 10)
|
434
|
647
|
864
|
1,238
|
|
|
Share-based compensation (note 7)
|
2,328
|
241
|
4,837
|
1,691
|
|
|
Unrealized (gain) loss on commodity contracts
|
(14,996)
|
(5,992)
|
8,680
|
6,307
|
|
|
Gain on property dispositions and swaps
|
(9,399)
|
-
|
(28,513)
|
(250)
|
|
|
Deferred tax expense (note 9)
|
13,410
|
5,324
|
21,979
|
7,128
|
|
|
Decommissioning costs incurred
|
(72)
|
(268)
|
(136)
|
(547)
|
|
|
Change in non-cash working capital (note 8)
|
(10,878)
|
(6,684)
|
(4,156)
|
(8,423)
|
|
|
60,063
|
29,611
|
144,363
|
65,138
|
|
|
|
|
|
|
|
CASH FLOW FROM (USED IN) FINANCING ACTIVITIES
|
|
|
|
|
|
|
Issuance of share capital (note 6)
|
174,200
|
-
|
177,451
|
191
|
|
|
Issue costs on share capital (note 6)
|
(7,597)
|
-
|
(7,563)
|
-
|
|
|
Settlement of restricted awards (note 7)
|
(1,256)
|
|
(1,256)
|
|
|
|
Advances from loans and borrowings
|
724,362
|
301,000
|
1,210,162
|
472,030
|
|
|
Repayment of loans and borrowings
|
(736,473)
|
(257,825)
|
(1,174,247)
|
(411,075)
|
|
|
Obligations under finance lease
|
(369)
|
(353)
|
(725)
|
(692)
|
|
|
Deferred lease inducements
|
390
|
-
|
319
|
-
|
|
|
Change in non-cash working capital (note 8)
|
303
|
(479)
|
113
|
237
|
|
|
153,560
|
42,343
|
204,254
|
60,691
|
|
|
|
|
|
|
|
CASH FLOW FROM (USED IN) INVESTING ACTIVITIES
|
|
|
|
|
|
|
Expenditure on exploration and evaluation assets
|
(1,342)
|
(1,269)
|
(2,142)
|
(6,961)
|
|
|
Additions to property, plant and equipment
|
(133,226)
|
(45,447)
|
(288,068)
|
(131,354)
|
|
|
Proceeds on sale of property, plant and equipment
|
8,613
|
16
|
8,392
|
1
|
|
|
Change in non-cash working capital (note 8)
|
(87,668)
|
(25,254)
|
(66,799)
|
12,485
|
|
|
|
(213,623)
|
(71,954)
|
(348,617)
|
(125,829)
|
|
|
|
|
|
|
|
|
|
Change in cash
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
$ -
|
$ -
|
$ -
|
$ -
|
|
|
|
|
|
|
|
Cash paid:
|
|
|
|
|
|
Interest
|
$ 3,411
|
$ 2,895
|
$ 6,891
|
$ 4,212
|
|
Taxes
|
-
|
-
|
-
|
-
|
See accompanying notes to the condensed consolidated financial
statements.
|
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, expressed in Canadian dollars)
1. CORPORATE INFORMATION
Bellatrix Exploration Ltd. (the "Company" or "Bellatrix") is a growth
oriented, public exploration and production oil and gas company.
2. BASIS OF PREPARATION
a. Statement of compliance
These condensed consolidated financial statements ("interim financial
statements") were authorized by the Board of Directors on August 5,
2014. The Company prepared these interim financial statements in
accordance with IAS 34 Interim Financial Reporting. The interim
financial statements do not include all information and disclosures
normally provided in annual financial statements and should be read in
conjunction with the Company's 2013 audited annual financial
statements, available at www.sedar.com. The Company has prepared these interim financial statements using the
same accounting policies and critical accounting estimates applied in
the 2013 audited annual financial statements, except as noted below.
b. Change in accounting policies
IFRIC 21 - "Levies", which establishes guidelines for the recognition
and accounting treatment of a liability relating to a levy imposed by a
government. This standard is effective for annual periods beginning on
or after January 1, 2014 and was adopted by Bellatrix effective January
1, 2014. The adoption of IFRIC 21 had no impact on Bellatrix.
Amendments to "Offsetting Financial Assets and Financial Liabilities"
addressed within IAS 32 - "Financial Instruments: Presentation", which
provides guidance regarding when it is appropriate and permissible for
an entity to disclose offsetting financial assets and financial
liabilities on a net basis. The amendments to this standard are
effective for annual periods beginning on or after January 1, 2014 and
were adopted by Bellatrix effective January 1, 2014. The adoption of
IAS 32 amendments had no impact on Bellatrix.
c. Basis of measurement
The interim financial statements are presented in Canadian dollars, the
Company's functional currency, and have been prepared on the historical
cost basis except for derivative financial instruments and liabilities
for cash-settled share-based payment arrangements measured at fair
value. The interim financial statements have, in management's opinion,
been properly prepared using careful judgment and reasonable limits of
materiality. These interim financial statements are prepared within the
framework of the same significant accounting policies, critical
judgments, accounting estimates, accounting policies and methods of
computation as the consolidated financial statements for the fiscal
year ended December 31, 2013. The interim financial statement note
disclosures do not include all of those required by IFRS applicable for
annual financial statements. Accordingly, the interim financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto as at and for the year ended
December 31, 2013.
3. EXPLORATION AND EVALUATION ASSETS
|
($000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
Balance, December 31, 2012
|
|
|
|
|
$
|
|
38,177
|
|
Acquisitions through business combinations, net
|
|
|
|
|
|
|
97,520
|
|
Additions
|
|
|
|
|
|
|
10,391
|
|
Transfer to oil and natural gas properties
|
|
|
|
|
|
|
(7,424)
|
|
Disposals (1)
|
|
|
|
|
|
|
(5,693)
|
|
Balance, December 31, 2013
|
|
|
|
|
|
|
132,971
|
|
Additions
|
|
|
|
|
|
|
2,142
|
|
Transfer to oil and natural gas properties
|
|
|
|
|
|
|
(13,472)
|
|
Disposals (1)
|
|
|
|
|
|
|
(31)
|
|
Balance, June 30, 2014
|
|
|
|
|
$
|
|
121,610
|
|
(1)
|
Disposals include swaps.
|
|
|
|
4. PROPERTY, PLANT AND EQUIPMENT
|
($000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and
natural gas
properties
|
|
|
Office
furniture and
equipment
|
|
|
|
|
|
Total
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2012
|
|
|
$
|
|
851,108
|
|
|
|
$
|
|
2,802
|
|
|
|
$
|
|
853,910
|
|
Acquisitions through business combinations, net
|
|
|
|
|
498,371
|
|
|
|
|
|
-
|
|
|
|
|
|
498,371
|
|
Additions
|
|
|
|
|
298,288
|
|
|
|
|
|
9,270
|
|
|
|
|
|
307,558
|
|
Transfer from exploration and evaluation assets
|
|
|
|
|
7,424
|
|
|
|
|
|
-
|
|
|
|
|
|
7,424
|
|
Farmout wells
|
|
|
|
|
11,244
|
|
|
|
|
|
-
|
|
|
|
|
|
11,244
|
|
Disposals (1)
|
|
|
|
|
(37,408)
|
|
|
|
|
|
(487)
|
|
|
|
|
|
(37,895)
|
|
Balance, December 31, 2013
|
|
|
|
|
1,629,027
|
|
|
|
|
|
11,585
|
|
|
|
|
|
1,640,612
|
|
Additions
|
|
|
|
|
290,606
|
|
|
|
|
|
6,162
|
|
|
|
|
|
296,768
|
|
Transfer from exploration and evaluation assets
|
|
|
|
|
13,472
|
|
|
|
|
|
-
|
|
|
|
|
|
13,472
|
|
Farmout wells
|
|
|
|
|
29,257
|
|
|
|
|
|
-
|
|
|
|
|
|
29,257
|
|
Disposals (1)
|
|
|
|
|
(9,079)
|
|
|
|
|
|
-
|
|
|
|
|
|
(9,079)
|
|
Balance, June 30, 2014
|
|
|
$
|
|
1,953,283
|
|
|
|
$
|
|
17,747
|
|
|
|
$
|
|
1,971,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Depletion, Depreciation and Impairment losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2012
|
|
|
$
|
|
262,570
|
|
|
|
$
|
|
1,581
|
|
|
|
$
|
|
264,151
|
|
Charge for time period
|
|
|
|
|
84,902
|
|
|
|
|
|
927
|
|
|
|
|
|
85,829
|
|
Disposals (1)
|
|
|
|
|
(2,510)
|
|
|
|
|
|
(267)
|
|
|
|
|
|
(2,777)
|
|
Balance, December 31, 2013
|
|
|
$
|
|
344,962
|
|
|
|
$
|
|
2,241
|
|
|
|
$
|
|
347,203
|
|
Charge for time period
|
|
|
|
|
76,050
|
|
|
|
|
|
1,339
|
|
|
|
|
|
77,389
|
|
Balance, June 30, 2014
|
|
|
$
|
|
421,012
|
|
|
|
$
|
|
3,580
|
|
|
|
$
|
|
424,592
|
|
(1) Disposals include swaps.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2013
|
|
|
$
|
|
1,284,065
|
|
|
|
$
|
|
9,344
|
|
|
|
$
|
|
1,293,409
|
|
At June 30, 2014
|
|
|
$
|
|
1,532,271
|
|
|
|
$
|
|
14,167
|
|
|
|
$
|
|
1,546,438
|
Bellatrix has included $1.1 billion (2013: $504.7 million) for future
development costs and excluded $70.2 million (2013: $39.3 million) for
estimated salvage from the depletion calculation for the three months
ended June 30, 2014. Facilities under construction associated capital
of $28.7 million was excluded from the depletable base for the
depletion calculation for the three months ended June 30, 2014.
In the three and six months ended June 30, 2014, Bellatrix recognized a
total net gain on dispositions of $9.4 million and $28.5 million,
respectively, relating to gains on wells drilled under the Grafton
Joint Venture and the Troika Joint Venture which were completed during
the three and six month periods ended June 30, 2014.
For the six months ended June 30, 2014, the Company capitalized $5.4
million (2013: $2.5 million) of general and administrative expenses,
and $2.1 million (2013: $0.7 million) of share-based compensation
expense directly related to exploration and development activities.
Bellatrix's credit facilities are secured against all of the assets of
the Corporation by a $1 billion debenture containing a first ranking
floating charge and security interest. The Corporation has provided a
negative pledge and undertaking to provide fixed charges over major
petroleum and natural gas reserves in certain circumstances.
5. LONG-TERM DEBT
Based upon the Company's semi-annual borrowing base review for May 31,
2014, Bellatrix increased its borrowing base and credit facilities to
$625 million from $500 million. The bank syndicate lenders approved
the Company's request to change the term of the credit facilities to a
3 year facility, fully revolving until maturity, and extendible
annually at the Company's option (subject to lender approval), provided
that the term after any extension would not be more than 3 years.
Concurrently with such changes, the credit facilities were also amended
to include certain ongoing financial covenants that will require
quarterly compliance.
As of June 30, 2014, the Company's credit facilities are available on an
extendible revolving term basis and consist of a $75 million operating
facility provided by a Canadian bank and a $550 million syndicated
facility provided by nine financial institutions.
Amounts borrowed under the credit facilities will bear interest at a
floating rate based on the applicable Canadian prime rate, U.S. base
rate, CDOR rate or LIBOR margin rate, plus between 0.8% to 3.75%,
depending on the type of borrowing and the Company's senior debt to
EBITDA ratio. A standby fee is charged of between 0.405% and 0.84375%
on the undrawn portion of the credit facilities, depending on the
Company's senior debt to EBITDA ratio. The credit facilities are
secured by a $1 billion debenture containing a first ranking charge and
security interest. Bellatrix has provided a negative pledge and
undertaking to provide fixed charges over its properties in certain
circumstances.
The revolving period for the revolving term credit facility will end on
May 30, 2017, unless extended for a further period of up to three
years. Should the facility not be extended, the outstanding balance is
due upon maturity. The borrowing base will be subject to
re-determination on or before May 31 and November 30 in each year prior
to maturity, with the next semi-annual redetermination occurring on or
before November 30, 2014.
As at June 30, 2014, the Company had outstanding letters of credit
totaling $0.5 million that reduce the amount otherwise available to be
drawn on the syndicated facility.
As at June 30, 2014, the Company had approximately $301.5 million or 48%
of unused and available bank credit under its credit facilities.
Bellatrix was fully compliant with all of its debt covenants.
6. SHAREHOLDER'S CAPITAL
Bellatrix is authorized to issue an unlimited number of common shares.
All shares issued are fully paid and have no par value. The common
shareholders are entitled to dividends declared by the Board of
Directors; no dividends were declared by the Board of Directors during
the six months ended June 30, 2014 or 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
Number
|
|
|
|
Amount
($000s)
|
|
|
Number
|
|
|
|
Amount
($000s)
|
|
Common shares, opening balance
|
|
|
|
170,990,605
|
|
|
$
|
824,065
|
|
|
107,868,774
|
|
|
$
|
371,576
|
|
Issued for cash on equity issue
|
|
|
|
18,170,000
|
|
|
|
172,615
|
|
|
-
|
|
|
|
-
|
|
Share issue costs on equity issue and shelf
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
prospectus, net of tax effect of $1.9 million
|
|
|
|
-
|
|
|
|
(5,667)
|
|
|
-
|
|
|
|
-
|
|
Cancellation of shares
|
|
|
|
(137,486)
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
Shares issued for cash on exercise of options
|
|
|
|
2,068,622
|
|
|
|
4,062
|
|
|
50,555
|
|
|
|
191
|
|
Contributed surplus transferred on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercised options
|
|
|
|
-
|
|
|
|
1,047
|
|
|
-
|
|
|
|
83
|
|
Balance, end of period
|
|
|
|
191,091,741
|
|
|
$
|
996,122
|
|
|
107,919,329
|
|
|
$
|
371,850
|
On June 5, 2014, Bellatrix closed a bought deal financing of 18,170,000
common shares at a price of $9.50 per common share for aggregate gross
proceeds of $172.6 million (net proceeds of $165.5 million after
transaction costs excluding deferred tax impacts).
7. SHARE-BASED COMPENSATION PLANS
The following table provides a summary of the Company's share-based
compensation plans for the three and six months ended June 30, 2014:
|
($000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Options
|
|
|
Deferred
Share Units
|
|
|
Restricted
Awards
|
|
|
Performance
Awards
|
|
|
|
|
Total
|
Expense for the three months ended
June 30, 2014 (1)
|
|
|
$
|
|
828
|
|
|
|
$
|
|
971
|
|
|
|
$
|
|
272
|
|
|
|
$
|
|
257
|
|
|
$
|
|
2,328
|
Expense for the six months ended
June 30, 2014 (2)
|
|
|
$
|
|
1,641
|
|
|
|
$
|
|
1,839
|
|
|
|
$
|
|
854
|
|
|
|
$
|
|
503
|
|
|
$
|
|
4,837
|
|
Liability balance, June 30, 2014
|
|
|
$
|
|
-
|
|
|
|
$
|
|
5,884
|
|
|
|
$
|
|
1,191
|
|
|
|
$
|
|
1,276
|
|
|
$
|
|
8,351
|
|
(1)
|
The expense for share options is net of adjustments for forfeitures of
$0.2 million, and capitalization of $0.6
million. The expense for restricted awards is net of capitalization of
$0.3 million. The expense for performance
awards is net of capitalization of $0.2 million.
|
|
(2)
|
The expense for share options is net of adjustments for forfeitures of
$0.3 million, and capitalization of $1.1 million.
The expense for restricted awards is net of adjustments for forfeitures
of $0.1 million and capitalization of $0.6 million.
The expense for performance awards is net of capitalization of $0.3
million.
|
|
|
The following table provides a summary of the Company's share-based
compensation plans for the three and six months ended June 30, 2013:
|
($000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Options
|
|
|
Deferred
Share Units
|
|
|
Restricted
Awards
|
|
|
Performance
Awards
|
|
|
|
|
Total
|
Expense (recovery) for the three months ended
June 30, 2013 (1)
|
|
|
$
|
|
385
|
|
|
|
$
|
|
(144)
|
|
|
|
$
|
|
-
|
|
|
|
$
|
|
-
|
|
|
$
|
|
241
|
Expense for the six months ended
June 30, 2013 (2)
|
|
|
$
|
|
906
|
|
|
|
$
|
|
785
|
|
|
|
$
|
|
-
|
|
|
|
$
|
|
-
|
|
|
$
|
|
1,691
|
|
Liability balance, June 30, 2013
|
|
|
$
|
|
-
|
|
|
|
$
|
|
2,513
|
|
|
|
$
|
|
-
|
|
|
|
$
|
|
-
|
|
|
$
|
|
2,513
|
|
(1)
|
The expense for share options is net of adjustments for forfeitures of
$0.1 million, and capitalization of $0.3 million.
|
|
(2)
|
The expense for share options is net of adjustments for forfeitures of
$0.1 million, and capitalization of $0.7 million.
|
|
|
a. Share Option Plan
During the three and six months ended June 30, 2014, Bellatrix granted
2,718,000 (2013: nil) and 2,946,000 (2013: nil) share options,
respectively. The fair values of all share options granted are
estimated on the date of grant using the Black-Scholes option-pricing
model. The weighted average fair market value of share options granted
during the three months ended June 30, 2014, and the weighted average
assumptions used in their determination are as noted below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
Inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Share price
|
|
|
|
|
$
|
|
9.26
|
|
|
|
|
|
Exercise price
|
|
|
|
|
$
|
|
9.26
|
|
|
|
|
|
Risk free interest rate (%)
|
|
|
|
|
|
|
1.2
|
|
|
|
|
|
Option life (years)
|
|
|
|
|
|
|
2.8
|
|
|
|
|
|
Option volatility (%)
|
|
|
|
|
|
|
44
|
|
|
|
|
|
Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair value of each share option granted
|
|
|
|
|
$
|
|
2.79
|
Bellatrix calculates volatility based on historical share price.
Bellatrix incorporates an estimated forfeiture rate between 3% and 10%
for stock options that will not vest, and adjusts for actual
forfeitures as they occur.
The weighted average trading price of the Company's common shares on the
Toronto Stock Exchange ("TSX") for the three and six months ended June
30, 2014 was $9.92 (2013: $5.91), and $9.39 (2013: $5.70),
respectively.
The following tables summarize information regarding Bellatrix's Share
Option Plan:
Share Options Continuity
|
|
|
|
|
Weighted Average
Exercise Price
|
|
|
|
Number
|
|
Balance, December 31, 2013
|
|
|
|
|
|
|
$
|
|
4.75
|
|
|
|
11,182,963
|
|
Granted
|
|
|
|
|
|
|
$
|
|
9.20
|
|
|
|
2,946,000
|
|
Exercised
|
|
|
|
|
|
|
$
|
|
1.96
|
|
|
|
(2,068,622)
|
|
Forfeited
|
|
|
|
|
|
|
$
|
|
6.91
|
|
|
|
(483,502)
|
|
Balance, June 30, 2014
|
|
|
|
|
|
|
$
|
|
6.29
|
|
|
|
11,576,839
|
As of June 30, 2014, a total of 19,109,174 common shares were reserved
for issuance on exercise of share options, leaving an additional
7,532,335 available for future share option grants.
|
Share Options Outstanding, June 30, 2014
|
|
|
|
|
Outstanding
|
|
|
|
|
|
Exercisable
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
|
Average
|
|
|
Remaining
|
|
|
At
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Life
|
|
|
|
|
|
|
|
|
|
|
Exercise Price
|
|
|
June 30, 2014
|
|
|
Exercise Price
|
|
|
(years)
|
|
|
June 30, 2014
|
|
|
Exercise Price
|
|
$ 1.07 - $ 3.43
|
|
|
1,866,336
|
|
|
|
$
|
|
3.10
|
|
|
2.6
|
|
|
1,152,340
|
|
|
|
$
|
|
2.99
|
|
$ 3.44 - $ 3.97
|
|
|
1,648,001
|
|
|
|
$
|
|
3.86
|
|
|
1.0
|
|
|
1,556,332
|
|
|
|
$
|
|
3.87
|
|
$ 3.98 - $ 5.38
|
|
|
2,208,002
|
|
|
|
$
|
|
5.15
|
|
|
2.1
|
|
|
1,998,332
|
|
|
|
$
|
|
5.25
|
|
$ 5.39 - $ 7.68
|
|
|
1,473,500
|
|
|
|
$
|
|
7.30
|
|
|
4.3
|
|
|
47,500
|
|
|
|
$
|
|
5.49
|
|
$ 7.69 - $ 8.42
|
|
|
1,530,000
|
|
|
|
$
|
|
7.99
|
|
|
4.5
|
|
|
-
|
|
|
|
|
|
-
|
|
$ 8.43 - $ 9.04
|
|
|
143,000
|
|
|
|
$
|
|
8.84
|
|
|
4.7
|
|
|
-
|
|
|
|
|
|
-
|
|
$ 9.05 - $10.04
|
|
|
2,708,000
|
|
|
|
$
|
|
9.26
|
|
|
4.9
|
|
|
-
|
|
|
|
|
|
-
|
|
$ 1.07 - $10.04
|
|
|
11,576,839
|
|
|
|
$
|
|
6.29
|
|
|
3.3
|
|
|
4,754,504
|
|
|
|
$
|
|
4.25
|
b. Deferred Share Unit Plan
During the six months ended June 30, 2014, the Company granted 113,610
(2013: 4,796) DSUs, and had 646,516 DSUs outstanding as at June 30,
2014 (2013: 413,320). $5.9 million (December 31, 2013: $4.0 million)
was included in accounts payable and accrued liabilities as at June 30,
2014 in relation to the DSUs.
c. Incentive Plan
On August 7, 2013, the Directors of Bellatrix approved an Incentive Plan
where the Company may grant Restricted Awards ("RAs") and Performance
Awards ("PAs") to officers, employees, and other service providers.
Unless approved by the TSX (or such other stock exchange on which the
common shares may be listed) and the shareholders, the Incentive Plan
does not provide for the issuance of common shares to holders of PAs or
RAs, but rather RAs and PAs are settled in cash in lieu of such common
shares.
During the six months ended June 30, 2014, the Company granted 572,850
(2013: nil) RAs, settled 158,265 (2013: nil) RAs, and had 899,085 RAs
outstanding as at June 30, 2014 (2013: nil). $1.2 million (December
31, 2013: $1.0 million) was included in accounts payable and accrued
liabilities as at June 30, 2014 in relation to the RAs.
During the three months ended June 30, 2014, the Company granted 411,150
(2013: nil) PAs, and had 863,850 PAs outstanding as at June 30, 2014
(2013: nil). $1.3 million (December 31, 2013: $0.4 million) was
included in accounts payable and accrued liabilities as at June 30,
2014 in relation to the PAs.
8. SUPPLEMENTAL CASH FLOW INFORMATION
|
Change in Non-cash Working Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
($000s)
|
|
|
|
|
2014
|
|
|
|
|
2013
|
|
|
|
|
2014
|
|
|
|
|
2013
|
|
Changes in non-cash working capital items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
$
|
|
(4,685)
|
|
|
$
|
|
-
|
|
|
$
|
|
13,720
|
|
|
$
|
|
-
|
|
|
Accounts receivable
|
|
|
|
|
(31,273)
|
|
|
|
|
4,889
|
|
|
|
|
(54,649)
|
|
|
|
|
(3,227)
|
|
|
Deposits and prepaid expenses
|
|
|
|
|
4,688
|
|
|
|
|
22
|
|
|
|
|
190
|
|
|
|
|
(2,934)
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
(52,877)
|
|
|
|
|
(34,639)
|
|
|
|
|
2,335
|
|
|
|
|
15,415
|
|
|
Advances from joint venture partners
|
|
|
|
|
(14,096)
|
|
|
|
|
(2,689)
|
|
|
|
|
(32,438)
|
|
|
|
|
(4,955)
|
|
|
|
|
$
|
|
(98,243)
|
|
|
$
|
|
(32,417)
|
|
|
$
|
|
(70,842)
|
|
|
$
|
|
4,299
|
|
Changes related to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
$
|
|
(10,878)
|
|
|
$
|
|
(6,684)
|
|
|
$
|
|
(4,156)
|
|
|
$
|
|
(8,423)
|
|
|
Financing activities
|
|
|
|
|
303
|
|
|
|
|
(479)
|
|
|
|
|
113
|
|
|
|
|
237
|
|
|
Investing activities
|
|
|
|
|
(87,668)
|
|
|
|
|
(25,254)
|
|
|
|
|
(66,799)
|
|
|
|
|
12,485
|
|
|
|
|
$
|
|
(98,243)
|
|
|
$
|
|
(32,417)
|
|
|
$
|
|
(70,842)
|
|
|
$
|
|
4,299
|
9. INCOME TAXES
Bellatrix is a corporation as defined under the Income Tax Act (Canada)
and is subject to Canadian federal and provincial taxes. Bellatrix is
subject to provincial taxes in Alberta, British Columbia and
Saskatchewan as the Company operates in those jurisdictions.
Deferred taxes reflect the tax effects of differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts reported for tax purposes. As at June 30,
2014, Bellatrix had approximately $1.4 billion in tax pools available
for deduction against future income. Included in this tax basis are
estimated non-capital loss carry forwards of approximately $157.1
million that expire in years through 2030.
10. FINANCE INCOME AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
($000s)
|
|
|
|
|
|
2014
|
|
|
|
|
2013
|
|
|
|
|
|
2014
|
|
|
|
|
2013
|
|
Finance expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on long-term debt
|
|
|
|
$
|
|
4,866
|
|
|
$
|
|
2,460
|
|
|
|
$
|
|
8,593
|
|
|
$
|
|
4,441
|
|
|
Interest on convertible debentures
|
|
|
|
|
|
-
|
|
|
|
|
651
|
|
|
|
|
|
-
|
|
|
|
|
1,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion on convertible debentures
|
|
|
|
|
|
-
|
|
|
|
|
431
|
|
|
|
|
|
-
|
|
|
|
|
849
|
|
|
Accretion on decommissioning liabilities
|
|
|
|
|
|
434
|
|
|
|
|
216
|
|
|
|
|
|
864
|
|
|
|
|
389
|
|
|
|
|
|
|
|
434
|
|
|
|
|
647
|
|
|
|
|
|
864
|
|
|
|
|
1,238
|
|
Finance expense
|
|
|
|
$
|
|
5,300
|
|
|
$
|
|
3,758
|
|
|
|
$
|
|
9,457
|
|
|
$
|
|
6,975
|
11. PER SHARE AMOUNTS
The calculation of basic earnings per share for the three and six months
ended June 30, 2014 was based on a net profit of $38.3 million (2013:
$15.5 million) and a net profit of $63.4 million (2013: $20.0 million),
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
|
|
|
2014
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Basic common shares outstanding
|
|
|
191,091,741
|
|
107,919,329
|
|
|
191,091,741
|
|
|
107,919,329
|
|
Fully dilutive effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share options outstanding
|
|
|
11,576,839
|
|
9,173,560
|
|
|
11,576,839
|
|
|
9,173,560
|
|
|
Shares issuable for convertible debentures
|
|
|
-
|
|
9,821,429
|
|
|
-
|
|
|
9,821,429
|
|
Fully diluted common shares outstanding
|
|
|
202,668,580
|
|
126,914,318
|
|
|
202,668,580
|
|
|
126,914,318
|
|
Weighted average shares outstanding
|
|
|
177,847,190
|
|
107,919,329
|
|
|
174,754,132
|
|
|
107,900,781
|
Dilutive effect of share options and
convertible debentures (1)
|
|
|
3,128,220
|
|
13,346,005
|
|
|
2,654,515
|
|
|
13,137,885
|
|
Diluted weighted average shares outstanding
|
|
|
180,975,410
|
|
121,265,334
|
|
|
177,408,647
|
|
|
121,038,666
|
|
(1)
|
|
For the three and six months ended June 30, 2014, a total of 3,128,220
and 2,654,515 share options were included
in the calculation as they were dilutive.
|
|
|
|
For the three and six months ending June 30, 2013, a total of 3,524,576
and 3,316,456 share options, respectively,
were included in the calculation as they were dilutive. Additionally,
9,821,429 and 9,821,429 common shares issuable
pursuant to the conversion of the convertible debentures were included
in the calculation for the three and six month
periods ending June 30, 2013 as they were also dilutive.
|
|
|
|
|
12. COMMITMENTS
As at June 30, 2014, Bellatrix committed to drill 2 gross (1.2 net)
wells pursuant to farm-in agreements. Bellatrix expects to satisfy
these drilling commitments at an estimated cost of approximately $4.5
million.
In addition, Bellatrix entered into two joint operating agreements
during the 2011 year and an additional joint operation agreement during
2012. The agreements include a minimum commitment for the Company to
drill a specified number of wells each year over the term of the
individual agreements. The details of these agreements are provided in
the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint Operating Agreement
|
|
|
|
Feb. 1, 2011
|
|
|
|
Aug. 4, 2011
|
|
|
|
Dec. 14, 2012
|
|
Commitment Term
|
|
|
|
2011 to 2015
|
|
|
|
2011 to 2016
|
|
|
|
2014 to 2018
|
|
Minimum wells per year (gross and net)
|
|
|
|
3
|
|
|
|
5 to 10
|
|
|
|
2
|
|
Minimum total wells (gross and net)
|
|
|
|
15
|
|
|
|
40
|
|
|
|
10
|
|
Estimated total cost ($000s)
|
|
|
|
$ 56.3
|
|
|
|
$ 150.0
|
|
|
|
$ 37.5
|
|
Remaining wells to drill at June 30, 2014
|
|
|
|
3
|
|
|
|
9
|
|
|
|
7
|
|
Remaining estimated total cost ($000s)
|
|
|
|
$ 11.3
|
|
|
|
$ 33.8
|
|
|
|
$ 26.5
|
Bellatrix also has certain drilling commitments relating to the Grafton
Joint Venture, the Daewoo and Devonian Partnership, and the Troika
Joint Venture. In meeting the drilling commitments under these
agreements, Bellatrix will satisfy some of the drilling commitments
under the joint operating agreements described above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agreement
|
|
|
Grafton (2)
|
|
|
|
Daewoo and
Devonian
|
|
|
Troika
|
|
Commitment Term
|
|
|
2013 to 2015
|
|
|
|
2013 to 2016
|
|
|
2013 to 2014
|
|
Minimum total wells (gross) (1)
|
|
|
|
|
58
|
|
|
|
|
|
70
|
|
|
|
|
63
|
|
Minimum total wells (net) (1)
|
|
|
|
|
10.5
|
|
|
|
|
|
30.4
|
|
|
|
|
31.5
|
|
Estimated total cost ($000s) (gross) (1)
|
|
|
|
$
|
244.0
|
|
|
|
|
$
|
200.0
|
|
|
|
$
|
240.0
|
|
Estimated total cost ($000s) (net) (1)
|
|
|
|
$
|
44.0
|
|
|
|
|
$
|
100.0
|
|
|
|
$
|
120.0
|
|
Remaining wells to drill at June 30, 2014 (gross)
|
|
|
|
|
35
|
|
|
|
|
|
33
|
|
|
|
|
25
|
|
Remaining wells to drill at June 30, 2014 (net)
|
|
|
|
|
6.9
|
|
|
|
|
|
16.3
|
|
|
|
|
12.5
|
|
Remaining estimated total cost ($000s) (gross) (1)
|
|
|
|
$
|
147.7
|
|
|
|
|
$
|
131.6
|
|
|
|
$
|
95.2
|
|
Remaining estimated total cost ($000s) (net) (1)
|
|
|
|
$
|
29.0
|
|
|
|
|
$
|
65.8
|
|
|
|
$
|
47.6
|
|
(1)
|
|
Gross and net estimated total cost values and gross and net minimum
estimated total wells for the
Troika and Grafton Joint Ventures represent Bellatrix's total capital
and well commitments pursuant
to the Troika and Grafton joint venture agreements. Gross and net
minimum total wells for the
Daewoo and Devonian Partnership represent Bellatrix's total well
commitments pursuant to the
Daewoo and Devonian Partnership agreement. Gross and net estimated
total cost values for the
Daewoo and Devonian Partnership represent Bellatrix's estimated cost
associated with its well
commitments under the Daewoo and Devonian Partnership agreement.
Remaining estimated total
cost (gross) for the Daewoo and Devonian Partnership is based on initial
Daewoo Devonian
Partnership gross capital divided by initial total gross capital
including third parties.
|
|
(2)
|
|
During April 2014, Grafton elected to exercise an option to increase
committed capital investment
to the Grafton Joint Venture established during 2013 by an additional
$50 million, for a total
commitment of $250 million, on the same terms and conditions as the
previously announced
Grafton Joint Venture. Specific well commitments associated with the
increase are under
determination and have not been incorporated into the commitments table.
|
|
|
|
|
13. FINANCIAL RISK MANAGEMENT
a. Credit Risk
As at June 30, 2014, accounts receivable was comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aging ($000s)
|
|
|
|
Not past due
(less than 90
days)
|
|
|
|
Past due (90
days or more)
|
|
|
|
|
Total
|
|
Joint venture and other trade accounts receivable
|
|
|
|
|
$
|
56,984
|
|
|
|
|
$
|
17,762
|
|
|
|
$
|
74,746
|
|
Amounts due from government agencies
|
|
|
|
|
|
468
|
|
|
|
|
|
695
|
|
|
|
|
1,163
|
|
Revenue and other accruals
|
|
|
|
|
|
51,493
|
|
|
|
|
|
8,148
|
|
|
|
|
59,641
|
|
Cash call receivables
|
|
|
|
|
|
-
|
|
|
|
|
|
21
|
|
|
|
|
21
|
|
Less: Allowance for doubtful accounts
|
|
|
|
|
|
-
|
|
|
|
|
|
(616)
|
|
|
|
|
(616)
|
|
Total accounts receivable
|
|
|
|
|
$
|
108,945
|
|
|
|
|
$
|
26,010
|
|
|
|
$
|
134,955
|
Amounts due from government agencies include GST and royalty
adjustments. Accounts payable due to same partners includes amounts
which may be available for offset against certain receivables.
Cash calls receivables consist of advances paid to joint interest
partners for capital projects.
The carrying amount of accounts receivable and derivative assets
represents the maximum credit exposure.
b. Liquidity Risk
The following are the contractual maturities of liabilities as at June
30, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities ($000s)
|
|
|
|
Total
|
|
|
|
< 1 Year
|
|
|
|
1-3 Years
|
|
|
|
3-5 Years
|
|
|
|
More than
5 years
|
|
Accounts payable and accrued liabilities (1)
|
|
|
$
|
142,678
|
|
|
$
|
142,678
|
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
Advances from joint venture partners
|
|
|
|
66,942
|
|
|
|
66,942
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Long-term debt - principal (2)
|
|
|
|
323,007
|
|
|
|
-
|
|
|
|
|
323,007
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Commodity contract liability
|
|
|
|
25,612
|
|
|
|
25,612
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Decommissioning liabilities (3)
|
|
|
|
74,480
|
|
|
|
-
|
|
|
|
|
2,285
|
|
|
|
|
3,554
|
|
|
|
|
68,641
|
|
Finance lease obligation
|
|
|
|
12,407
|
|
|
|
1,534
|
|
|
|
|
3,206
|
|
|
|
|
2,178
|
|
|
|
|
5,489
|
|
Deferred lease inducements
|
|
|
|
3,169
|
|
|
|
333
|
|
|
|
|
666
|
|
|
|
|
666
|
|
|
|
|
1,504
|
|
Total
|
|
|
$
|
648,295
|
|
|
$
|
237,099
|
|
|
|
$
|
329,164
|
|
|
|
$
|
6,398
|
|
|
|
$
|
75,634
|
|
(1)
|
|
Includes $0.8 million of accrued interest payable in relation to the
credit facilities is included in Accounts Payable and
Accrued Liabilities.
|
|
(2)
|
|
Bank debt is based on a three year facility, fully revolving until
maturity, and extendable annually at the Company's
option (subject to lender approval), provided that the term after any
extension would not be more than three years.
Interest due on the bank credit facility is calculated based upon
floating rates.
|
|
(3)
|
|
Amounts represent the inflated, discounted future abandonment and
reclamation expenditures anticipated to be
incurred over the life of the Company's properties (between 2017 and
2068).
|
c. Commodity Price Risk
The Company utilizes both financial derivatives and physical delivery
sales contracts to manage commodity price risks. All such transactions
are conducted in accordance with the commodity price risk management
policy that has been approved by the Board of Directors.
As at June 30, 2014, the Company has entered into commodity price risk
management arrangements as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type
|
|
|
|
Period
|
|
|
|
Volume
|
|
|
|
|
Price Floor
|
|
|
|
|
Price Ceiling
|
|
|
|
Index
|
|
Crude oil fixed
|
|
|
|
January 1, 2014 to Dec. 31, 2014
|
|
|
|
500 bbl/d
|
|
|
|
$
|
93.30 US
|
|
|
|
$
|
93.30 US
|
|
|
|
WTI
|
|
Crude oil fixed
|
|
|
|
January 1, 2014 to Dec. 31, 2014
|
|
|
|
1,500 bbl/d
|
|
|
|
$
|
94.00 CDN
|
|
|
|
$
|
94.00 CDN
|
|
|
|
WTI
|
|
Crude oil fixed
|
|
|
|
January 1, 2014 to Dec. 31, 2014
|
|
|
|
500 bbl/d
|
|
|
|
$
|
95.00 US
|
|
|
|
$
|
95.00 US
|
|
|
|
WTI
|
|
Crude oil fixed
|
|
|
|
January 1, 2014 to Dec. 31, 2014
|
|
|
|
1,500 bbl/d
|
|
|
|
$
|
95.22 CDN
|
|
|
|
$
|
95.22 CDN
|
|
|
|
WTI
|
|
Crude oil fixed
|
|
|
|
January 1, 2014 to Dec. 31, 2014
|
|
|
|
500 bbl/d
|
|
|
|
$
|
98.30 CDN
|
|
|
|
$
|
98.30 CDN
|
|
|
|
WTI
|
|
Crude oil fixed
|
|
|
|
January 1, 2014 to Dec. 31, 2014
|
|
|
|
1,000 bbl/d
|
|
|
|
$
|
99.50 CDN
|
|
|
|
$
|
99.50 CDN
|
|
|
|
WTI
|
|
Crude oil fixed
|
|
|
|
January 1, 2014 to Dec. 31, 2014
|
|
|
|
500 bbl/d
|
|
|
|
$
|
99.60 CDN
|
|
|
|
$
|
99.60 CDN
|
|
|
|
WTI
|
|
Natural gas fixed
|
|
|
|
January 1, 2014 to Dec. 31, 2014
|
|
|
|
20,000 GJ/d
|
|
|
|
$
|
3.30 CDN
|
|
|
|
$
|
3.30 CDN
|
|
|
|
AECO
|
|
Natural gas fixed
|
|
|
|
January 1, 2014 to Dec. 31, 2014
|
|
|
|
20,000 GJ/d
|
|
|
|
$
|
3.60 CDN
|
|
|
|
$
|
3.60 CDN
|
|
|
|
AECO
|
|
Natural gas fixed
|
|
|
|
July 1, 2014 to Dec. 31, 2014
|
|
|
|
15,000 GJ/d
|
|
|
|
$
|
3.71 CDN
|
|
|
|
$
|
3.71 CDN
|
|
|
|
AECO
|
|
Natural gas fixed
|
|
|
|
February 1, 2014 to Dec. 31, 2014
|
|
|
|
10,000 GJ/d
|
|
|
|
$
|
3.79 CDN
|
|
|
|
$
|
3.79 CDN
|
|
|
|
AECO
|
|
Natural gas fixed
|
|
|
|
February 1, 2014 to Dec. 31, 2014
|
|
|
|
10,000 GJ/d
|
|
|
|
$
|
3.80 CDN
|
|
|
|
$
|
3.80 CDN
|
|
|
|
AECO
|
|
Natural gas fixed
|
|
|
|
February 1, 2014 to Dec. 31, 2014
|
|
|
|
15,000 GJ/d
|
|
|
|
$
|
3.85 CDN
|
|
|
|
$
|
3.85 CDN
|
|
|
|
AECO
|
|
Natural gas fixed
|
|
|
|
February 1, 2014 to Dec. 31, 2014
|
|
|
|
10,000 GJ/d
|
|
|
|
$
|
3.84 CDN
|
|
|
|
$
|
3.84 CDN
|
|
|
|
AECO
|
|
Natural gas fixed
|
|
|
|
March 1, 2014 to Dec. 31, 2014
|
|
|
|
10,000 GJ/d
|
|
|
|
$
|
4.14 CDN
|
|
|
|
$
|
4.14 CDN
|
|
|
|
AECO
|
14. FAIR VALUE
The Company's financial instruments as at June 30, 2014 include
restricted cash, accounts receivable, deposits, commodity contract
asset, accounts payable and accrued liabilities, advances from joint
venture partners, deferred lease inducements, finance lease
obligations, and long-term debt. The fair value of accounts receivable,
deposits, accounts payable and accrued liabilities approximate their
carrying amounts due to their short-terms to maturity.
The fair value of commodity contracts is determined by discounting the
difference between the contracted price and published forward price
curves as at the balance sheet date, using the remaining contracted
petroleum and natural gas volumes. The fair value of commodity
contracts as at June 30, 2014 was a net liability of $25.6 million
(December 31, 2013: $16.9 million net liability). The commodity
contracts are classified as level 2 within the fair value hierarchy.
Long-term bank debt bears interest at a floating market rate and the
credit and market premiums therein are indicative of current rates;
accordingly the fair market value approximates the carrying value.
Bellatrix Exploration Ltd. is a Western Canadian based growth oriented
oil and gas company engaged in the exploration for, and the
acquisition, development and production of oil and natural gas reserves
in the provinces of Alberta, British Columbia and Saskatchewan. Common
shares of Bellatrix trade on the Toronto Stock Exchange ("TSX") and on
the NYSE MKT under the symbol BXE.
SOURCE Bellatrix Exploration Ltd.
PDF available at: http://stream1.newswire.ca/media/2014/08/06/20140806_C9201_DOC_EN_42320.pdf
Raymond G. Smith, P.Eng., President and CEO (403) 750-2420
or
Edward J. Brown, CA, Executive Vice President, Finance and CFO (403) 750-2655
or
Brent A. Eshleman, P.Eng., Executive Vice President (403) 750-5566
or
Troy Winsor, Investor Relations (800) 663-8072