Bellatrix Exploration Ltd (Canada) BXEFF

TD Investment Conclusion - Buy

[CanadianBuck]

TD Investment Conclusion The company continues to direct the majority of capital to the Spirit River play where efficiencies continue look attractive, even in a low commodity price environment. In 2016, Bellatrix will look to sustain production near current levels while minimizing capital spending to maintain sufficient liquidity. While we view the company's current debt levels as elevated, Bellatrix still has ~$200mm of additional leeway on their bank facilities which are not up for review until May 2016. Furthermore, the company has demonstrated the ability to drive down cash costs and continues to see benefits from previous capital outlays, specifically phase 1 of the company's Alder Flats gas plant. With firm transportation agreements and all required near-term infrastructure in place, the company is in a relatively good position to withstand the current commodity price downturn, in our view. Our target price remains at $2.25 and we reiterate our BUY recommendation. Details Q4 2015 production of approximately 40,500 BOE/d is in line with TD's forecast of 40,299 BOE/d and Street expectations of 40,099 BOE/d. This results in FY 2015 production of 41,389 BOE/d, which is on the high end of the company's previous guidance of 40,500-41,500 BOE/d. The company has announced a capital budget of $46mm for the first half of 2016 which will be focused on development of the company's Spirit River play while minimizing/deferring additional infrastructure spending. This budget is expected to result in first half average production of 39,000 BOE/d (72% natural gas).