Stockwatch Writeup...lol they call Brent 400K man...hahah:) Alberta gas producer Bellatrix Exploration Ltd. (BXE) plunged 11 cents to 43 cents on 4.17 million shares, after arranging a badly needed but badly received recapitalization. The arrangement largely involves exchanging debt for shares or for new debt with a longer-term expiry. This will reduce Bellatrix's debt by $110-million, or about one-quarter of the current outstanding debt, while pushing out the maturity dates of the remaining debt to 2023. (Over $145-million (U.S.) in debt had previously been scheduled to mature next year.) Yet it will also inflate Bellatrix's share count to the point that current shareholders will own just 16.5 per cent of the recapitalized company.
The dilution is just the latest of many blows that Bellatrix's long-term shareholders have taken over the years. Adjusting for a 1-for-5 rollback in 2017 -- which was done to maintain the company's New York listing, though this was subsequently lost anyway -- the stock has plummeted to the current level of 43 cents from its mid-2014 high of over $58. One of the heaviest anchors dragging it down has been debt. Bellatrix has brought its debt down bit by bit from its 2015 peak of about $720-million, through asset sales and share issuances. The above rollback reduced the share count in 2017 to about 50 million. It has since risen to about 81 million due to a handful of asset acquisitions and a different shares-for-debt deal. Following the recapitalization, the share count will balloon to about 490 million.
Despite the dilution, Brent Eshleman, Bellatrix's $400,000-a-year president and CEO, declared himself "pleased" with the recapitalization, which he claimed will leave the company "well positioned to take advantage of future improvements in the commodity and operating environments." Shareholders seem doubtful. Even after the recapitalization, Bellatrix's debt will be a high $328.5-million, and the company has yet to prove that it can reliably make more money than it spends. The company would doubtless point out in response that the recapitalization will save a hefty $12-million a year in interest costs. As well, the recent completion of a years-long infrastructure program will lead to lower overall spending annually, as Mr. Eshleman has repeatedly reminded investors since the program was finished about a year ago. This infrastructure is intended to support eventual production of 60,000 barrels of oil equivalent a day, compared with about 35,000 barrels a day in 2018. Such a sizable production boost is not in the cards this year, however. According to the guidance it released in January, Bellatrix is aiming for flat 2019 production of about 35,000 barrels a day on a budget of about $45-million.