Bellatrix Exploration Ltd (Canada) BXEFF

Scotia Capital Inc comments re. BXE.

[cohoe]

Increasing our 2014 forecast for BELLATRIX EXPLORATION.


Bellatrix Exploration Ltd.
(BXE-T C$7.78)
(BXE-A US$7.54)
Increasing 2014 Estimates
Jason Bouvier, CFA - [phone]
(Scotia Capital Inc. - Canada)
[e-mail]
Cameron Bean - [phone]
(Scotia Capital Inc. - Canada)
[e-mail]
Rating: Sector Outperform Target 1-Yr: C$10.00 ROR 1-Yr: 28.5%
Risk Ranking: High
Valuation: 1.0x our 2P NAV plus risked upside.
Key Risks to Target: Oil and natural gas prices; Drilling program success.
Div. (NTM) $0.00
Div. (Curr.) $0.00
Yield (Curr.) 0.0%
Event Pertinent Revisions
New Old
Target:
1-Yr $10.00 $9.00
CFPS14E $1.89 $1.64
■ We are increasing our 2014 forecasts for Bellatrix Exploration.
Implications
■ JV capital accelerates growth profile. We have increased our 2014
capital forecast and now expect to see BXE spend ~$300M net ($450M-
$500M gross), including the balance of the Grafton JV capital and
much of the Daewoo/Devonian JV capital. Under the Grafton JV, BXE
will spend $44M net ($244M gross) through Q2/15 and receive 46% of
the production (~2.6x capital multiple) before payout (return of capital
+ 8% IRR) and 67% after (or 100% subject to a 17.5% GORR).
■ 2014 forecasts increased. Based on our new capital forecast, we are
increasing our production and CFPS forecasts to 33.2 mboe/d (from
29.9 mboe/d) and $1.89 (from $1.64). With this, we see BXE delivering
debt-adjusted production per share and CFPS growth of 38% (up from
34% in 2013) and 50% (up from 32% in 2013).
■ Attractive valuation. Despite growing its production (DA/sh) and
CFPS by over 25%/year since 2010, BXE's valuation continues to lag
behind its gas-weighted peers (2014E EV/DACF of 4.9x vs. peers at
7.5x). Given its attractive valuation, industry-leading results in the
Cardium and Notikewin, and increased 2014 growth profile, we
continue to view BXE as one of our top gas-weighted names.
Recommendation
■ With our updated forecasts, we are increasing our one-year target price to
$10/sh (from $9/sh) and maintaining our SO rating.
Qtly CFPS (FD) Q1 Q2 Q3 Q4 Year P/CFPS Capitalization
Shares O/S (M) 127.0
Market Cap (M) $988.3
Float O/S (M) 101.6
Float Value (M) $790.3
ScotiaView Analyst Link
2011A $0.16 A $0.21 A $0.21 A $0.24 A $0.83 5.9x
2012A $0.25 A $0.22 A $0.23 A $0.26 A $0.96 4.5x
2013E $0.32 A $0.31 A $0.28 $0.35 $1.26 6.2x
2014E $0.41 $0.44 $0.48 $0.56 $1.89 4.1x
(FY-Dec.) 2010A 2011A 2012A 2013E 2014E
Oil Price (WTI, /bbl) (US$) $79.39 $95.06 $94.09 $94.00 $90.00
Nat Gas (HH, /mmBtu) (US$) $4.38 $3.99 $2.76 $3.81 $4.25
Prod-Equiv (mboe/d) 8.52 11.95 16.69 22.58 33.24
Production Growth (%) 1.1% 40.3% 39.6% 35.3% 47.2%
Prod/Share Growth -15.1% 18.1% 27.1% 34.2% 37.7%
Production (% gas) 70.1% 62.0% 65.7% 72.1% 73.8%
Cash Flow from Ops (M) $53 $93 $111 $151 $232
Net Cap Exp (M) $107 $180 $164 $240 $300
IBES CFPS 2013E: $1.39 NAV: $6.05
IBES CFPS 2014E: $2.08 P/NAV: 1.29x
Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates.
All values in C$ unless otherwise indicated.