Bellatrix Exploration Ltd (Canada) BXEFF

RE:RE:RE:RE:BXE unlikely to remain a going concern due to crushing debt

[Jnorris25]

Just to help some of you out, the PDP PV 10 (Present value of the reserves) is done by a reserve engineer consulting firm. I dont think this is something that OP came up with himself. They have their own pricing assumptions, and typically use higher ones than the forward strip, especially on gas. I see someone posted a comment on the weak gas futures strip.

Most revolving creditors - the types that have their review with due date May 30, think that companies only have a lending capacity of about 65% of the PDP PV10 as per the reserve engineer. The PDP PV10 of BXE as OP mentioned was in the $200 and something million dollar range. While debt was over $400mm. It seems this is why their revolver creditors (banks) are having a conniption. 

BXE in their corporate guidance used a pretty optimistic pricing assumption for 2019 - US $65 WTI and  $1.60/GJ AECO. The forward strip is much below those levels.

If you use the actual forward strip, the stock looks very expensive. trading nat almost 7x EV/DACF versus peers at under 4x in many cases for companies with much stronger balance sheets. In any case the Debt/Cash Flow in Q4 was 7.1X, which is a highly distressed metric.

The other big hammer on this company is the May 2020 $145mm maturity of the Senior Notes, which is just a massive problem, They could sell off that one half facility they own and all excess land and it wouldnt come close to covering this amount.

In terms of rights offerings - who would buy this? Typically last ditch rights offerings are done at massive discounts in order to get enough cash in to pay creditors. Something like a massively dilutive rights offering for $75mm or something at 10 or 20 cents could kick the can down the road until 2020 I suppose. At which point the notes comes due. It's a huge problem. Who is going to put $100mm into this company?

I would stay away from this thing, it looks pretty grim. No one will buy this thing with the amount of debt outstanding, not a chance. I would add that it looks like they are actually going ot become more indebted this year as their expected cash flow at forward prices will be less than capex and expenses. Not good.