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Bellatrix to Run Eight Rigs in 4Q; Updates Guidance

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   |    Friday,October 17,2014

Bellatrix Exploration Ltd. has reported an operations update.

Cardium and Mannville Consolidation Efforts

Bellatrix recently completed a tuck-in acquisition of working-interests in the Company’s core Ferrier area in West Central Alberta, extending the Company’s Cardium light oil resource play.  The acquired assets included current low decline rate net production of approximately 300 boe/d (24% oil and liquids and 76% natural gas).  The acquisition included 8 gross (7.0 net) sections of Cardium mineral rights and 3 gross (1.2 net) sections of Mannville prospective lands.  The Company estimates the acquired acreage to contain 18 gross (16.1 net) low risk Cardium development locations, which are adjacent to Bellatrix’s core land base in the Ferrier area. Bellatrix acquired the assets for a net purchase price of$13.9 million, which was funded using the Company’s existing credit facilities.  The proved plus probable reserves assigned by the vendor’s independent reserves evaluator as ofDecember 31, 2013 were 4.7 million boe (3.4 million boe proved), resulting in proved plus probable acquisition metrics of $2.97/boe ($4.11/boe proved).

Bellatrix has entered into a farmin arrangement encompassing 12 gross (9.4 net) sections of Mannville rights and 6 gross (3.5 net) sections Cardium rights in the Ferrier area of West Central Alberta. Under the arrangement, Bellatrix has committed to drill a minimum of 6 wells into the Cardium interval and 6 wells into the Mannville interval. By drilling these wells, Bellatrix will earn the farmor’s entire working interest in either the Cardium orMannville for each section drilled, but reserving a 15% gross overriding royalty payable onMannville wells and a 7.5% to 12% gross overriding royalty payable on Cardium wells to the farmee.  After drilling all commitment wells, Bellatrix has the right to drill additional option wells to earn the remaining sections of Cardium and Mannville rights on similar terms.  Bellatrix is pleased to report that 2 Mannville and 2 Cardium commitment wells are already in progress.

Bellatrix also was active in recent Alberta land sales acquiring 2 gross (2 net) sections of mineral rights in the Mannville and Cardium intervals in the highly prospective Alder Flatsarea in Central Alberta for $4.3 million.

Operational Update

As a result of an underground fire that occurred in downtown Calgary on October 11, 2014, the Company’s corporate head office is temporarily without power and therefore closed.  City officials currently estimate the outage will last until Thursday, October 16, 2014. Bellatrix has robust backup information technology infrastructure that has allowed it to substantially mitigate any associated downtime.  Main reception calls are being routed through the Company’s Drayton Valley field office until power is restored. The outage has had no impact on the Company’s production or field operations.

As previously announced, two third-party operated gas processing facilities served Bellatrix with notice of their requirement to shut in for 3 days and 5 days, respectively, to facilitate necessary maintenance during the month of September.  As a result, Bellatrix announced a reduction to third quarter production guidance on September 11, 2014.  The first facility was shut in for 7 days, curtailing the Company’s production by 2,000 boe/d gross (1,200 boe/d net) during the shut in period while the second facility was offline for 19 days resulting in the additional loss of 16,800 boe/d gross (10,080 boe/d net) during the shut in period.

After giving effect to the aforementioned and continued tightness in available processing capacity, Bellatrix’s daily production averaged approximately 38,000 boe/d in the third quarter of 2014.  This represents a 5% increase over second quarter 2014 production volumes of 36,342 boe/d and a 74% increase over third quarter 2013 volumes of 21,852 boe/d.  Currently fourth quarter production is estimated to average approximately 45,000 boe/d.

The Company plans to employ 8 rigs throughout the fourth quarter of 2014.

Updated 2014 Guidance

Based on the timing of proposed expenditures, normal production declines, execution of the revised 2014 capital budget of $530 million including the aforementioned tuck-in acquisition, and bearing in mind the continued tightness in available processing capacity, the Company expects 2014 average daily production guidance of approximately 38,500 boe/d and an updated exit rate guidance of approximately 45,000 to 47,000 boe/d. The Company is in the process of installing additional compression and gas gathering infrastructure that will enable Bellatrix to increase production to existing and access additional midstream gas processing facilities.

2014 cash flow forecasts have been updated to reflect the impact of these outages and the aforementioned tuck-in acquisition, as well as current expectations for commodity prices. 2014 funds flow from operations are expected at $305 million, or $1.66 per basic share.

Based on an assumed 2014 average Edmonton Light oil price of $96.64/bbl and AECO$4.35/GJ, average 2014 royalty rates of 17.5% and estimated 2014 operating costs of $111.7 million ($7.92  boe/d), the Company expects to exit 2014 with total net debt of approximately $455 million or 1.3 times total net debt to annualized estimated fourth quarter 2014 funds flow from operations.