Exploration & Production | Quarterly / Earnings Reports | Third Quarter (3Q) Update | Deals - Acquisition, Mergers, Divestitures | Production Rates | Forecast - Production

Bellatrix Announces 2015 Capex and Guidance

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Bellatrix Exploration Ltd. has reported record year-to-date production, funds flow from operations, net profit and third quarter 2014 financial results.

Operational highlights for the three and nine months ended September 30, 2014 include:

• Record sales of 37,838 boe/d (69% natural gas), up 73% from sales volumes of 21,852 boe/d registered in the third quarter of 2013.
• During the third quarter of 2014, Bellatrix drilled and/or participated in 35 gross (17.5 net) wells, consisting of 22 gross (11.2 net) Cardium wells and 13 gross (6.3 net) Spirit River Interval liquids-rich gas wells. In the nine months ended September 30, 2014, Bellatrix posted a 100% success rate drilling and/or participating in 98 gross (52.0 net) wells, resulting in 71 gross (39.6 net) Cardium wells and 27 gross (12.4 net) Spirit River Interval liquids-rich gas wells.
• During the third quarter of 2014, Bellatrix spent $167.8 million on capital projects, compared to $49.5 million in Q3 2013. In the nine months ended September 30, 2014, Bellatrix spent $458.0 million on capital projects, compared to $187.8 million in the first nine months of 2013.
• As at September 30, 2014, Bellatrix had approximately 390,141 net undeveloped acres of land in Alberta, British Columbia and Saskatchewan.
• Continued historical year-over-year production and reserve growth

Cardium and Mannville Consolidation Efforts

During the third quarter of 2014, Bellatrix completed a tuck-in acquisition of working-interests in the Company's core Ferrier area in West Central Alberta, extending the Company's Cardium resource play. The acquired assets included 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.

In addition, during the third quarter of 2014 Bellatrix was active in recent Alberta land sales acquiring 2 gross (2.0 net) sections of Mannville and Cardium mineral rights in the highly prospective Alder Flats area in Central Alberta for $4.4 million. Bellatrix also acquired additional working interests in multiple existing properties for a total cost of $13.7 million after adjustments.

Subsequent to September 30, 2014, Bellatrix entered into a farmin arrangement encompassing 12 gross (9.4 net) sections of Mannville rights and 6 gross (3.5 net) sections of Cardium rights in the Ferrier area of West Central Alberta. Under the arrangement, Bellatrix has committed to drill a minimum of 6 Cardium wells and 6 Mannville wells. By drilling these wells, Bellatrix will earn the farmor's entire working interest in either the Cardium or Mannville for each section drilled, but reserving a 15% gross overriding royalty payable on Mannville 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.

 

Grafton $250 Million Additional Commitment

On September 30, 2014, Bellatrix announced that based upon the success of the first joint venture with Grafton, Bellatrix has entered into a new multi-year joint venture arrangement with Canadian Non-Operated Resources Corp., a non-operated oil and gas company managed by Grafton Asset Management Inc. pursuant to which CNOR has committed $250 million in capital towards future accelerated development of a portion of Bellatrix's extensive undeveloped land holdings.

Under the terms of the agreement, CNOR will pay 50% of the drilling, completion, equipping and tie-in capital expenditures associated with development plans to be proposed by Bellatrix and approved by a management committee comprised of representatives of Bellatrix and CNOR in order to earn 33% of Bellatrix's working interest before payout and automatically converting to a 10.67% gross overriding royalty on Bellatrix's pre-joint venture working interest after payout (being recovery of CNOR's capital investment plus an 8% return on investment). The joint venture funding is available immediately; however, Bellatrix expects the funds to be spent primarily from 2016 through 2018. Between Grafton and CNOR, a total of $500 million has been committed to the development of Bellatrix's lands.

Commodity Price Risk Management

As of November 3, 2014, the Company has entered into the following commodity price risk management arrangements:

 

Outlook

Business Prospects and 2014 Year Outlook

Bellatrix continues to develop its core assets and conduct exploration programs utilizing its large inventory of geological prospects. Based on the timing of proposed expenditures, normal production declines and execution of its 2014 capital budget of $530 million including tuck-in acquisitions completed in the third quarter of 2014, the Company expects 2014 average daily production guidance of approximately 38,500 boe/d and to exit the year within the range of approximately 45,000 to 47,000 boe/d. Bellatrix is in the process of installing additional compression and gas gathering infrastructure that will enable the Company to increase production to existing and access additional midstream gas processing facilities.

 

Preliminary 2015 Outlook

The Board of Directors has approved an initial $450 million net capital budget for 2015.

Our focus in 2015 will remain on execution of strategic priorities including key infrastructure projects and construction of Phase 1 of our 110 mmcf/d deep cut gas plant at Alder Flats, which remains on schedule and on budget, with an expected in-service date of July 1, 2015.

Based on timing of our forecast expenditures, and anticipated production processing availability, we anticipate achieving full year 2015 average daily production of approximately 48,000 to 49,000 boe/d; this represents approximately 26% forecast production growth using the midpoint of our initial 2015 average volume guidance compared with our current 2014 full year average outlook.

Infrastructure investments made through 2014 and into 2015 are expected to provide improved operational reliability and reduced impacts from third party facility downtime, provide increased revenue and netback contribution from higher liquids extraction of our natural gas streams, and continue to reduce our already low operating cost profile. Given its superior liquids extraction capability and reductions to operating costs, the proposed Alder Flats deep cut plant has an estimated payback period of two years. Despite this relatively quick payback, it also provides significant strategic value, and anchors long term development of our multi-billion dollar inventory of low risk development well locations.

Near term catalysts include the completion of strategic infrastructure projects expected to be on-stream in December. This includes both the addition of booster compression at our 13-5 compressor station, and the construction of the Twin Rivers pipeline. These projects in combination are expected to increase gross processing capability of approximately 30 to 40 mmcf/d; representing potential increased processing capability net to Bellatrix of approximately 3,000 to 4,000 boe/d, based on forecast working interest volumes.

Additionally, construction and tie-in of new pipelines early in the second quarter of 2015, and additional liquids handling capability at an existing third party gas plant in mid-2015 is expected to provide further gross processing capability of approximately 60 mmcf/d. Finally the two Phases of our proposed Alder Flats deep cut gas plant is anticipated to add 110 mmcf/d capacity by July 2015, expanding to 220 mmcf/d total by April 2016. In combination, these strategic endeavors provide for potential volume growth and total processing capability net to Bellatrix' working interest of over 80,000 boe/d by mid-2016.