TSX: BXE
CALGARY, March 14, 2019 /PRNewswire/ - Bellatrix Exploration Ltd. ("Bellatrix" or the "Company") (TSX: BXE) announces 2018 year end reserves, highlighted by 13% reserve growth and low cost reserve additions.
Reserves at December 31, 2018 were independently evaluated by InSite Petroleum Consultants Ltd. ("InSite"). The evaluation encompasses 100% of Bellatrix's oil and gas properties and was prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook").
2018 YEAR END RESERVE HIGHLIGHTS
Bellatrix delivered low cost reserve additions in 2018 with 13% growth in each of Proved Developed Producing ("PDP"), Proved ("1P"), and Proved plus Probable ("2P") reserve categories. The Company achieved a 100% success rate through the drill bit, focused on the low cost Spirit River liquids rich natural gas play.
In 2018, Bellatrix drilled and/or participated in 14 gross (9.2 net) total wells including 10 gross (7.7 net) operated Spirit River liquids rich natural gas wells, 1 gross (1.0 net) operated Cardium well and 3 gross (0.5 net) non-operated wells (two Spirit River and one Cardium). Bellatrix's operated drilling activity in 2018 included, a total of 49,027 meters drilled, 18,026 meters of which was horizontal length.
Bellatrix demonstrated strong results within its core area in 2018 highlighted by the following achievements:
- Total 1P and 2P reserves at year end 2018 increased to 193 mmboe and 265 mmboe, respectively, representing 13% growth within each category, driven by strong positive technical reserve revisions and infill drilling additions which more than offset the impact of reserves produced during the year.
- Achieved reserves replacement of 330% in 2018 including the effect of total net acquisitions, and 166% reserve replacement excluding the effect of total net acquisitions in 2018.
- Bellatrix established a December 31, 2018 2P net asset value (2P net present value discounted at 10% ("NPV10") before tax) of $1.12 billion ($13.84/share) which incorporates future net revenue adjusted for year end total net debt, seismic, and land value.
- The 2018 year end PDP NPV10 before tax value of $472.5 million remained relatively unchanged from the 2017 year end PDP NPV10 value of $475.3 million as the 13% growth in reserve volumes mitigated the impact of lower forecast natural gas and natural gas liquids prices year over year.
- Bellatrix maintained a focused capital program in 2018 adding PDP reserves at a finding, development and acquisition ("FD&A") cost of $3.12/boe excluding capital invested in the Bellatrix O'Chiese Nees-Ohpawganu'ck deep-cut gas plant at Alder Flats (the "Alder Flats Plant"), and $3.22/boe including the Alder Flats Plant. The PDP recycle ratio excluding Alder Flats Plant capital was 2.7 times.
- Bellatrix's 2P and 1P FD&A costs including changes in future development capital ("FDC") in 2018 averaged $1.99/boe and $2.28/boe, respectively. On a three year average basis (2016 to 2018), Bellatrix delivered strong 2P and 1P FD&A costs of $3.22/boe and $3.76/boe, respectively.
- The Company's calculated 1P and 2P reserve life indices improved year over year to 14.7 years and 19.2 years (compared with 13.5 and 17.4 years in 2017), respectively.
- Bellatrix's corporate decline rate forecast by InSite for PDP reserves in 2019 is 26% (relatively unchanged compared with an estimated first year PDP decline rate at December 31, 2017 of 25%).
2018 HIGHLIGHTS
Twelve months ended December, | |||
2018 | 2017 | ||
Reserves (Working Interest (1), mboe) | |||
Proved Developed Producing | 77,327 | 65,305 | |
Total Proved | 192,979 | 171,198 | |
Proved Undrilled/Total Proved | 59% | 61% | |
Total Proved and Probable | 265,222 | 235,330 | |
Probable/Total Proved and Probable | 27% | 27% | |
Net Present Value of Reserves (Before Tax, 10% Discount Rate) (2) | |||
Total Proved ($MM) | $1,049 | $1,016 | |
Proved and Probable ($MM) (3) | $1,500 | $1,501 | |
Net Asset Value | |||
Proved and Probable ($MM) (4) | $1,120 | $1,161 | |
Proved and Probable Net Asset Value, per basic share (5) | $13.84 | $23.52 | |
FD&A Costs (Including Changes in FDC) | |||
PDP, excluding Alder Flats Plant capital ($/boe) | $3.12 | $4.81 | |
1P, excluding Alder Flats Plant capital ($/boe) | $2.28 | $4.12 | |
2P, excluding Alder Flats Plant capital ($/boe) | $1.99 | $3.15 | |
3 year average 1P ($/boe) | $3.76 | $4.05 | |
3 year average 2P ($/boe) | $3.22 | $2.39 | |
Selected Key Operating Statistics | |||
Annual average sales volumes (boe/d) | 35,635 | 36,872 | |
Q4 average sales volumes (boe/d) | 35,001 | 37,077 | |
Annual operating netback ($/boe) (6) | $8.51 | $9.02 | |
Total net debt ($MM) (6) | $443.3 | $420.8 | |
Reserve Life Index (Years) | |||
Proved | 14.7 | 13.5 | |
Proved and Probable | 19.2 | 17.4 | |
Recycle Ratio | |||
PDP, excluding change in FDC and Alder Flats Plant capital | 2.7 x | 1.9 x | |
1P, excluding change in FDC and Alder Flats Plant capital | 3.8 x | 3.8 x | |
2P, excluding change in FDC and Alder Flats Plant capital | 4.7 x | 4.1 x | |
Evaluated Future Horizontal Drilling Locations (7) | |||
Gross Spirit River | 174 | 177 | |
Net Spirit River | 132 | 129 | |
Gross Cardium | 150 | 147 | |
Net Cardium | 127 | 117 | |
(1) "Working Interest" means Bellatrix's working interest (operated or non-operated) share excluding any royalty interest and before deduction of royalties and is also referred to as "Gross" reserves under NI 51-101. May not add due to rounding. |
(2) It should not be assumed that the present worth of estimated future net revenue presented in the tables above or elsewhere in this press release represents the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserves estimates of Bellatrix's crude oil and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein. |
(3) Bellatrix reserves information includes the impact of IFRS 16, which changes the accounting treatment of certain operating leases so that the future lease payments associated with such leases are recognized as a financial liability on the Company's balance sheet. As a result, for the purposes of preparing the reserves data presented herein, the lease payments associated with such leases are recognized as financing costs rather than as operating costs and have not been deducted in calculating the value of the Company's reserves. If such lease payments were recognized as operating costs in calculating the value of the Company's reserves, it would result in a reduction to the Company's 2P NPV10 future net revenue by $88 million from approximately $1.5 billion to $1.412 billion. |
(4) Proved plus Probable net asset value incorporates 2P NPV10 (before tax) value and adjusts for year end total net debt, seismic, and land value. |
(5) Based on 80.9 million common shares outstanding as at December 31, 2018 (excluding common shares issuable pursuant to securities that are convertible, exercisable or exchangeable into common shares). |
(6) The terms "operating netback" and "total net debt" do not have standard meanings under Canadian generally accepted accounting principles ("GAAP"). Operating netback is calculated by deducting transportation, royalties and operating costs from revenue. Operating netback includes the impact of commodity price risk management contracts. The Company's calculation of total net debt excludes other deferred liabilities, deferred capital obligations, long-term risk management contract liabilities, decommissioning liabilities, and deferred tax liabilities. Total net debt includes the adjusted working capital deficiency, long term loans receivable, 8.5% senior unsecured notes due 2020 (the "Senior Notes"), 8.5% second lien notes due 2023 (the "Second Lien Notes"), 6.75% convertible unsecured subordinated debentures due 2021 (the "Convertible Debentures") (liability component), and current and long term amounts outstanding under our syndicated revolving credit facilities (the "Credit Facilities"). The adjusted working capital deficiency is calculated as net working capital deficiency excluding current risk management contract assets and liabilities, current portion of other deferred liabilities, current portion of deferred capital obligation and the current Credit Facilities. See "Non-GAAP measures" in the Reader Advisories at the end of this Press Release. |
(7) Represents proved plus probable undeveloped locations included in the InSite Report as defined below. |
2018 RESERVES
Bellatrix engaged InSite to complete a reserve report in accordance with NI 51-101, on 100% of Bellatrix's oil and gas properties effective December 31, 2018 (the "InSite Report"). Highlights include:
- 265.2 million boe total working interest 2P reserves and 193.0 million boe 1P reserves.
- $1.5 billion net present value of future net revenue of 2P reserves before tax at a 10% discount rate.
- A net asset value of $13.84 per basic share outstanding based on the InSite evaluation of 2P reserves at a 10% discount rate.
- Bellatrix's corporate decline rate forecast by InSite for PDP reserves in 2019 is 26% (relatively unchanged compared with an estimated first year PDP decline rate at December 31, 2017 of 25%).
Working interest | 2018 Reserves | 2017 Reserves | ||||
Oil & Liquids | Natural Gas | Total | Total | Variance | ||
(mbbl) | (mmcf) | (mboe) | (mboe) | % | ||
Proved | 62,308 | 784,024 | 192,979 | 171,198 | 13% | |
Probable | 23,421 | 292,934 | 72,243 | 64,132 | 13% | |
Proved Plus Probable (1) | 85,729 | 1,076,957 | 265,222 | 235,330 | 13% | |
(1) Totals may not add due to rounding. |
NET ASSET VALUE – PROVED PLUS PROBABLE
The following table of net asset value, as at December 31, 2018, is based on the InSite evaluation of future net revenue of the Company's 2P reserves before tax, which does not represent fair market value.
($000s except acre, unit and per unit amounts) | |||||||
PV 0% | PV 5% | PV 8% | PV 10% | PV 15% | |||
Proved plus Probable Reserves (1) | 3,793,797 | 2,246,652 | 1,743,453 | 1,500,254 | 1,083,970 | ||
Undeveloped Lands (2) | 35,952 | 35,952 | 35,952 | 35,952 | 35,952 | ||
Value of Seismic (3) | 26,872 | 26,872 | 26,872 | 26,872 | 26,872 | ||
Total Net Debt (4) | (443,332) | (443,332) | (443,332) | (443,332) | (443,332) | ||
Net Asset Value | 3,413,289 | 1,866,144 | 1,362,945 | 1,119,746 | 703,462 | ||
Per Basic Common Share (5) | $42.19 | $23.06 | $16.85 | $13.84 | $8.69 | ||
(1) As evaluated by InSite as at December 31, 2018 based on forecast prices and costs before income tax. | ||||||
(2) As estimated by Bellatrix as at December 31, 2018 based on 133,815 net acres of undeveloped land at an average price of $268.67 per acre. | ||||||
(3)Based on 25% of $105.7 million replacement value based on seismic costs to buy data at an average of approximately $1,600/km for 2D and $16,000/km2 for 3D. | ||||||
(4) The Company's calculation of total net debt excludes other deferred liabilities, deferred capital obligations, long-term risk management contract liabilities, decommissioning liabilities, and deferred tax liabilities. Total net debt includes the adjusted working capital deficiency, long term loans receivable, Second Lien Notes, Senior Notes, Convertible Debentures (liability component), current Credit Facilities and long term Credit Facilities. The adjusted working capital deficiency is calculated as net working capital deficiency excluding current risk management contract assets and liabilities, current portion of other deferred liabilities, current portion of deferred capital obligation and the current Credit Facilities. | ||||||
(5) Based on 80.9 million common shares outstanding as at December 31, 2018 (excluding common shares issuable pursuant to securities that are convertible, exercisable or exchangeable into common shares). |
NET PRESENT VALUE ("NPV") OF FUTURE NET REVENUE
The forecast prices used in the InSite Report incorporate InSite's commodity price forecasts as at December 31, 2018 ("InSite Forecast Prices") which are noted below under the heading "Reserve Report Commodity Pricing". It should not be assumed that the NPV estimated by InSite represents the fair market value of Bellatrix's reserves. Estimated future net revenues are reduced for estimated future abandonment and reclamation costs (for wells (both current and future wells) that have been attributed reserves), estimated royalties payable, estimated operating costs, and estimated capital for future development associated with the reserves.
In the InSite Report, the net total future capital over the life of the reserves associated with 1P reserves is $679 million ($512 million discounted at 10%) and $863 million ($639 million discounted at 10%) for 2P reserves. The change in 2018 net total FDC over the life of the reserves associated with 1P reserves is $15 million ($1 million discounted at 10%) and $31 million ($7 million discounted at 10%) for 2P reserves. Calculated changes in net FDC exclude future capital from acquired properties.
SUMMARY OF NPV BEFORE INCOME TAXES (1), (2)
As at December 31, 2018 | 0% | 5% | 8% | 10% | 15% | |
Proved | ||||||
Developed producing | 887,468 | 619,667 | 522,192 | 472,545 | 382,630 | |
Developed non-producing | 18,791 | 13,685 | 11,690 | 10,637 | 8,654 | |
Undeveloped | 1,506,640 | 885,604 | 671,650 | 566,101 | 382,763 | |
Total proved | 2,412,899 | 1,518,956 | 1,205,532 | 1,049,283 | 774,047 | |
Probable | 1,380,898 | 727,696 | 537,921 | 450,971 | 309,923 | |
Total proved plus probable | 3,793,797 | 2,246,652 | 1,743,453 | 1,500,254 | 1,083,970 | |
(1 )Forecast Prices and Costs ($000s). Discounted at (%/year). |
(2) May not add due to rounding. |
SUMMARY OF NPV AFTER INCOME TAXES (1), (2), (3)
As at December 31, 2018 | 0% | 5% | 8% | 10% | 15% | |
Proved | ||||||
Developed producing | 887,468 | 619,667 | 522,192 | 472,545 | 382,630 | |
Developed non-producing | 18,791 | 13,685 | 11,690 | 10,637 | 8,654 | |
Undeveloped | 1,245,226 | 763,538 | 590,955 | 503,942 | 348,934 | |
Total proved | 2,151,485 | 1,396,890 | 1,124,837 | 987,124 | 740,218 | |
Probable | 1,022,509 | 545,391 | 407,431 | 344,313 | 241,878 | |
Total proved plus probable | 3,173,994 | 1,942,281 | 1,532,268 | 1,331,437 | 982,096 | |
(1) Forecast Prices and Costs ($000s), Discounted at (%/year). |
(2) May not add due to rounding. |
(3) The after-tax NPV of Bellatrix's oil and gas properties reflects the tax burden on the properties on a stand-alone basis and |
FD&A COSTS (1)
The Company achieved another strong year of capital investment in 2018 with average drill, complete, equip and tie-in costs for its Spirit River program in 2018 averaging approximately $3.4 million per well (down from $3.8 million in 2017).
Total exploration and development capital expenditures in 2018 (before acquisition and divestiture activities) were $50.3 million. Total net capital expenditures after acquisition and divestiture activities were $75.6 million in 2018.
2018 | 2017 | 2016 | 2016 – | |
PROVED PLUS PROBABLE FD&A COSTS | ||||
Excluding changes in FDC | ||||
FD&A Costs, 2P ($/boe) | ||||
Exploration and development (2) | 2.32 | 3.39 | 1.77 | 2.46 |
Acquisitions (excluding dispositions) (3) | 1.43 | 0.04 | 3.26 | 1.35 |
Total (including acquisitions) | 1.88 | 2.43 | 2.02 | 2.12 |
Total excluding Alder Flats Plant capital (4) | 1.82 | 2.22 | 1.82 | 1.96 |
Including changes in FDC (2) | ||||
FD&A Costs, 2P ($/boe) | ||||
Exploration and development | 1.44 | 3.58 | 3.68 | 3.16 |
Acquisitions (excluding dispositions) (3) | 2.66 | 2.83 | 5.80 | 3.35 |
Total (including acquisitions) | 2.05 | 3.36 | 4.03 | 3.22 |
Total excluding Alder Flats Plant capital (4) | 1.99 | 3.15 | 3.83 | 3.05 |
PROVED FD&A COSTS | ||||
Excluding changes in FDC | ||||
FD&A Costs, 1P ($/boe) | ||||
Exploration and development (2) | 2.62 | 3.42 | 1.88 | 2.59 |
Acquisitions (excluding dispositions) (3) | 1.94 | 0.05 | 4.34 | 1.79 |
Total (including acquisitions) | 2.31 | 2.61 | 2.22 | 2.38 |
Total excluding Alder Flats Plant capital (4) | 2.24 | 2.38 | 1.99 | 2.20 |
Including changes in FDC (2) | ||||
FD&A Costs, 1P ($/boe) | ||||
Exploration and development | 1.41 | 4.67 | 3.75 | 3.62 |
Acquisitions (excluding dispositions) (3) | 3.51 | 3.33 | 6.99 | 4.14 |
Total (including acquisitions) | 2.36 | 4.34 | 4.20 | 3.76 |
Total excluding Alder Flats Plant capital (4) | 2.28 | 4.12 | 3.98 | 3.57 |
PROVED DEVELOPED PRODUCING FD&A COSTS | ||||
FD&A Costs, PDP ($/boe) | ||||
Exploration and development (2) | 3.51 | 5.56 | 5.02 | 4.83 |
Acquisitions (excluding dispositions) (3) | 2.84 | 0.47 | 11.14 | 4.11 |
Total (including acquisitions) | 3.22 | 5.27 | 5.90 | 4.67 |
Total excluding Alder Flats Plant capital (4) | 3.12 | 4.81 | 5.30 | 4.31 |
(1) FD&A costs are used as a measure of capital efficiency. FD&A presented above has been calculated based on exploration and development capital and/or acquisition capital spent in the applicable period (both including and excluding changes in future development capital for that period) divided by the change in reserves for that period including revisions for that same period. Bellatrix provides FD&A costs that incorporate all acquisitions and exclude the reserve, capital, and FDC impact of dispositions during the year. The foregoing calculation is based on working interest reserves. |
(2) The aggregate of exploration and development costs incurred in the most recent year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year. |
(3) FD&A is calculated using the announced purchase price for corporate acquisitions rather than the actual amount allocated to property, plant and equipment for accounting purposes. |
(4) In 2018, the Company completed facilities and equipment investments totalling $50.3 million including approximately $2.6 million directly on the Alder Flats Plantas such capital is non-recurring and no further development capital will be required to be spent on the Alder Flats Plant in future years, total FD&A costs are shown excluding capital spent directly on the Alder Flats Plant. |
RESERVE LIFE INDEX
Bellatrix's reserve life index has been determined for 1P and 2P working interest reserves using forecast prices and costs. The reserve life index for 2018 is calculated by dividing reserves as at December 31, 2018 by 2019 forecasted average production of 37,853 boe/d for 2P reserves and 35,824 boe/d for 1P reserves, as set forth in the InSite Report, representing a measure of the amount of time production could be sustained at the production rates based on the reserves at the applicable point in time.