BELLATRIX EXPLORATION LTD. ANNOUNCES FIRST QUARTER 2011 FINANCIAL RESULTS

TSX: BXE

CALGARY, May 12 /CNW/ - (TSX: BXE) Bellatrix Exploration Ltd. ("Bellatrix" or the "Company") announces its financial and operating results for the three months ended March 31, 2011.

Forward-Looking Statements

This press release contains forward-looking statements. Please refer to our cautionary language on forward-looking statements and the other matters set forth at the beginning of the management's discussion and analysis attached to this press release.

Effective January 1, 2011, Bellatrix began reporting its financial results in accordance with International Financial Reporting Standards ("IFRS"). Prior year comparative amounts have been restated to reflect results as if Bellatrix had always prepared its financial results using IFRS. Please see additional discussion regarding IFRS later in this press release.

    <<
                                 HIGHLIGHTS
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
                                                           2011         2010
    -------------------------------------------------------------------------
    FINANCIAL (unaudited)
    (CDN$000s except share and per share amounts)
    Revenue (before royalties and risk management(1))    40,535       26,929
    Funds flow from operations (2)                       17,027       10,198
      Per basic share(5)                                  $0.17        $0.12
      Per diluted share(5)                                $0.16        $0.11
    Cash flow from operating activities                  15,718       13,456
      Per basic share(5)                                  $0.16        $0.15
      Per diluted share(5)                                $0.15        $0.15
    Net income (loss)(7)                                 (5,487)       3,969
      Per basic share(5)                                 $(0.06)       $0.04
      Per diluted share (5)                              $(0.06)       $0.04
    -------------------------------------------------------------------------
    Exploration and development                          55,486       18,311
    Corporate and property acquisitions                   3,631           35
    -------------------------------------------------------------------------
    Capital expenditures - cash                          59,117       18,346
    Property dispositions - cash                            130           47
    Non-cash items                                          513          288
    -------------------------------------------------------------------------
    Total capital expenditures - net                     59,760       18,681
    -------------------------------------------------------------------------
    Long-term debt                                       70,298            -
    Convertible debentures(3)                            47,951       82,186
    Working capital deficiency  (excess)                 11,921       (8,572)
    -------------------------------------------------------------------------
    Total net debt (3)                                  130,170       73,614
    -------------------------------------------------------------------------
    Total assets(7)                                     525,579      436,964
    Shareholders' equity(7)                             292,976      285,901
    -------------------------------------------------------------------------



    OPERATING                                    Three months ended March 31,
                                                           2011         2010
    -------------------------------------------------------------------------
    Average daily sales volumes
      Crude oil, condensate and NGLs       (bbls/d)       3,860        1,907
      Natural gas                           (mcf/d)      37,346       32,044
      Total oil equivalent                  (boe/d)      10,084        7,248
    Average prices
      Light crude oil and condensate        ($/bbl)       83.75        77.91
      NGLs                                  ($/bbl)       51.27        44.14
      Heavy oil                             ($/bbl)       59.55        64.85
      Crude oil, condensate and NGLs        ($/bbl)       77.36        66.71
      Crude oil, condensate and NGLs
     (including risk management(1))         ($/bbl)       74.61        66.71
      Natural gas                           ($/mcf)        3.94         5.18
      Natural gas (including risk
       management(1))                       ($/mcf)        3.94         6.04
      Total oil equivalent                  ($/boe)       44.20        40.44
      Total oil equivalent (including
       risk management(1))                  ($/boe)       43.14        44.26

    Statistics
      Operating netback(4)                  ($/boe)       23.33        17.79
      Operating netback(4) (including
       risk management(1))                  ($/boe)       22.28        21.61
      Transportation                        ($/boe)        1.29         1.24
      Production expenses                   ($/boe)       12.45        13.36
      General & administrative              ($/boe)        2.50         3.89
      Royalties as a % of sales after
       transportation                                       17%          21%
    -------------------------------------------------------------------------
    COMMON SHARES
    Common shares outstanding                        97,463,302   92,474,372
    Share options outstanding                         5,903,601    4,133,533
    Shares issuable on conversion of
     convertible debentures(6)                        9,821,429    5,305,250
    -------------------------------------------------------------------------
    Diluted common shares outstanding               113,188,332  101,913,155
    Diluted weighted average shares (5)              97,448,078   88,212,802

    -------------------------------------------------------------------------
    SHARE TRADING STATISTICS
    (CDN$, except volumes) based on intra-day trading
    High                                                   6.19         4.60
    Low                                                    4.61         3.00
    Close                                                  5.64         3.78
    Average daily volume                                546,747      901,994
    -------------------------------------------------------------------------
    (1) The Company has entered into various commodity price risk management
        contracts which are considered to be economic hedges. Per unit
        metrics after risk management includes only the realized portion of
        gains or losses on commodity contracts.

        The Company does not apply hedge accounting to these contracts. As
        such, these contracts are revalued to fair value at the end of each
        reporting date. This results in recognition of unrealized gains or
        losses over the term of these contracts which is reflected each
        reporting period until these contracts are settled, at which time
        realized gains or losses are recorded. These unrealized gains or
        losses on commodity contracts are not included for purposes of per
        share metrics calculations disclosed.

    (2) The highlights section contains the term "funds flow from
        operations" which should not be considered an alternative to, or more
        meaningful than cash flow from operating activities as determined in
        accordance with generally accepted accounting principles ("GAAP") as
        an indicator of the Company's performance. Therefore reference to
        diluted funds flow from operations or funds flow from operations per
        share may not be comparable with the calculation of similar measures
        for other entities. Management uses funds flow from operations to
        analyze operating performance and leverage and considers funds flow
        from operations to be a key measure as it demonstrates the Company's
        ability to generate the cash necessary to fund future capital
        investments and to repay debt. The reconciliation between cash flow
        from operating activities and funds flow from operations can be found
        in the Management Discussion and Analysis ("MD&A"). Funds flow from
        operations per share is calculated using the weighted average number
        of common shares for the period.

    (3) Net debt and total net debt are considered non-GAAP terms. The
        Company's calculation of net debt includes the net working capital
        deficiency (excess) before short-term commodity contract assets and
        liabilities and current finance lease obligation. Total net debt also
        includes the liability component of convertible debentures and
        excludes deferred liabilities, decommissioning liabilities, long-term
        finance lease obligation and the deferred tax assets and liabilities.
        A reconciliation between total liabilities under GAAP and total net
        debt as calculated by the Company is found in the MD&A.

    (4) Operating netbacks are calculated by subtracting royalties,
        transportation, and operating costs from revenues before other
        income.

    (5) Basic weighted average shares for the three months ended were
        97,448,078 (2010: 88,212,802).

        In computing weighted average diluted earnings per share for the
        three months ended March 31, 2011 a total of 5,903,601 (2010:
        4,133,433) share options and 9,821,429 (2010: 5,305,250) common
        shares issuable on conversion of convertible debentures were excluded
        from the calculation as they were not dilutive.

        In computing weighted average diluted cash flow from operations and
        funds flow from operations for the three months ended March 31, 2011
        a total of 2,221,592 (2010: 1,901,131) shares were added to the
        denominator as a consequence of applying the treasury stock method to
        the Company's outstanding share options and a total of 9,821,429
        (2010: nil) common shares issuable on conversion of convertible
        debentures were also added to the denominator as they were dilutive,
        resulting in diluted weighted average common shares of 109,491,099.
        As a consequence, a total of $0.7 million for interest accretion
        expense (net of income tax effect) was added to the numerator.

    (6) Shares issuable on conversion of convertible debentures are
        calculated as the $55.0 million principal amount of the convertible
        debentures divided by the conversion price of $5.60 per share.

    (7) As of January 1, 2011, Bellatrix prepares its consolidated financial
        statements in accordance with IFRS, IFRS 1 - First-time adoption of
        International Financial Reporting Standards ("IFRS 1") and
        International Accounting Standard 34 - Interim Financial Reporting,
        as issued by the International Accounting Standards Board.
        Previously, Bellatrix's financial statements were prepared in
        accordance with Canadian generally accepted accounting principles
        ("previous GAAP"). Reconciliations between previous GAAP and IFRS
        financial information can be found in the consolidated financial
        statements for the three months ended March 31, 2011.


                           REPORT TO SHAREHOLDERS
    >>

Bellatrix Exploration Ltd. was extremely active in directing a capital expenditure budget of $59.1 million in the first quarter of 2011. The program was focused on exploiting our Cardium Oil and Notikewin liquid rich gas resources by drilling 21 gross (12.1 net) wells coupled with increasing our undeveloped acreage on the Cardium play by 14,042 net acres (21.9 sections), which replaces more than the inventory drilled to date.

Increased unscheduled facility and well downtime and infrastructure construction delays occurred in the first quarter associated with the extremely frigid weather experienced in Alberta. As a result, sales volumes in Q1 2011 were flat with Q4 2010 at 10,084 boe/d (approximately 39% oil and liquids). The estimated field production level for the month of April 2011 has increased dramatically to 12,134 boe/d (39% oil & liquids) as a direct result of the first quarter drilling success.

OPERATIONS

Operational highlights for the quarter ended March 31, 2011 include:

    <<
    -   The Company established 100% drill bit success drilling 21 gross
        (12.07 net) wells consisting of 15 gross (9.67 net) oil wells and
        6 gross (2.4 net) liquids rich gas wells.

    -   Bellatrix implemented a modification in our fracturing proppant
        carrying fluid from oil based to water based, in May 2010, as a
        component of our ongoing optimization program. The results exceeded
        our expectation reflected by reduced well costs by $500,000, while
        more than doubling the post frac production rates. The population of
        wells tested was in 4 different quadrants of the Cardium embankment
        (Norbuck, Lodgepole, Willesden Green and West Pembina).
    >>

Below is a table comparing average IP rates for 30 days followed by graphical presentation of the comparable rates over a 28 week period:

Cardium Production Test Results

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             *Oil Fraced Wells    (xx)Water Fraced      (xxx)Q1 2011 Wells
                                           Wells
    -------------------------------------------------------------------------
              boe/d    No. Wells    boe/d    No. Wells    boe/d    No. Wells
    -------------------------------------------------------------------------
    IP7(1)     214         13        699         21        671          9
    -------------------------------------------------------------------------
    IP15(1)    203         13        614         21        562          9
    -------------------------------------------------------------------------
    IP30(1)    177         13        515         19        484          7
    -------------------------------------------------------------------------
    (1)   IP represents average boe/d for 7, 15 and 30 days.
    *   All wells fraced with oil in the aforementioned 4 areas of the
          pool.
    (xx)  All wells fraced with water in 3 areas (Lodgepole, Willesden Green
          & West Pembina).
    (xxx) All wells in Q1 2011 were water fraced in 3 areas (Lodgepole,
          Willesden Green & West Pembina).

    To view "Bellatrix Horizontal Cardium Oil Production Area by Area
Comparison to Original Oil Frac's", please click
http://files.newswire.ca/958/CardiumArea.pdf

    To view "Bellatrix Horizontal Cardium Oil Production Average of all oil
fraced wells compared to all water fraced wells", please click 
http://files.newswire.ca/958/CopyCardiumPlots.pdf


    -   In the March 28, 2011 CIBC Resource Play Watch, the author listed
        5 of Bellatrix's Cardium producers in the top 8 producing wells based
        on "Peak IP rate" which represents the maximum "monthly producing
        rate" in a wells first 8 months of production. The population of
        wells reviewed was 497.

    -   In Q1 2011 the Company drilled or participated in drilling 13 gross
        (7.66 net) Cardium Oil tests, 2 gross (2 net) McLaren heavy oil tests
        and 6 gross (2.4 net) Notikewin/Fahler liquids rich gas tests.

    -   All 6 gross (2.4 net) Notikewin wells drilled in Q1 tested at rates
        at or above 10 MMcf/d with 35 bbls of liquids per MMcf. Four gross
        (1.85 net) were placed on production in Q1 at various rates between
        7 and 10 MMcf/d with approximately 35 bbls liquids per MMcf while the
        remaining 2 gross (0.55 net) wells are expected to commence
        production during May.

    -   As at March 31, 2011 Bellatrix had over 220,290 net undeveloped acres
        of land in Alberta, British Columbia and Saskatchewan up from 211,893
        net acres as at December 31, 2010.

    -   Q1 2011 sales volumes averaged 10,084 boe/d (weighted approximately
        39% to oil and natural gas liquids).

    -   For the month of April 2011 production volumes are estimated to
        average 12,134 boe/d (weighted 39% to oil and natural gas liquids).
    >>

FINANCIAL

Financial highlights for the quarter ended March 31, 2011 include:

    <<
    -   Bellatrix spent $59.1 million in Q1 2011 consisting of $39.5 million
        capital on drilling and completions, $5.7 million capital on
        facilities and equipment, $13.7 million capital on property and lease
        acquisitions and retention with the remaining $0.2 million spent on
        other items.

    -   Q1 2011 revenue of $40.5 million up from $26.9 million in Q1 2010.

    -   Funds flow from operations was $17.0 million, up from $10.2 million
        in Q1 2010.

    -   Crude oil and NGLs produced 67% of revenue in Q1 2011.

    -   Production expenses totalled $11.3 million ($12.45/boe) which
        included adjustments relating to changes in previous estimates
        totalling $1.2 million ($1.80/boe).

    -   Net debt as of March 31, 2011 was $130.2 million.

    -   On May 11, 2011, Bellatrix closed a $55 million bought deal equity
        financing. In addition, an over-allotment option to purchase up to
        1.5 million common shares for gross proceeds of $8.2 million is
        available to the underwriters until 30 days following closing. The
        financing facilitates acceleration of our inventory of 320 net
        Cardium locations and 100 net Notikewin locations which represents
        $1.5 billion of development capital exceeding 10 years of cash flow
        at current levels.

    -   Increased 2011 capital expenditures program from $100 million to
        $170 million.

    -   As of May 10, 2011, the banking syndicate has agreed, subject to and
        effective upon final documentation, to increase the borrowing base
        from $100 million to $140 million through to November 30, 2011 and
        extend the revolving period of the credit facility from June 28, 2011
        to June 26, 2012.

    -   Increased estimated exit rate guidance from 13,000 boe/d to
        15,000 boe/d.
    >>

COMMODITY PRICE RISK MANAGEMENT

During the first quarter 2011, Bellatrix financially sold 18.2 MMcf/d of natural gas for the period of April 01 to October 31, 2011 at an average fixed price of CAD$4.15/mcf. Additionally, Bellatrix sold a call on 833 bbl/d of crude oil for calendar 2012 at a price of US$110/bbl and used the proceeds to enter into a financial fixed price swap on 4.55 MMcf/d of natural gas for the term of May 1 to December 31, 2011 at a price of CAD$6.92/mcf. Bellatrix also entered into fixed price swaps for 500 bbl/d of crude oil for the term of February 1 to December 31, 2011 at a price of US$95.00/bbl and 500 bbl/d of crude oil for the term of March 1 to December 31, 2011 at a fixed price of US$97.50/bbl.

OUTLOOK

As a result of the successful completion of the May 2011 equity offering, Bellatrix has revised its capital expenditure budget for 2011 from $100 million to $170 million, which includes the $59.1 million spent in the first quarter of 2011 on capital expenditures. Bellatrix will use cash flow, the proceeds of the financing, and to the extent necessary, bank indebtedness to fund its 2011 capital expenditures budget.

In 2011, Bellatrix anticipates drilling 63 gross (47.57 net) wells. Of the 63 gross wells, the Company anticipates drilling 9 gross (9.0 net) potential McLaren heavy oil wells in the Frog Lake area of Alberta and a total of 54 gross (38.57 net) Cardium (85%) and Notikewin (15%) wells in the Pembina and Ferrier areas of Alberta, for an approximate cost of $138.7 million. In addition, the Corporation anticipates spending approximately $2.2 million on land and seismic acquisitions, $12.2 million on well site equipping and field facilities, $13.7 million related to the acquisition of property interests and $3.2 million in costs associated with ongoing abandonment of wells. In addition, over and above the $170 million capital expenditure program, Bellatrix anticipates utilizing up to $10.0 million from a joint venture partner that would earn a non-convertible gross overriding royalty in any resulting production. As a result of the expansion of its 2011 capital program, Bellatrix has revised its guidance on 2011 exit production from 13,000 boe/d to 15,000 boe/d.

The second quarter will be relatively quiet on the operations side of our business due to road restrictions and expected spring wet weather. By the end of Q2 2011, Bellatrix anticipates to be drilling our Cardium play inventory with four drilling rigs.

Bellatrix is focused on expanding the oil side of our business and is always staunchly devoted to providing growth in shareholder value.

    <<
    Raymond G. Smith, P. Eng.
    President and CEO
    May 11, 2011



                     MANAGEMENT'S DISCUSSION AND ANALYSIS
    >>

May 11, 2011 - The following Management's Discussion and Analysis of financial results as provided by the management of Bellatrix Exploration Ltd. ("Bellatrix" or the "Company") should be read in conjunction with the unaudited interim consolidated financial statements of the Company for the three months ended March 31, 2010 and the audited consolidated financial statements of the Company for the years ended December 31, 2010 and 2009 and the related Management's Discussion and Analysis of financial results, as disclosure which is unchanged from such Management's Discussion and Analysis may not be repeated herein. This commentary is based on information available to, and is dated as of, May 11, 2011. The financial data presented is in Canadian dollars, except where indicated otherwise. As of January 1, 2011, Bellatrix prepares its consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS"), IFRS 1 - First-time adoption of International Financial Reporting Standards ("IFRS 1") and International Accounting Standard 34 - Interim Financial Reporting, as issued by the International Accounting Standards Board. Previously, Bellatrix's financial statements were prepared in accordance with Canadian generally accepted accounting principles ("previous GAAP"). Reconciliations between previous GAAP and IFRS financial information can be found in the consolidated financial statements for the three months ended March 31, 2011.

CONVERSION: The term barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 mcf/bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in this report are derived from converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil.

NON-GAAP MEASURES: This Management's Discussion and Analysis contains the term "funds flow from operations" which should not be considered an alternative to, or more meaningful than "cash flow from operating activities" as determined in accordance with generally accepted accounting principles ("GAAP") as an indicator of the Company's performance. Therefore reference to funds flow from operations or funds flow from operations per share may not be comparable with the calculation of similar measures for other entities. Management uses funds flow from operations to analyze operating performance and leverage and considers funds flow from operations to be a key measure as it demonstrates the Company's ability to generate the cash necessary to fund future capital investments and to repay debt. The reconciliation between cash flow from operating activities and funds flow from operations can be found in the Management's Discussion and Analysis. Funds flow from operations per share is calculated using the weighted average number of shares for the period.

This Management's Discussion and Analysis also contains other terms such as total net debt and operating netbacks, which are not recognized measures under GAAP. Total net debt is calculated as long-term debt plus the liability component of the convertible debentures and the net working capital deficiency (excess) before short-term commodity contract assets and liabilities and current finance lease obligation. Operating netbacks are calculated by subtracting royalties, transportation, and operating expenses from revenues before other income. Management believes these measures are useful supplemental measures of firstly, the total amount of current and long-term debt and secondly, the amount of revenues received after transportation, royalties and operating expenses. Readers are cautioned, however, that these measures should not be construed as an alternative to other terms such as current and long-term debt or net income determined in accordance with GAAP as measures of performance. Bellatrix's method of calculating these measures may differ from other entities, and accordingly, may not be comparable to measures used by other trusts or companies.

Additional information relating to the Company, including the Bellatrix's Annual Information Form, is available on SEDAR at www.sedar.com.

FORWARD LOOKING STATEMENTS: Certain information contained herein may contain forward looking statements including management's assessment of future plans and operations, drilling plans and the timing thereof, commodity price risk management strategies, expected 2011 average production and exit rate, expected first quarter 2011 average production and production to be tied in, timing of completion and tie-in of wells, anticipated liquidity of the Company and various matters that may impact such liquidity, expected 2011 operating expenses and general and administrative expenses, 2011 capital expenditures budget and the nature of capital expenditures and the timing and method of financing thereof, method of funding drilling commitments, commodity prices and expected volatility thereof, estimated amount and timing of incurring decommissioning liabilities, use of proceeds from recent financings and activity levels, may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. The recovery and reserve estimates of Bellatrix's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Events or circumstances may cause actual results to differ materially from those predicted, as a result of the risk factors set out and other known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Bellatrix. In addition, forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. In addition, forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information in order to provide shareholders with a more complete perspective on Bellatrix's future operations. Such information may prove to be incorrect and readers are cautioned that the information may not be appropriate for other purposes. Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which the Company operates; the timely receipt of any required regulatory approvals; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manner; the ability of the Company to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development of exploration; the timing and costs of pipeline, storage and facility construction and expansion and the ability of the Company to secure adequate product transportation; future commodity gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Additional information on these and other factors that could effect Bellatrix's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), at Bellatrix's website (www.bellatrixexploration.com). Furthermore, the forward-looking statements contained herein are made as at the date hereof and Bellatrix does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

The reader is further cautioned that the preparation of financial statements in accordance with GAAP requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Estimating reserves is also critical to several accounting estimates and requires judgments and decisions based upon available geological, geophysical, engineering and economic data. These estimates may change, having either a negative or positive effect on net earnings as further information becomes available, and as the economic environment changes.

Overview and Description of the Business

Bellatrix is a Western Canadian based growth oriented oil and gas company engaged in the exploration for, and the acquisition, development and production, of oil and natural gas reserves in the provinces of Alberta, British Columbia and Saskatchewan.

Bellatrix is the continuing corporation resulting from the reorganization effective November 1, 2009 pursuant to a plan of arrangement involving, among others, True Energy Trust (the "Trust" or "True"), Bellatrix Exploration Ltd. ("Bellatrix" or the "Company") and securityholders of the Trust.

Bellatrix's common shares and convertible debentures are listed on the Toronto Stock Exchange under the symbols BXE and BXE.DB.A, respectively.

Changes in Accounting Policies

As of January 1, 2011, Bellatrix prepares its financial statements in accordance with International Financial Reporting Standards ("IFRS"), IFRS 1 - First-time adoption of International Financial Reporting Standards ("IFRS 1") and International Accounting Standard 34 - Interim Financial Reporting, as issued by the International Accounting Standards Board. Previously, Bellatrix's financial statements were prepared in accordance with Canadian generally accepted accounting principles ("previous GAAP"). Unless otherwise noted, 2010 comparative information has been prepared in accordance with IFRS.

The adoption of IFRS has not had an impact on the Company's operations, strategic decisions and cash flow. The most significant area of impact was the adoption of the IFRS property, plant and equipment accounting principles, the related decomissioning liabilities and resulting deferred tax adjustments on transition. Further information on the IFRS impacts is provided in the Accounting Policies and Estimates Section of this Management's Discussion and Analysis.

First Quarter 2011 Financial and Operational Results

Acquisitions and Dispositions

The Company's goal is to provide consistent growth by drilling and developing its extensive land position to maximize the value of its reserve and resource potential. Bellatrix has been working on a number of internal initiatives to streamline and optimize our ongoing operations, specifically the ability to expand and accelerate the drilling of its Cardium oil and the liquid rich Notikewin gas resource.

On January 25, 2011, Bellatrix acquired the interest in a section of Frog Lake First Nation lands from a joint venture partner for a net purchase price of $2.2 million after adjustments. The transaction had an effective date of January 1, 2011. These assets consists of approximately 130 boe/d of net production; an additional 20% interest in the Colony formation in these lands (Bellatrix already has 13.75%WI) and an additional 50% WI in the McLaren formation in these lands (Bellatrix already has a 50% WI) except for a 1/4 section (which Bellatrix already has a 13.75% WI).

On January 25, 2011, Bellatrix exercised a right of first refusal increasing its interest in a joint venture property in the Brazeau area of West Central Alberta for approximately $1.5 million. The asset acquisition consisted of approximately 3,200 gross (1,102.8 net) acres of Cardium rights providing the Company with up to 6.3 additional net Cardium locations and included 15 boe/d of production.

Sales Volumes

Sales volumes for the three months ended March 31, 2011 averaged 10,084 boe/d compared to 7,248 boe/d for the same period in 2010, representing a 39% increase. Total crude oil, condensate and NGLs averaged approximately 39% of sales volumes for the three months ended March 31, 2011 compared to 26% of sales volumes in the same period in 2010. The increase in sales is primarily a result of a year over year increased capital program. Capital expenditures on exploration and development for the year ended December 31, 2009 were $15.8 million, compared to $98.4 million for the same period in 2010. By comparison, Bellatrix's capital expenditures on exploration and development for the three months ended March 31, 2011, increased by approximately 203% when compared to the same period in 2010.

Sales Volumes

    <<
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
                                                           2011         2010
    -------------------------------------------------------------------------
    Light oil and condensate               (bbls/d)       3,031        1,054
    NGLs                                   (bbls/d)         556          494
    Heavy oil                              (bbls/d)         273          359
    -------------------------------------------------------------------------
    Total crude oil, condensate and NGLs   (bbls/d)       3,860        1,907
    -------------------------------------------------------------------------

    Natural gas                             (mcf/d)      37,346       32,044
    -------------------------------------------------------------------------

    Total boe/d                               (6:1)      10,084        7,248
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

In the first quarter of 2011 Bellatrix drilled and participated in 21 gross (12.07 net) successful wells. Bellatrix completed and tied in 14 (10.33 net) of the 15 gross operated wells drilled in the quarter. The remaining 1 gross (0.33 net) well will be completed following break up. The Company participated in 6 gross (1.41 net) successful non-operated wells which includes one gross (0.06 net) joint venture Cardium well, which is expected to be completed and tied in after break up.

By comparison, Bellatrix drilled or participated in 14 gross (8.06 net) wells in the first quarter of 2010, which consisted of 11 gross (6.01 net) oil wells and 3 gross (2.05 net) gas wells.

For the three months ended March 31, 2011, the weighting towards crude oil, condensate and NGLs increased by approximately 102% averaging 3,860 bbl/d compared to 1,907 bbl/d in the same period in 2010. The increase is a direct result of the Company's efforts to balance production by exploiting the Company's crude oil drilling locations. For the three months ended March 31, 2011, crude oil, condensate and NGLs averaged approximately 38% of sales volumes compared to an average of approximately 26% of sales volumes in the same period in 2010.

Sales of natural gas averaged 37.4 Mmcf/d for the first quarter of 2011, compared to 32.4 Mmcf/d in the same 2010 period, an increase of approximately 17%. The weighting towards natural gas sales volumes averaged approximately 61% for the three months ended March 31, 2011 compared to 74% in the same period in 2010.

Based on the timing of proposed expenditures, downtime for anticipated plant turnarounds and normal production declines, execution of the 2011 budget is anticipated to provide 2011 average daily production of approximately 12,000 boe/d to 12,500 boe/d. Bellatrix has revised its capital expenditure program for 2011 from $100 million to $170 million as a result of the recently closed May 2011 financing. Due to the increased capital expenditure program for 2011, Bellatrix has increased its previously estimated exit production guidance for 2011 of 13,000 boe/d to 15,000 boe/d. The 2011 capital budget is expected to be directed primarily towards horizontal drilling and completions activities in the Cardium and Notikewin resource plays.

Commodity Prices

    <<
    Average Commodity Prices
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
                                              2011         2010     % Change
    -------------------------------------------------------------------------

    Exchange rate (US$/Cdn$)                1.0147       0.9615            6

    Crude oil:
    WTI (US$/bbl)                            94.60        78.88           20
    Edmonton par - light oil ($/bbl)         88.45        80.31           10
    Bow River - medium/heavy oil ($/bbl)     71.30        73.44           (3)
    Hardisty Heavy - heavy oil ($/bbl)       61.43        68.78          (11)
    Bellatrix's average prices ($/bbl)
      Light crude oil and condensate         83.75        77.91            7
      NGLs                                   51.27        44.14           16
      Heavy crude oil                        59.55        64.85           (8)
      Total crude oil and NGLs               77.36        66.71           16
      Total crude oil and NGLs (including
       risk management(1))                   74.61        66.71           12

    Natural gas:
    NYMEX (US$/mmbtu)                         4.20         4.99          (16)
    AECO daily index (CDN$/mcf)               3.76         4.95          (24)
    AECO monthly index (CDN$/mcf)             3.77         5.36          (30)
    Bellatrix's average price ($/mcf)         3.94         5.18          (24)
    Bellatrix's average price (including
     risk management(1)) ($/mcf)              3.94         6.04          (35)
    -------------------------------------------------------------------------
    (1) Per unit metrics including risk management include realized gains or
        losses on commodity contracts and exclude unrealized gains or losses
        on commodity contracts.
    >>

For light oil and condensate, Bellatrix recorded an average $83.75/bbl before commodity price risk management contracts during the first quarter of 2011, 7% higher than the average price received in the same period in 2010. In comparison, the Edmonton par price increased by 10% over the same period. The average WTI crude oil US dollar based price increased 20% from the first quarter of 2010 to that in 2011. The average US$/CDN$ foreign exchange rate was 1.0147 for the three months ended March 31, 2011 compared to 0.9615 in the same period in 2010.

For heavy crude oil, Bellatrix received an average price before transportation of $59.55/bbl in the 2011 first quarter, a decrease of 8% over prices in the same 2010 period. The Bow River reference price decreased by 3% and the Hardisty Heavy reference price decreased by 11% from the first quarter of 2010 to that in 2011. The majority of Bellatrix's heavy crude oil density ranges between 11 and 16 degrees API consistent with the Hardisty Heavy reference price.

Bellatrix's natural gas sales are priced with reference to the daily or monthly AECO indices. During the 2011 first quarter, the AECO daily and monthly reference price decreased by 24% and 30%, respectively, compared to the same period in 2010. Bellatrix's natural gas average sales price before commodity price risk management contracts for the 2011 first quarter decreased by 24% compared to the same period in 2010. Bellatrix's natural gas average price after including commodity price risk management contracts for the first quarter in 2011 was $3.94/mcf compared to $6.04/mcf for the same period in 2010.

Revenue

Revenue before other income, royalties and commodity price risk management contracts for the three month period ended March 31, 2011 was $40.1 million, 52% higher than the $26.4 million in the same period in 2010.

Revenue before other income, royalties and commodity price risk management contracts for crude oil and NGLs for the three months ended March 31, 2011 increased approximately 135% as a result of higher sales volumes in conjunction with higher light crude oil, condensate and NGL prices. In the 2011 first quarter, total crude oil, condensate and NGL revenues contributed 67% of total revenue (before other) compared to 43% in the same period in 2010. Light crude oil, condensate and NGL revenues in the first quarter of 2011 contributed 95% of total crude oil, condensate and NGL revenue (before other) compared to 82% in the same period in 2010.

Revenue before other income, royalties and commodity price risk management contracts for natural gas for the three months ended March 31, 2011 decreased approximately 11% as a result of weaker prices when compared to the same period in 2010.

    <<
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    ($000s)                                                2011         2010

    Light crude oil and condensate                       22,844        7,394
    NGLs                                                  2,564        1,961
    Heavy oil                                             1,464        2,099
    -------------------------------------------------------------------------
    Crude oil and NGLs                                   26,872       11,454
    Natural gas                                          13,240       14,928
    -------------------------------------------------------------------------
    Total revenue before other                           40,112       26,382
    Other (1)                                               423          547
    -------------------------------------------------------------------------
    Total revenue before royalties and risk
     management                                          40,535       26,929
    -------------------------------------------------------------------------
    (1) Other revenue primarily consists of processing and other third party
        income
    >>

Revenues for the remainder of 2011 are currently expected to be higher than the corresponding period in 2010 due to expected increased sales volumes and higher crude oil prices. While sales volumes and crude oil and liquid prices for 2011 are expected to be higher than 2010, natural gas prices remain relatively weak.

Commodity Price Risk Management

The Company has a formal commodity price risk management policy which permits management to use specified price risk management strategies including fixed price contracts, collars and the purchase of floor price options and other derivative financial instruments and physical delivery sales contracts to reduce the impact of price volatility for a maximum of eighteen months beyond the transaction date. The program is designed to provide price protection on a portion of the Company's future production in the event of adverse commodity price movement, while retaining significant exposure to upside price movements. By doing this, the Company seeks to provide a measure of stability to funds flow from operations, as well as, to ensure Bellatrix realizes positive economic returns from its capital development and acquisition activities. The Company plans to continue its commodity price risk management strategies focusing on maintaining sufficient cash flow to fund Bellatrix's capital expenditure program. Any remaining production is realized at market prices.

A summary of the financial commodity price risk management volumes and average prices by quarter currently outstanding as of May 11, 2011 is shown in the following tables:

    <<
    Natural gas
    Average Volumes (GJ/d)
    -------------------------------------------------------------------------
                                           Q2 2011      Q3 2011      Q4 2011
    -------------------------------------------------------------------------
    Fixed                                   23,352       25,000       11,739
    -------------------------------------------------------------------------
    Total GJ/d                              23,352       25,000       11,739
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average Price ($/GJ AECO C)
    -------------------------------------------------------------------------
                                           Q2 2011      Q3 2011      Q4 2011
    -------------------------------------------------------------------------
    Fixed                                     4.14         4.29         4.85
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Crude oil and liquids

    Average Volumes (bbls/d)
    -------------------------------------------------------------------------
                                           Q2 2011      Q3 2011      Q4 2011
    -------------------------------------------------------------------------
    Fixed (CDN$/bbl)                         1,500        1,500        1,500
    Fixed (US$/bbl)                          1,500        1,500        1,500
    -------------------------------------------------------------------------
    Total bbls/d                             3,000        3,000        3,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average Price ($/bbl WTI)
    -------------------------------------------------------------------------
                                           Q2 2011      Q3 2011      Q4 2011
    -------------------------------------------------------------------------
    Fixed price (CDN$/bbl)                   88.45        88.45        88.45
    Fixed Price (US$/bbl)                    93.87        93.87        93.87
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average Volumes (bbls/d)
    -------------------------------------------------------------------------
                              Q1 2012      Q2 2012      Q3 2012      Q4 2012
    -------------------------------------------------------------------------
    Call option                   833          833          833          833
    -------------------------------------------------------------------------
    Total bbls/d                  833          833          833          833
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average Price ($/bbl WTI)
    -------------------------------------------------------------------------
                              Q1 2012      Q2 2012      Q3 2012      Q4 2012
    -------------------------------------------------------------------------
    Call option (ceiling
     price) (US$/bbl)          110.00       110.00       110.00       110.00
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Included in the above natural gas table is a fixed price contract of $6.30/GJ at 5,000 GJ/d from May 1, 2011 to October 31, 2011 which was funded by selling a call option of 833 bbl/d at US$110.00 for the 2012 calendar year.

As of March 31, 2011, the fair value of Bellatrix's outstanding commodity contracts is a net unrealized liability of $13.0 million as reflected in the financial statements. The fair value or mark-to-market value of these contracts is based on the estimated amount that would have been received or paid to settle the contracts as at March 31, 2011 and may be different from what will eventually be realized. Changes in the fair value of the commodity contracts are recognized in the Consolidated Statements of Comprehensive Income within the financial statements.

The following is a summary of the gain (loss) on commodity contracts for the three months ended March 31, 2011 and 2010 as reflected in the Consolidated Statements of Comprehensive Income in the financial statements:

    <<
    Commodity contracts
    -------------------------------------------------------------------------
                                         Crude Oil      Natural      Q1 2011
    ($000s)                              & Liquids          Gas        Total
    -------------------------------------------------------------------------
    Realized cash loss on contracts           (956)          -          (956)
    Unrealized gain (loss) on
     contracts(1)                          (12,962)       3,734       (9,228)
    -------------------------------------------------------------------------
    Total gain (loss) on commodity
     contracts                             (13,918)       3,734      (10,184)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Commodity contracts
    -------------------------------------------------------------------------
                                         Crude Oil      Natural      Q1 2010
    ($000s)                              & Liquids          Gas        Total
    -------------------------------------------------------------------------
    Realized cash gain on contracts              -        2,492        2,492
    Unrealized gain (loss) on
     contracts(1)                               (7)       7,263        7,256
    -------------------------------------------------------------------------
    Total gain (loss) on commodity
     contracts                                  (7)       9,755        9,748
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Unrealized gain (loss) commodity contracts represent non-cash
        adjustments for changes in the fair value of these contracts during
        the period.
    >>

Royalties

For the three months ended March 31, 2011, total royalties were $6.5 million, compared to $5.3 million incurred in the same 2010 period. Overall royalties as a percentage of revenue (after transportation costs) in the first quarter of 2011 were 17%, compared with 21% in the same 2010 period.

The decrease in light oil, condensate and NGL royalties' percentage from the first quarter of 2010 to 2011 is primarily due to increased production from recently drilled light oil wells which take advantage of Alberta royalty incentive programs. The heavy oil royalty rate increased as a result of the sale of Saskatchewan heavy oil assets with lower royalty rates in December 2010 and recently added heavy oil production in Frog Lake, Alberta with higher crown royalty rates.

    <<
    -------------------------------------------------------------------------
    Royalties by Commodity Type                  Three months ended March 31,
    ($000s, except where noted)                            2011         2010
    -------------------------------------------------------------------------

    Light crude oil, condensate and NGLs                  4,044        2,499
      $/bbl                                               12.53        17.93
      Average light crude oil, condensate and
       NGLs royalty rate (%)                                 16           27

    Heavy Oil                                               717          547
      $/bbl                                               29.16        16.93
      Average heavy oil royalty rate (%)                     49           27

    Natural Gas                                           1,710        2,204
      $/mcf                                                0.51         0.76
      Average natural gas royalty rate (%)                   14           15

    -------------------------------------------------------------------------
    Total                                                 6,471        5,250
    -------------------------------------------------------------------------
    $/boe                                                  7.13         8.05
    -------------------------------------------------------------------------
    Average total royalty rate (%)                           17           21
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Royalties, by Type
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    ($000s)                                                2011         2010
    -------------------------------------------------------------------------
    Crown royalties                                       2,663        1,346
    Indian Oil and Gas Canada royalties                   1,182          921
    Freehold & GORR                                       2,626        2,983
    -------------------------------------------------------------------------
    Total                                                 6,471        5,250
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Expenses
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    ($000s)                                                2011         2010
    -------------------------------------------------------------------------
    Production                                           11,298        8,717
    Transportation                                        1,167          808
    General and administrative                            2,267        2,536
    Interest and financing charges(1)                     1,701        2,414
    Share-based compensation                                495          192
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Does not include financing charges in relation to the Company's
        unwinding of decommissioning liabilities.


    Expenses per boe
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    ($ per boe)                                            2011         2010
    -------------------------------------------------------------------------
    Production                                            12.45        13.36
    Transportation                                         1.29         1.24
    General and administrative                             2.50         3.89
    Interest and financing charges                         1.87         3.70
    Share-based compensation                               0.55         0.29
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Production Expenses

For the three months ended March 31, 2011, production expenses totaled $11.3 million ($12.45/boe), compared to $8.7 million ($13.36/boe) recorded in the same period in 2010. The decrease in production expenses in 2011 on a boe basis is due to increased production from 2010 and continued 2011 drilling in areas with lower production expenses and the Company's continued efforts to streamline operations and field optimization projects. Production expenses for the three months ended March 31, 2011 include approximately $1.2 million (2010: $0.3 million) of adjustments relating to changes in previous estimates.

Bellatrix is targeting operating costs of approximately $51.6 million ($11.78/boe) in 2011. This is based upon assumptions of estimated 2011 average production of approximately 12,000 boe/d, continued field optimization work and planned capital expenditures in producing areas which are anticipated to have lower operating costs.

    <<
    Production Expenses, by Commodity Type
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    ($000s, except where noted)                            2011         2010
    -------------------------------------------------------------------------
    Light crude oil, condensate and NGLs                  4,509        2,378
     $/bbl                                                13.97        17.07

    Heavy oil                                               787          313
     $/bbl                                                32.03         9.69

    Natural gas                                           6,002        6,026
     $/mcf                                                 1.79         2.09

    -------------------------------------------------------------------------
    Total                                                11,298        8,717
    -------------------------------------------------------------------------
     $/boe                                                12.45        13.36
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total                                                11,298        8,717
    -------------------------------------------------------------------------
    Processing and other third party income(1)             (423)        (547)
    -------------------------------------------------------------------------
    Total after deducting processing and other
     third party income                                  10,875        8,170
    -------------------------------------------------------------------------
    $/boe                                                 11.98        12.52
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Processing and other third party income is included within petroleum
        and natural gas sales on the Consolidated Statements of
        Comprehensive Income.
    >>

Transportation

Transportation expenses for the three months ended March 31, 2011 were $1.2 million ($1.29/boe) compared to $0.8 million ($1.24/boe) in the same 2010 period.

Operating Netback

    <<
    Field Operating Netback - Corporate (before risk management)
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    ($/boe)                                                2011         2010
    -------------------------------------------------------------------------
    Sales                                                 44.20        40.44
    Transportation                                        (1.29)       (1.24)
    Royalties                                             (7.13)       (8.05)
    Production expense                                   (12.45)      (13.36)
    -------------------------------------------------------------------------
    Field operating netback                               23.33        17.79
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

For first quarter of 2011, corporate field operating netback (before commodity price risk management contracts) was $23.33/boe compared to $17.79/boe in the same 2010 period. This was primarily the result of an increase in crude oil, condensate and natural gas liquids commodity prices, as well as a decrease in production expenses and royalties offset by an increase in transportation expenses. After including commodity price risk management contracts, the corporate field operating netback for the first quarter of 2011 was $22.28/boe compared to $21.61/boe in the same 2010 period. In comparison, fourth quarter 2010, corporate field operating netback (before commodity price risk management contracts) was $19.71/boe.

    <<
    Field Operating Netback - Crude Oil, Condensate and NGLs (before risk
    management)
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    ($/bbl)                                                2011         2010
    -------------------------------------------------------------------------
    Sales                                                 77.35        66.71
    Transportation                                        (1.52)       (0.97)
    Royalties                                            (13.70)      (17.74)
    Production expense                                   (15.24)      (15.68)
    -------------------------------------------------------------------------
    Field operating netback                               46.89        32.32
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Field operating netback for crude oil, condensate and NGLs averaged $46.89/bbl for the three month period ended March 31, 2011, up 45% compared to $32.32/bbl for the same period in 2010. The significant increase is primarily due to the increase in commodity prices for crude oil, condensate and natural gas liquids, as well as decreases in royalties and production expenses, offset by an increase in transportation. After including commodity price risk management contracts, field operating netback for crude oil and NGLs for the first quarter in 2011 was $44.13/boe compared to $32.32/boe in the same period in 2010.

    <<
    Field Operating Netback - Natural Gas (before risk management)
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    ($/mcf)                                                2011         2010
    -------------------------------------------------------------------------
    Sales                                                  3.94         5.18
    Transportation                                        (0.19)       (0.22)
    Royalties                                             (0.51)       (0.76)
    Production expense                                    (1.79)       (2.09)
    -------------------------------------------------------------------------
    Field operating netback                                1.45         2.11
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Field operating netback for natural gas in the first quarter of 2011 decreased 31% to $1.45/mcf, compared to $2.11/mcf in the same period in 2010, reflecting weaker natural gas prices experienced offset by lower transportation, royalties and production expenses. After including commodity price risk management contracts, field operating netback for natural gas for the three month period ended March 31, 2011 was $1.45/mcf compared to $2.96/mcf in the same period in 2010.

General and Administrative

General and administrative ("G&A") expenses (after capitalized G&A and recoveries) for the period ended March 31, 2011 were $2.3 million ($2.50/boe) compared to $2.5 million ($3.89/boe) for the same period in 2010. The decrease in the G&A expense for the first quarter of 2011 from the same period in 2010 reflects higher compensation and base costs, offset by an increase in capitalized G&A and recoveries which are consistent with Bellatrix's higher 2011 capital program.

For 2011, the Company is anticipating G&A costs after capitalization to be approximately $12.0 million ($2.74/boe) based on estimated 2011 average production volumes of approximately 12,000 boe/d.

    <<
    General and Administrative Expenses
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    ($000s, except where noted)                            2011         2010
    -------------------------------------------------------------------------
    Gross expenses                                        4,265        3,192
    Capitalized                                            (844)        (364)
    Recoveries                                           (1,154)        (292)
    -------------------------------------------------------------------------
    G&A expenses                                          2,267        2,536
    -------------------------------------------------------------------------
    G&A expenses, per unit ($/boe)                         2.50         3.89
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Interest and Financing Charges

Bellatrix recorded $1.7 million of interest and financing charges related to bank debt and its debentures for the three months ended March 31, 2011 compared to $2.4 million in the same period in 2010. The reduction in interest and financing charges is primarily due to the Company's issuance of its 4.75% Convertible Unsecured Subordinated Debentures due April 30, 2015 (the "4.75% Debentures") in April 2010 which facilitated the redemption of Bellatrix's 7.5% Convertible Unsecured Subordinated Debentures (the "7.5% Debentures") which were outstanding during the first quarter of 2010. The decrease in interest and financing charges in the 2011 first quarter was offset by a higher average debt balance when compared to the same period in 2010.

Bellatrix's total net debt at March 31, 2011 of $130.2 million includes the $48.0 million liability portion of 4.75% Debentures, $70.3 million of bank debt and the net balance of a working capital deficiency. The 4.75% Debentures have a maturity date of April 30, 2015.

    <<
    Interest and Financing Charges(1)
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    ($000s, except where noted)                            2011         2010
    -------------------------------------------------------------------------
    Interest and financing charges                        1,701        2,414
    Interest and financing charges ($/boe)                 1.87         3.70
    -------------------------------------------------------------------------
    (1) Does not include financing charges in relation to the Company's
        unwinding of decommissioning liabilities


    -------------------------------------------------------------------------
                                                 Three months ended March 31
    ($000s, except where noted)                            2011         2010
    -------------------------------------------------------------------------

    Debt to funds flow from operations(1)
     ratio annualized(3)
    Funds flow from operations(1) (annualized)           68,108       40,792
    Total net debt(2) at period end                     130,170       73,614
    Total net debt to periods funds flow from
     operations ratio annualized(3)                        1.9x         1.8x

    Net debt(2) (excluding convertible
     debentures) at period end                           82,219            -
    Net debt to periods funds flow from operations
     ratio annualized(3)                                   1.2x            -

    Debt to funds flow from operations(1) ratio
     (trailing)(4)
    Funds flow from operations(1) ratio trailing         59,871       39,734
    Total net debt (2) to funds flow from operations
     trailing                                              2.2x         1.9x

    Net debt(2) (excluding convertible debentures)
     to funds flow from operations for the period          1.4x            -

    -------------------------------------------------------------------------
    (1) As detailed previously in this Management's Discussion and Analysis,
        funds flow from operations is a term that does not have any
        standardized meaning under GAAP.  Funds flow from operations is
        calculated as cash flow from operating activities, decomissioning
        costs incurred and changes in non-cash working capital incurred.

    (2) Net debt includes the net working capital deficiency (excess) before
        short-term commodity contract assets and liabilities and current
        finance lease obligation. Total net debt also includes the liability
        component of convertible debentures and excludes deferred
        liabilities, finance lease obligation, decommissioning liabilities
        and deferred tax assets and liabilities. Total net debt is a non-GAAP
        measure; refer to the following reconciliation of total liabilities
        to total net debt.

    (3) Total net debt and net debt to periods funds flow from operations
        ratio (annualized) is calculated based upon first quarter funds flow
        from operations annualized.

    (4) Trailing periods funds flow from operations ratio annualized is based
        on the twelve-months period ended March 31, 2011 and March 31, 2010.


    Reconciliation of Total Liabilities to Total Net Debt
    -------------------------------------------------------------------------
                                                              As at March 31,
    ($000s, except where noted)                            2011         2010
    -------------------------------------------------------------------------
    Total liabilities per financial statements          232,603      151,063
      Current liabilities included within working
       capital calculation                              (70,403)     (29,354)
      Deferred liability - flow-through shares           (3,288)           -
      Decommissioning Liabilities                       (39,256)     (39,523)
      Finance lease obligation                           (1,407)           -

    Working Capital
      Current assets                                    (45,375)     (48,556)
      Current liabilities                                70,403       29,354
      Current portion of finance lease                     (147)           -
      Net commodity contract asset (liability)          (12,960)      10,630
    -------------------------------------------------------------------------
                                                         11,921       (8,572)
    -------------------------------------------------------------------------
    Total net debt                                      130,170       73,614
    -------------------------------------------------------------------------
    >>

Share-Based Compensation

Non-cash share-based compensation expense for the three months ended March 31, 2011 was an expense of $0.5 million compared to $0.2 million in the same period in 2010. The increase in expense from the first quarter of 2010 compared to 2011 is primarily due to 2.3 million share options granted subsequent to March 31, 2010 with an average exercise price of $3.92 and an average fair value of $1.96 per option.

Depletion and Depreciation

Depletion and depreciation expense for the first quarter in 2011 was $13.8 million ($15.16/boe) compared to $10.1 million ($15.55/boe) in the same period in 2010. The decrease in depletion and depreciation expense per boe from the first quarter in 2010 to that in 2011 is primarily due to a 58% increase in the reserve base used for depletion, offset by a higher cost base and future development costs.

For the three months ended March 31, 2011 Bellatrix has included a total $254.1 million (2010: $94.1 million) for future development costs in the depletion calculation and excluded from the depletion calculation a total of $34.9 million (2010: $27.8 million) for estimated salvage.

    <<
    Depletion and Depreciation
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    ($000s, except where noted)                            2011         2010
    -------------------------------------------------------------------------
    Depletion and Depreciation                           13,759       10,146
    Per unit ($/boe)                                      15.16        15.55
    -------------------------------------------------------------------------
    >>

Income Taxes

Deferred income taxes arise from differences between the accounting and tax bases of the Company's assets and liabilities. For the three months ended March 31, 2011, the Company recognized a deferred income tax recovery of $1.5 million compared to an expense of $2.0 million in the same period in 2010, which is consistent with the pre-tax loss of $7.0 million for the three months ended March 31, 2011 and the pre-tax profit of $6.0 million for three months ended March 31, 2010.

As at March 31, 2011, the Company had a total net deferred tax asset balance of $15.8 million. IFRS requires that a deferred tax asset be recorded when the tax pools exceeds the book value of assets, to the extent the amount is probable to be realized.

At March 31, 2011, Bellatrix had approximately $489 million in tax pools available for deduction against future income as follows:

    <<
    -------------------------------------------------------------------------
    ($000s)                                 Rate %         2011         2010
    -------------------------------------------------------------------------
    Intangible resource pools:
      Canadian exploration expenses            100       44,300       43,800
      Canadian development expenses             30      325,300      225,700
      Canadian oil and gas property
       expenses                                 10       17,200       15,300
      Foreign resource expenses                 10          800        1,100
    Attributed Canadian Royalty
     Income                           100 (Alberta)      16,100       16,100
    Undepreciated capital cost            6 - 55(1)      82,700      102,100
    Non-capital losses (expire
     through 2027)                             100          300        4,800
    Financing costs                    20 straight
                                              line        2,200        2,000
    -------------------------------------------------------------------------
                                                        488,900      410,900
    -------------------------------------------------------------------------
    (1) Approximately $78 million of undepreciated capital cost pools are
        class 41, which is claimed at a 25% rate.
    >>

As a result of the issuance of the common shares issued on a "flow-through" basis ("Flow-Through Shares") on August 12, 2010, Bellatrix is committed to incur approximately $20.0 million in qualifying Canadian Exploration Expenses ("CEE") on or prior to December 31, 2011. As of March 31, 2011, Bellatrix has satisfied approximately $2.5 million of this commitment, reducing its remaining commitment to $17.5 million.

Cash Flow from Operating Activities, Funds Flow from Operations and Net Profit (Loss)

As detailed previously in this Management's Discussion and Analysis, funds flow from operations is a term that does not have any standardized meaning under GAAP. Funds flow from operations is calculated as cash flow from operating activities before decommissioning costs incurred and changes in non-cash working capital incurred.

    <<
    Reconciliation of Cash Flow from Operating Activities and Funds Flow
    from Operations
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    ($000s)                                                2011         2010
    -------------------------------------------------------------------------
    Cash flow from operating activities                  15,718       13,456
    Decommissioning costs incurred                          149          162

    Change in non-cash working capital                    1,160       (3,420)
    -------------------------------------------------------------------------

    Funds flow from operations                           17,027       10,198
    -------------------------------------------------------------------------
    >>

Bellatrix's cash flow from operating activities of $15.7 million ($0.15 per diluted share) for the three months ended March 31, 2011 increased approximately 17% from the $13.5 million ($0.15 per diluted share) generated in the same 2010 period. Bellatrix generated funds flow from operations of $17.0 million ($0.16 per diluted share) for the three months ended March 31, 2011, up 67% from $10.2 million ($0.11 per diluted share) for the same period in 2010. The increase in cash flow from operating activities and funds flow from operations for the first quarter of 2011 compared to the first quarter of 2010 was primarily the result of higher sales volumes in conjunction with higher prices received for light crude oil, condensate and natural gas liquids, as well as a reduction in finance and interest charges for the Company's long term debt and convertible debentures. The increase was offset by a realized loss of $1.0 million for commodity risk management contracts in the first quarter of 2011 when compared to a realized gain of $2.5 million in the same period in 2010 and higher operating expenses.

Bellatrix maintains a commodity price risk management program to provide a measure of stability to funds flow from operations. Unrealized mark-to-market gains or losses are non-cash adjustments to the current fair market value of the contract over its entire term and are included in the calculation of net income.

The net loss for the three month period ended March 31, 2011 was $5.5 million ($0.06 per diluted share) compared to a net profit of $4.0 million ($0.04 per diluted share) for the same period in 2010. The net loss recorded in the first quarter of 2011 compared to net profit in the first quarter of 2010 is primarily a consequence of a $16.5 million non-cash difference between a $7.3 million unrealized gain on commodity risk management contracts in Q1 2010 compared to a $9.2 million unrealized loss on commodity risk management contracts recorded in Q1 2011, higher operating expenses, offset by an increase in sales and a reduction in royalties.

    <<
    Cash Flow from Operating Activities, Funds Flow from Operations and Net
    Profit (Loss)
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    ($000s, except per share amounts)                      2011         2010
    -------------------------------------------------------------------------
    Cash flow from operating activities                  15,718       13,456
      Basic   ($/share)                                    0.16         0.15
      Diluted ($/share)                                    0.15         0.15

    Funds flow from operations                           17,027       10,198
      Basic   ($/share)                                    0.17         0.12
      Diluted ($/share)                                    0.16         0.11

    Net profit (loss)                                    (5,487)       3,969
      Basic   ($/share)                                   (0.06)        0.04
      Diluted ($/share)                                   (0.06)        0.04
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Capital Expenditures

Bellatrix invested $55.5 million on exploration and development activities during the first quarter of 2011 compared to $21.0 million in the same 2010 period. The increase in these expenditures during the period is consistent with the higher capital budget for 2011.

    <<
    Capital Expenditures
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    ($000s)                                                2011         2010
    -------------------------------------------------------------------------
    Lease acquisitions and retention                      9,996          199
    Geological and geophysical                              293          603
    Drilling and completion costs                        39,468       18,736
    Facilities and equipment                              5,729        1,417
    -------------------------------------------------------------------------
                                                         55,486       20,955
    Drilling incentive credits                                -       (2,644)
    -------------------------------------------------------------------------
      Exploration and development(1)                     55,486       18,311
    Corporate(2)                                             59           35
    Property acquisitions                                 3,572            -
    -------------------------------------------------------------------------
      Total capital expenditures - cash                  59,117       18,346
    Property dispositions - cash                            130           47
    -------------------------------------------------------------------------
      Total net capital expenditures - cash              59,247       18,393
    -------------------------------------------------------------------------
    Other - non-cash (3)                                    513          288
    -------------------------------------------------------------------------
    Total net capital expenditures                       59,760       18,681
    -------------------------------------------------------------------------
    (1) Excludes capitalized costs related to decommissioning liabilities
        expenditures incurred during the period.
    (2) Corporate costs include office furniture, fixtures and equipment and
        other costs.
    (3) Other includes non-cash adjustments for current period's
        decommissioning liabilities and share based compensation.
    >>

In the first quarter of 2011 Bellatrix drilled and participated in 21 gross (12.07 net) successful wells. Bellatrix completed and tied in 14 (10.33 net) of the 15 gross operated wells drilled in the quarter. The remaining 1 gross (0.33 net) well will be completed following break up. The Company participated in 6 gross (1.41 net) successful non-operated wells which includes one gross (0.06 net) joint venture Cardium well, which is expected to be completed and tied in after break up.

During the first quarter of 2011, Bellatrix entered into an agreement to acquire 20 net sections of Cardium rights.

The $59.2 million capital program, for the three months ended March 31, 2011 was financed with funds flow from operations and bank debt.

Based on the current economic conditions and Bellatrix's operating forecast for 2011, the Company budgets a capital program of $170 million funded from the Company's cash flows, proceeds from the May 2011 offering and to the extent necessary, bank indebtedness.

Impairment of Assets

The Company calculates an impairment test on a quarterly basis in accordance with IFRS. The impairment test is performed at the asset or cash generating unit ("CGU") level. IAS 36 - "Impairment of Assets" ("IAS 36") is a one step process for testing and measuring impairment of assets. Under IAS 36, the asset or CGU's carrying value is compared to the higher of: value-in-use and fair value less costs to sell. Value in use is defined as the present value of future cash flows expected to be derived from the asset or CGU.

For the three months ended March 31, 2011, Bellatrix performed an impairment test in accordance with IAS 36 resulting in recoverable amounts to be greater than the carrying value of Bellatrix's assets or CGU. Consequently, no impairment in oil and gas assets was identified as at March 31, 2011.

The impairment test will be based upon fair market values for the Company's properties, including but not limited to an updated external reserve engineering report which incorporates a full evaluation of reserves on an annual basis or internal reserve updates at quarterly periods, and the latest commodity pricing deck. Estimating reserves is very complex, requiring many judgments based on available geological, geophysical, engineering and economic data. Changes in these judgments could have a material impact on the estimated reserves. These estimates may change, having either a negative or positive effect on net earnings as further information becomes available and as the economic environment changes.

Decommissioning Liabilities

As at March 31, 2011, Bellatrix has recorded decommissioning liabilities of $39.3 million, compared to $38.7 million at December 31, 2010, for future abandonment and reclamation of the Company's properties. For the three months ended March 31, 2011, the liability increased by $0.5 million as a result of $0.6 million incurred on property acquisitions and development activities, $0.3 million as a result of charges for the unwinding of the discount rates used for fair valuing the liabilities, offset by a reduction of $0.03 million for liabilities reversed on dispositions, $0.1 million for liabilities settled during the year and $0.2 million for changes in estimates.

    <<
    Unwinding of Decommissioning Liabilities
    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    ($000s, except where noted)                            2011         2010
    -------------------------------------------------------------------------
    Unwinding of decommissioning liabilities                279          281
    Per unit ($/boe)                                       0.31         0.43
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Liquidity and Capital Resources

As an oil and gas business, Bellatrix has a declining asset base and therefore relies on ongoing development and acquisitions to replace production and add additional reserves. Future oil and natural gas production and reserves are highly dependent on the success of exploiting the Company's existing asset base and in acquiring additional reserves. To the extent Bellatrix is successful or unsuccessful in these activities, cash flow could be increased or reduced.

Bellatrix is focused on growing oil and natural gas production from its diversified portfolio of existing and emerging resource plays in Western Canada. Bellatrix remains highly focused on key business objectives of maintaining financial strength, optimizing capital investments - attained through a disciplined approach to capital spending, a flexible investment program and financial stewardship. Natural gas prices are primarily driven by North American supply and demand, with weather being the key factor in the short term. Bellatrix believes that natural gas represents an abundant, secure, long-term supply of energy to meet North American needs. Bellatrix's results are affected by external market and risk factors, such as fluctuations in the prices of crude oil and natural gas, movements in foreign currency exchange rates and inflationary pressures on service costs.

Liquidity risk is the risk that Bellatrix will not be able to meet its financial obligations as they fall due. Bellatrix actively manages its liquidity through daily and longer-term cash, debt and equity management strategies. Such strategies encompass, among other factors: having adequate sources of financing available through its bank credit facilities, estimating future cash generated from operations based on reasonable production and pricing assumptions, analysis of economic risk management opportunities, and maintaining sufficient cash flows for compliance with operating debt covenants. Bellatrix is fully compliant with all of its operating debt covenants.

Bellatrix generally relies on operating cash flows and its credit facilities to fund capital requirements and provide liquidity. Future liquidity depends primarily on cash flow generated from operations, existing credit facilities and the ability to access debt and equity markets. From time to time, the Company accesses capital markets to meet its additional financing needs and to maintain flexibility in funding its capital programs. While Bellatrix recently completed a May 2011, $55 million offering on a bought deal basis (the "financing"), there can be no assurance that future debt or equity financing, or cash generated by operations will be available or sufficient to meet these requirements or for other corporate purposes or, if debt or equity financing is available, that it will be on terms acceptable to Bellatrix.

Credit risk is the risk of financial loss to Bellatrix if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from Bellatrix's trade receivables from joint venture partners, petroleum and natural gas marketers, and financial derivative counterparties.

A substantial portion of Bellatrix's accounts receivable are with customers and joint interest partners in the petroleum and natural gas industry and are subject to normal industry credit risks. Bellatrix sells substantially all of its production to six primary purchasers under standard industry sale and payment terms. Purchasers of Bellatrix's natural gas, crude oil and natural gas liquids are subject to a periodic internal credit review to minimize the risk of non-payment. Bellatrix has continued to closely monitor and reassess the creditworthiness of its counterparties, including financial institutions. This has resulted in Bellatrix reducing or mitigating its exposures to certain counterparties where it is deemed warranted and permitted under contractual terms.

Bellatrix may be exposed to third party credit risk through its contractual arrangements with its current or future joint venture partners, marketers of its petroleum and natural gas production and other parties. In the event such entities fail to meet their contractual obligations to Bellatrix, such failures may have a material adverse effect on the Company's business, financial condition, results of operations and prospects. In addition, poor credit conditions in the industry and of joint venture partners may impact a joint venture partner's willingness to participate in Bellatrix's ongoing capital program, potentially delaying the program and the results of such program until Bellatrix finds a suitable alternative partner.

During 2010, Bellatrix concentrated on executing its considerable drilling program and improving its balance sheet. Bellatrix took advantage of several financial opportunities that improved the Company's financial flexibility. In 2011, Bellatrix continues to focus on its drilling program and maintaining a strong balance sheet. In May 2011, Bellatrix closed an equity issuance of 9.8 million common shares on a bought deal basis at a price of $5.60 per share for gross proceeds of $55.0 million (net proceeds of $52.3 million after underwriter fees and before other closing costs). In connection with this financing, Bellatrix has granted to the underwriters an over-allotment option exercisable in whole or in part from time to time until 30 days following closing of the financing to purchase up to an additional 1.5 million common shares at a price of $5.60 per common share for gross proceeds of $8.2 million (net proceeds of $7.8 million after underwriting fees). The net proceeds from this financing will be used to temporarily reduce outstanding indebtedness, thereby freeing up borrowing capacity that may be redrawn to fund Bellatrix's ongoing capital expenditures program and general corporate purposes.

Total net debt levels at March 31, 2011 have increased $42.3 million from $87.4 million at December 31, 2010, primarily as a consequence of Bellatrix's considerable drilling program. Total net debt includes the liability component of the convertible debentures and excludes unrealized commodity contract assets and liabilities, deferred taxes, finance lease obligations, deferred liabilities and decommissioning liabilities.

Funds flow from operations represents 29% of the funding requirements for Bellatrix's capital expenditures for the three months ended March 31, 2011. The remainder has been funded through bank indebtedness.

The Company's facilities consists of a $15 million demand operating facility provided by a Canadian bank and an $85 million extendible revolving term credit facility provided by a Canadian bank and a Canadian financial institution. Amounts borrowed under the credit facility will bear interest at a floating rate based on the applicable Canadian prime rate, U.S. base rate or LIBOR rate, plus between 1.25% and 4.25%, depending on the type of borrowing and the Company's debt to cash ratio. The credit facilities are secured by a $400 million debenture containing a first ranking charge and security interest. Bellatrix has provided a negative pledge and undertaking to provide fixed charges over major petroleum and natural gas reserves in certain circumstances. A standby fee is charged of between 0.55% and 1.02% on the undrawn portion of the credit facilities, depending on the Company's debt to cash flow ratio.

On June 8, 2010, Bellatrix executed an amending agreement with its banking syndicate that provided for the extension of the revolving period of existing credit facility from June 29, 2010 to June 28, 2011. Should the facility not be extended it will convert to a non-revolving term facility with the full amount outstanding due 366 days after the last day of the revolving period of June 28, 2011. The Company's borrowing base will be subject to re-determination on May 30, 2011. Thereafter, a semi-annual re-determination of the borrowing base will occur, with the next such re-determination occurring on November 30, 2011. As of May 10, 2011, the banking syndicate has agreed, subject to and effective upon final documentation, to increase the borrowing base from $100 million to $140 million through to November 30, 2011 and extend the revolving period of the credit facility from June 28, 2011 to June 26, 2012

As at March 31, 2011, approximately $29.7 million was undrawn under the existing credit facilities.

As an added layer of protection of its cash flows, during the first quarter of 2011, Bellatrix financially sold 18.2 MMcf/d of natural gas for the period of April 1 to October 31, 2011 at an average fixed price of CAD$4.15/mcf. Additionally, Bellatrix sold a call on 833 bbl/d of crude oil for calendar 2012 at a price of US$110/bbl and used the proceeds to enter into a financial fixed price swap on 4.55 MMcf/d of natural gas for the term of May 1 to December 31, 2011 at a price of CAD$6.92/mcf. Bellatrix also entered into fixed price swaps for 500 bbl/d of crude oil for the term of February 1 to December 31, 2011 at a price of US$95.00/bbl and 500 bbl/d of crude oil for the term of March 1 to December 31, 2011 at a fixed price of US$97.50/bbl. Contracts entered into in 2010 provide for 1,500 bbl/d of crude oil at an average price of CAD$88.45/bbl and 500 bbl/d of crude oil at fixed price of US$89.10/bbl for the remainder of 2011.

Bellatrix currently has commitments associated with its credit facilities outlined above and the commitments outlined under the "Commitments" section. Bellatrix continually monitors its capital spending program in light of the recent volatility with respect to commodity prices and Canadian dollar exchange rates with the aim of ensuring the Company will be able to meet future anticipated obligations incurred from normal ongoing operations with funds flow from operations and draws on Bellatrix's credit facility, as necessary. Bellatrix has the ability to fund its 2011 capital program of $170 million by utilizing cash flow, the proceeds of the May 2011 financing, and to the extent necessary, bank indebtedness.

As at April 29, 2011, Bellatrix had outstanding a total of 5,818,099 options exercisable at an average exercise price of $2.73 per share, $55.0 million principal amount of 4.75% Debentures convertible into common shares (at a conversion price of $5.60 per share) and 97,533,134 common shares.

Commitments

As at March 31, 2011, Bellatrix committed to drill 8 gross (6.4 net) wells pursuant to farm-in agreements. Bellatrix expects to satisfy these drilling commitments at an estimated cost of approximately $20.9 million. In addition, on February 1, 2011, Bellatrix entered into a joint venture agreement which includes a minimum commitment for the Company to drill 3 gross (3.0 net) wells per year for 2011 to 2015 for a total estimated cost of approximately $52.5 million.

As a result of the issuance of the Flow-Through Shares on August 12, 2010, Bellatrix is committed to incur approximately $20.0 million in CEE on or before December 31, 2011. As of March 31, 2011, the Company has incurred approximately $2.5 million on CEE, reducing its remaining commitment to $17.5 million.

The following are the contractual maturities of financial liabilities as at March 31, 2011:

    <<
    Financial liability    (less than)
    ($000s)                    1 Year    1-2 Years    2-5 Years   Thereafter
    -------------------------------------------------------------------------
    Accounts payable and
     accrued
     liabilities(1)        $   53,562   $        -   $        -   $        -

    Bank debt -
     principal(2)                   -       70,298            -            -

    Convertible debentures
     - principal                    -            -       55,000            -

    Convertible debentures
     - interest(3)              2,620        2,612        5,440            -

    Finance lease
     obligation                   365          359          973        1,447
    -------------------------------------------------------------------------
     Total                 $   56,557   $   73,269   $   61,413   $    1,447
    -------------------------------------------------------------------------
    (1) As at March 31, 2011, $1.1 million of accrued coupon interest payable
        in relation to the 4.75% Debentures and $0.01 million of accrued
        interest payable in relation to the credit facilities is included in
        Accounts Payable and Accrued Liabilities.
    (2) Bank debt is based on a revolving term which is reviewed annually and
        converts to a 366 day non-revolving facility if not renewed.
    (3) The 4.75% Debentures outstanding at March 31, 2011 bear interest at a
        coupon rate of 4.75%, which currently requires total annual interest
        payments of $2.6 million.
    >>

Interest due on the bank credit facility is calculated based upon floating rates.

The Company estimates the total undiscounted amount of cash flows required to settle its decommissioning liabilities to be approximately $41.6 million which is estimated to be incurred between 2013 and 2053.

Off-Balance Sheet Arrangements

The Company has certain fixed term lease agreements, including primarily office space leases, which were entered into in the normal course of operations. All leases have been treated as operating leases whereby the lease payments are included in operating expenses or G&A expenses depending on the nature of the lease. The lease agreements do not currently provide for early termination. No asset or liability value has been assigned to these leases in the balance sheet as of March 31, 2011.

Business Prospects and 2011 Year Outlook

Bellatrix continues to develop its core assets and conducts exploration programs utilizing its large inventory of geological prospects. As at March 31, 2011, Bellatrix has approximately 220,290 net undeveloped acres with in excess of 700 exploitation drilling opportunities identified, representing over 10 years of drilling inventory.

In May 2011, Bellatrix closed an equity issuance of 9.8 million common shares on a bought deal basis at a price of $5.60 per share for gross proceeds of $55.0 million (net proceeds of $52.3 million after underwriter fees and before other closing costs). In connection with this financing, Bellatrix has granted to the underwriters an over-allotment option exercisable in whole or in part from time to time until 30 days following closing of the financing to purchase up to an additional 1.5 million common shares at a price of $5.60 per common share for gross proceeds of $8.2 million (net proceeds of $7.8 million after underwriting fees). The net proceeds from this financing will be used to temporarily reduce outstanding indebtedness, thereby freeing up borrowing capacity that may be redrawn to fund Bellatrix's ongoing capital expenditure program and for general purposes. Bellatrix has revised its capital expenditure budget for 2011 from $100 million to $170 million, which includes the $59.1 million spent in the first quarter of 2011 on capital expenditures. Bellatrix will use cash flow, the proceeds of the financing, and to the extent necessary, bank indebtedness to fund its 2011 capital expenditures budget.

In 2011, Bellatrix anticipates drilling 63 gross (47.57 net) wells. Of the 63 gross wells, Bellatrix anticipates drilling 9 gross (9.0 net) potential McLaren heavy oil wells in the Frog Lake area of Alberta and a total of 54 gross (38.57 net) Cardium and Notikewin wells in the Pembina and Ferrier areas of Alberta.

As a result of the expansion of its 2011 capital program and recent completion of the May 2011 financing, Bellatrix has revised its guidance on 2011 exit production from 13,000 boe/d to 15,000 boe/d.

The estimated field production level for the month of April 2011 is approximately 12,134 boe/d, weighted 39% crude oil, condensate and natural gas liquids and 61% natural gas.

As an added layer of protection of its cash flows, during the first quarter of 2011, Bellatrix financially sold 18.2 MMcf/d of natural gas for the period of April 1 to October 31, 2011 at an average fixed price of CAD$4.15/mcf. Additionally, Bellatrix sold a call on 833 bbl/d of crude oil for calendar 2012 at a price of US$110/bbl and used the proceeds to enter into a financial fixed price swap on 4.55 MMcf/d of natural gas for the term of May 1 to December 31, 2011 at a price of CAD$6.92/mcf. Bellatrix also entered into fixed price swaps for 500 bbl/d of crude oil for the term of February 1 to December 31, 2011 at a price of US$95.00/bbl and 500 bbl/d of crude oil for the term of March 1 to December 31, 2011 at a fixed price of US$97.50/bbl. Contracts entered into in 2010 provide for 1,500 bbl/d of crude oil at an average price of CAD$88.45/bbl and 500 bbl/d of crude oil at fixed price of US$89.10/bbl for the remainder of 2011.

Financial Reporting Update

Adoption of International Financial Reporting Standards

As of January 1, 2011, Bellatrix prepares its interim consolidated financial statements and comparative information in accordance with IFRS, "IFRS 1" and International Accounting Standard 34 - Interim Financial Reporting, as issued by the International Accounting Standards Board. Previously, Bellatrix's financial statements were prepared in accordance with previous GAAP.

The Company's IFRS accounting policies are provided in Note 3 to the Interim Consolidated Financial Statements. In addition, Note 22 to the Interim Consolidated Financial Statements presents reconciliations between the Company's 2010 previous GAAP results and the 2010 IFRS results. The Company presents reconciliations of equity as at January 1, 2010, March 31, 2010 and December 31, 2010, and reconciliations of Total Comprehensive Income for the three months ended March 31, 2010 and for the year ended December 31, 2010.

Accounting Policy Changes

The following discussion explains the significant differences between Bellatrix's previous GAAP accounting policies and those applied by the Company under IFRS and specifically, IFRS 1. IFRS policies have been retrospectively and consistently applied except where specific IFRS 1 optional and mandatory exemptions permitted an alternative treatment upon transition to IFRS for first-time adopters.

The most significant changes to the Company's accounting policies relate to the accounting for petroleum and natural gas expenditures. Under previous GAAP, Bellatrix followed the Canadian Institute of Chartered Accountants ("CICA") guideline on full cost accounting in which all costs directly associated with the acquisition of, the exploration for, and the development of crude oil, natural gas liquids and natural gas reserves were capitalized on a cost centre basis. Under previous GAAP, Bellatrix only had one cost centre. Costs accumulated within the cost centre were depleted using the unit-of-production method based on proved reserves determined using estimated future prices and costs. Upon transition to IFRS, Bellatrix was required to adopt new accounting policies for petroleum and natural gas expenditures, including exploration and evaluation ("E&E") costs and development costs.

Under IFRS, exploration and evaluation costs are those expenditures for an area where technical feasibility and commercial viability has not yet been determined. Development costs include those expenditures for areas where technical feasibility and commercial viability has been determined. Bellatrix adopted the IFRS 1 exemption whereby the Company deemed its January 1, 2010 property, plant and equipment ("PP&E) costs to be equal to its previous GAAP historical PP&E net book value. Accordingly, exploration and evaluation costs were deemed equal to the unproved properties balance and the development costs were deemed equal to the remaining PP&E balance. Under IFRS, exploration and evaluation costs are presented as exploration and evaluation assets and development costs of reserves are presented within property, plant and equipment on the Consolidated Balance Sheet.

Exploration and Evaluation

E&E assets as at January 1, 2010 of $20.5 million represent the unproved properties balance under previous GAAP. This resulted in a reclassification of $20.5 million from PP&E to E&E assets on Bellatrix's Consolidated Balance Sheet as at January 1, 2010. As at December 31, 2010, Bellatrix's E&E assets were $18.5 million.

Under previous GAAP, Bellatrix would capitalize all expenditures associated with unproved properties. Under IFRS, E&E expenditures can only be capitalized once the legal right to explore has been obtained. Once technical feasibility and commercial viability has been determined, the capitalized costs are transferred from E&E assets to PP&E and are subject to an impairment test.

Bellatrix has adopted an accounting policy whereby E&E assets will not be subject to depletion. Costs associated with unproved properties under previous GAAP were not subject to depletion.

Depreciation and Depreciation

Previous GAAP provided specific guidelines on the depletion calculation for oil and natural gas properties. Depletion was calculated based on proved reserves. Under IFRS, the Company has a choice in the reserve base to use for its depletion calculations. Bellatrix has adopted a policy of depleting its oil and natural gas properties using its proved plus probable reserve base. In addition, depletion calculations under previous GAAP were done on a cost centre basis, for which under previous GAAP, the Company only had one. Under IFRS, the Company is required to calculate depletion based on individual components for which the company has identified to be at the area level. The IFRS 1 exemption permitted Bellatrix to allocate PP&E costs to the area level using proved plus probable reserve values as at January 1, 2010.

As a result of using proved plus probable reserves and depleting at the area level for its depletion calculation, depreciation and depletion expense was reduced by $24.8 million for the year ended December 31, 2010.

Impairments

IFRS requires an asset impairment test to be conducted on transition date and when indicators of impairment are present. Under previous GAAP, impairment of long-lived assets is assessed on the basis of an asset's estimated undiscounted future cash flows compared with the asset's carrying amount and if impairment is indicated, discounted cash flows are prepared to quantify the amount of impairment. The impairment test under previous GAAP is done at the cost centre level. Under previous GAAP, Bellatrix had one cost centre for impairment test purposes. Impairments recognized under previous GAAP were not reserved.

IFRS requires the impairment test to occur at the asset level or at the cash generating unit ("CGU") level. Bellatrix currently has 6 CGUs. The carrying amount of the asset or CGU is compared to its recoverable amount which is the higher of discounted cash flows or fair value less costs to sell. Under IFRS, impairments recognized are reversed when there has been a subsequent increase in the recoverable amount. In the case of an impairment reversal, the carrying amount of the asset or CGU is limited to the original carrying amount less depreciation, depletion and amortization as if no impairment had been recognized for the asset or CGU for prior periods.

Bellatrix performed an impairment test on transition to IFRS on January 1, 2010 based on fair value less costs to sell. Fair value less costs to sell was based on merger and acquisition transactions on oil and gas properties similar to those owned by Bellatrix. The Company experienced transitional write-downs on its non-core and certain heavy oil properties with an offsetting entry to Bellatrix's January 1, 2010 deficit. Based on the assessment, the carrying amount of the following CGU's were impaired, with an offsetting entry to the January 1, 2010 deficit:

    <<
    ($000's)
    Cash Generating Unit    Product(1)             Transitional Impairment(2)
    -------------------------------------------------------------------------
    South East Alberta      100% Natural Gas                  $        5,366
    North East Alberta      89% Natural Gas                           10,895
    Meekwap                 75% Oil and NGL's                          4,093
    Saskatchewan            100% Heavy Oil                            23,441
    -------------------------------------------------------------------------
    Total                                                     $       43,795
    -------------------------------------------------------------------------
    (1) Based on 2009 year end proved and probable reserves.
    (2) Includes impairment related to corporate assets assigned to each CGU
        on a pro-rata basis.
    >>

Due to the continued weakening of natural gas prices, Bellatrix performed impairment tests on its oil and gas properties for all of the quarterly reporting periods in 2010. Fair value less costs to sell was used as the recoverable amount, using market transactions and the company's proved and probable reserves. The following impairments and impairment reversals were recorded in 2010:

    <<
    -------------------------------------------------------------------------
    ($000's)
    Cash Generating                                               Impairment
    Unit                         Product(1)                     (Reversal)(2)
    -------------------------------------------------------------------------
    Meekwap                      75% Oil and NGL's             $         336
    Meekwap                      70% Oil and NGL's                     1,286
    South East Alberta           100% Natural Gas                      4,988
    North East Alberta           81% Natural Gas                      (9,848)
    -------------------------------------------------------------------------
    Total reversal                                             $      (3,238)
    -------------------------------------------------------------------------
    (1) Based on applicable year end proved and probable reserves.
    (2) Includes impairment (reversal) related to corporate assets assigned
        to each CGU on a pro-rata basis.
    >>

Natural gas properties were further impaired in 2010, as well as another non-core oil property. Bellatrix experienced an impairment reversal in the fourth quarter of 2010 in its North East Alberta CGU as recent transactions in the CGU have increased the fair value of the properties written down on transition.

Asset Divestitures

Under previous GAAP, proceeds of a divestiture are deducted from the country cost centre pool without recognition of a gain or loss unless such a deduction resulted in a change to the depletion rate of 20% or greater. Under IFRS, proceeds of a divestiture are deducted from the carrying value of the asset and a gain or loss is recognized in earnings.

As a result of divestitures during 2010, including property swaps and prior period adjustments relating to divested properties, Bellatrix recognized a net gain on dispositions of $1.4 million for the year ended December 31, 2010.

Decommissioning Liabilities

IAS 37 - "Provisions, Contingent Liabilities and Contingent Assets," will govern how the Company accounts for its decommissioning liabilities (previously referred to as asset retirement obligations). The discount rate used for the decommissioning liability will be a risk free rate as the estimated provision is adjusted to reflect risks specific to the liability. Under previous GAAP, the Company used a credit-adjusted risk free rate. Therefore, under IFRS, the decommissioning liabilities are higher due to lower discount rates used. IFRS 1 provides an exemption that the Company has elected which allows Bellatrix to measure decommissioning liabilities as at the date of transition of January 1, 2010 to IFRS in accordance with IAS 37 and recognize directly in the Company's deficit any difference between that amount and the carrying amount of those liabilities at the date of transition to IFRS determined under previous GAAP.

As a result of applying this exemption, an increase of $13.3 million has been made to decommissioning liabilities and Bellatrix's deficit on January 1, 2010.

Under IFRS, the liability is to be re-measured each reporting period in order to reflect interest rates in effect at that time. As a result of re-measuring the decommissioning liabilities each reporting period, on a cumulative basis in 2010, PP&E and decommissioning liabilities decreased $0.2 million for the year ended December 31, 2010. The decrease in discount rates used under IFRS versus previous GAAP caused a decrease of $1.1 million in accretion expense for the year ended December 31, 2010.

Share Based Payments

Differences in the accounting for the Company's share option plan under previous GAAP and IFRS exist. IFRS 2 - "Share-based Payments," requires the Company to estimate the number of options expected to vest when a grant of equity instruments do not vest immediately. IFRS 2 does not allow the recognition of the expense on a straight-line basis and requires each installment to be treated as a separate arrangement. Under previous GAAP, the Company accounted for forfeitures as they occurred and recognized share-based compensation expense using the graded method, which is the method required under IFRS. IFRS 1 provides an elective exemption, which the Company has elected, which allows Bellatrix to apply IFRS 2 to the unvested options outstanding on transition date.

An adjustment of $0.05 million has been made on transition date to contributed surplus, with an offsetting entry to the January 1, 2010 deficit, as a result of applying this exemption.

As a result of applying IFRS 2, a reduction of share-based compensation of $0.03 million has been made to the Statement of Comprehensive Income for the year ended December 31, 2010.

Due to differences in the accounting for share-based compensation under previous GAAP and IFRS, adjustments are required in the amount of capitalized share-based compensation. For the year ended December 31, 2010, the Company capitalized $0.03 million less for share-based compensation under IFRS when compared to previous GAAP.

Flow-through Shares

Under previous GAAP, the accounting treatment of flow-through shares was addressed by EIC 146 - "Flow-Through Shares". Under previous GAAP, the proceeds received for the flow-through shares are credited to shareholders' capital and the deferred tax liability is recognized when the Company files the renouncement documents with the tax authorities to renounce the tax credits associated with the expenditures.

Under IFRS, Bellatrix set up a liability for the difference between the proceeds received and the market price of the shares on the date of the transaction (the "premium"). As the expenditures are made, Bellatrix will record the related tax liability associated with the renouncement of the tax benefits and remove the deferred liability originally set up. The difference between the deferred tax liability and the original liability set up will go through profit or loss.

As a result of the issuance of the Flow-Through Shares in the third quarter of 2010, the Company set up a deferred liability of $3.7 million with an offsetting adjustment to share capital. No qualifying CEE was made in 2010.

Convertible Debentures

Convertible debentures have both a debt and equity component under previous GAAP. As a consequence of the Company having status as an income trust in 2009, and no IFRS 1 exemption related to the conversion feature of convertible debentures for trust units, the Company has treated the 7.5% Debentures as a financial derivative instrument (the "instrument"). As a result, the fair value of the instrument was determined to be nil. The offsetting entry was made to share capital as a result of the Company's deficit elimination effective November 1, 2009. In addition, this IFRS difference has caused a $1.6 million increase to the Company's deficit as a result of the 7.5% Debenture redemption in the second quarter of 2010, as opposed to the $2.9 million reduction in the deficit under previous GAAP.

Also, the allocation of deferred tax on the convertible debentures differs under previous GAAP and IFRS. Under previous GAAP, the tax basis of the liability is considered to be the same as its carrying amount; therefore, no temporary difference exists. IFRS does not contain this special exemption and requires the temporary difference to be recognized. The deferred tax adjustment is charged directly to the carrying amount of the equity component of the convertible debentures.

Bellatrix recorded a deferred tax adjustment of $0.5 million relating to its 7.5% Debentures on transition to IFRS with an offsetting entry to the January 1, 2010 deficit.

Upon the issuance of its 4.75% Debentures in the second quarter of 2010, the Company recognized an adjustment of $1.5 million to the equity component of its 4.75% Debentures with an offsetting entry to the deferred tax asset.

Deferred Taxes

Deferred income taxes have been adjusted to reflect the tax effect arising from the differences between IFRS and previous GAAP. Upon transition to IFRS, the Company recognized a $14.2 million increase in the deferred income tax balance with a corresponding increase to the January 1, 2010 deficit. For the year ended December 31, 2010, the application of the IFRS adjustments discussed above resulted in a $8.7 million decrease to Bellatrix's deferred income tax asset and an expense of $8.0 million to Bellatrix's previous GAAP net loss.

Business Combinations

An exemption under IFRS 1 provides the entity with relief on the restatement of business combinations prior to the transition date. Under IFRS 3 - "Business Combinations," the determination of the fair value of share consideration differs from the determination under current Canadian accounting standards. Any difference in the fair value calculation would have a resulting impact on the carrying amount of net assets acquired, non-controlling interest and any goodwill. The Company made this election under IFRS 1, allowing Bellatrix to be exempt from restating business combinations that occurred prior to the transition date to IFRS.

Future Accounting Pronouncements

All accounting standards effective for periods beginning on or after January 1, 2011 have been adopted as part of the transition to IFRS. The following new IFRS pronouncement has been issued but is not yet effective:

As of January 1, 2013, Bellatrix will be required to adopt IFRS 9, Financial Instruments, which is the result of the first phase of the IASB's project to replace IAS 39, Financial Instruments: Recognition and Measurement. The new standard replaces the current multiple classification and measurement models for financial assets and liabilities with a single model that has only two classification categories: amortized cost and fair value. The adoption of this standard should not have a material impact on Bellatrix's Consolidated Financial Statements.

Business Risks and Uncertainties

The reader is advised that Bellatrix continues to be subject to various types of business risks and uncertainties as described in the Company's Management, Discussion and Analysis for the year ended December 31, 2010 and the Company's Annual Information Form for the year ended December 31, 2010.

Critical Accounting Estimates

The reader is advised that the critical accounting estimates, policies, and practices as described herein continue to be critical in determining Bellatrix's financial results.

The reader is cautioned that the preparation of financial statements in accordance with GAAP requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. The following discussion outlines accounting policies and practices that are critical to determining Bellatrix's financial results.

Accounts receivable

Accounts receivable are recorded at the estimated recoverable amount which involves the estimate of uncollectable accounts.

Derivatives

The fair value of commodity contracts are based on published market prices as at the balance sheet date and may differ from what will eventually be realized. Changes in the fair value of the commodity contracts are recognized in profit or loss. The actual gains and losses realized on eventual cash settlement can vary due to subsequent fluctuations in commodity prices.

Oil and gas reserves

Reserves and resources are used in the units of production calculation for depreciation, depletion and amortization and the impairment analysis which affect net income. There are numerous uncertainties inherent in estimating oil and gas reserves. Estimating reserves is very complex, requiring many judgments based on geological, geophysical, engineering and economic data. Changes in these judgments could have a material impact on the estimated reserves. These estimates may change, having either a negative or positive effect on net earnings as further information becomes available and as the economic environment changes.

Depreciation and depletion

Depletion of petroleum and natural gas properties is provided using the unit-of-production method based on production volumes before royalties in relation to total estimated proved and probable reserves as determined annually by independent engineers and determined in accordance with National Instrument 51-101. Natural gas reserves and production are converted at the energy equivalent of six thousand cubic feet to one barrel of oil.

Calculations for depletion and depreciation of production equipment are based on total capitalized costs plus estimated future development costs of proved and probable undeveloped reserves less the estimated net realizable value of production equipment and facilities after the proved reserves are fully produced. The costs of acquiring and evaluating unproved properties are excluded from depletion calculations.

Recoverability of asset carrying values

The Company assesses its oil and gas properties, including exploration and evaluation assets, for possible impairment if there are events or changes in circumstances that indicate that carrying values of the assets may not be recoverable, or at least at every reporting date.

The assessment of any impairment of property, plant and equipment is dependent upon estimates of recoverable amount that take into account factors such as reserves, economic and market conditions, timing of cash flows, the useful lives of assets and their related salvage values.

Liability component of convertible debentures

The Company's liability component of its convertible debentures has been determined by estimating a market rate of interest by reference to similar liabilities that do not have a conversion option.

Decommissioning obligations

Provisions for decommissioning obligations associated with the Company's drilling operations are based on current legal and constructive requirements, technology, price levels and expected plans for remediation. Actual costs and cash outflows can differ from estimates because of changes in laws and regulations, public expectations, prices, discover and analysis of site conditions and changes in clean up technology.

Share-based compensation

The fair value of stock options granted is measured using a Black Scholes model. Measurement inputs include share price on measurement date, exercise price of the option, expected volatility, expected life of the options, expected dividends and the risk-free rate. The Company estimates volatility based on historical share price excluding specific time frames in which volatility was affected by specific transactions that are not considered to be indicative of the Company's expected share price volatility. The expected life of the options is based on historical experience and general option holder behaviour. Dividends were not taken into consideration as the Company does not expect to pay dividends. Management also makes an estimate of the number of options that will forfeit and the rate is adjusted to reflect the actual number of options that actually vest.

Income taxes

Related assets and liabilities are recognized for the estimated tax consequences between amounts included in the financial statements and their tax base using substantively enacted future income tax rates. Timing of future revenue streams and future capital spending changes can affect the timing of any temporary differences, and accordingly affect the amount of the deferred income tax asset or liability calculated at a point in time. These differences could materially impact earnings.

Legal, Environmental Remediation and Other Contingent Matters

The Company is involved in various claims and litigation arising in the normal course of business. While the outcome of these matters is uncertain and there can be no assurance that such matters will be resolved in the Company's favor, the Company does not currently believe that the outcome of adverse decisions in any pending or threatened proceeding related to these and other matters or any amount which it may be required to pay by reason thereof would have a material adverse impact on its financial position or results of operations.

The Company reviews legal, environmental remediation and other contingent matters to both determine whether a loss is probable based on judgment and interpretation of laws and regulations and determine that the loss can reasonably be estimated. When the loss is determined, it is charged to earnings. The Company's management monitor known and potential contingent matters and make appropriate provisions by charges to earnings when warranted by the circumstances.

Controls and Procedures

Disclosure Controls and Procedures

The Company's Chief Executive Officer and Chief Financial Officer have designed, or caused to be designed under their supervision, disclosure controls and procedures to provide reasonable assurance that: (i) material information relating to the Company is made known to the Company's Chief Executive Officer and Chief Financial Officer by others, particularly during the period in which the annual and interim filings are being prepared; and (ii) information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time period specified in securities legislation.

Internal Control over Financial Reporting

The Company's Chief Executive Officer and Chief Financial Officer have designed, or caused to be designed under their supervision, internal control over financial reporting to provide reasonable assurance regarding the reliability of the Company's financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

The Company is required to disclose herein any change in the Company's internal control over financial reporting that occurred during the period beginning on January 1, 2011 and ended on March 31, 2011 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. No material changes in the Company's internal control over financial reporting were identified during such period that has materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

In conjunction with its conversion to IFRS, the Company completed an assessment of its information systems and based on this review no significant changes to the information systems were required as part of the IFRS conversion process. In addition, the effects of the adoption of IFRS on the Company's business activities and internal controls, including disclosure controls and procedures, were reviewed and no significant changes to the Corporation's business activities and internal control environment were required.

It should be noted that a control system, including the Company's disclosure and internal controls and procedures, no matter how well conceived, can provide only reasonable, but not absolute, assurance that the objectives of the control system will be met and it should not be expected that the disclosure and internal controls and procedures will prevent all errors or fraud.

Sensitivity Analysis

The table below shows sensitivities to funds flow from operations as a result of product price and operational changes. This is based on actual average prices received for the first quarter of 2011 and average production volumes of 10,084 boe/d during that period, as well as the same level of debt outstanding at March 31, 2011. Diluted weighted average shares are based upon the first quarter of 2011. These sensitivities are approximations only, and not necessarily valid under other significantly different production levels or product mixes. Commodity price risk management activities can significantly affect these sensitivities. Changes in any of these parameters will affect funds flow as shown in the table below:

    <<
    -------------------------------------------------------------------------
                                      Funds Flow from        Funds Flow from
                                         Operations(1)          Operations(1)
                                          (annualized)     Per Diluted Share
    -------------------------------------------------------------------------
    Sensitivity Analysis                       ($000s)                    ($)
    -------------------------------------------------------------------------
    Change of US $1/bbl WTI                     1,100                   0.01
    Change of $0.10/ mcf                        1,200                   0.01
    Change of US $0.01 CDN/ US
     exchange rate                                900                   0.01
    Change in prime of 1%                         700                   0.01
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The term "funds flow from operations" should not be considered an
        alternative to, or more meaningful than cash flow from operating
        activities as determined in accordance with GAAP as an indicator of
        the Company's performance. Therefore reference to diluted funds flow
        from operations or funds flow from operations per share may not be
        comparable with the calculation of similar measures for other
        entities. Management uses funds flow from operations to analyze
        operating performance and leverage and considers funds flow from
        operations to be a key measure as it demonstrates the Company's
        ability to generate the cash necessary to fund future capital
        investments and to repay debt. The reconciliation between cash flow
        from operating activities and funds flow from operations can be found
        elsewhere herein. Funds flow from operations per share is calculated
        using the weighted average number of common shares for the period.
    >>

Selected Quarterly Consolidated Information

The following table sets forth selected consolidated financial information of the Company for the most recently completed quarter ended March 31, 2011 and for the quarters in 2010 and 2009. The adoption date of IFRS of January 1, 2011 requires restatement for comparative purposes, of the Company's opening balance sheet as at January 1, 2010, all interim quarterly periods in 2010 and for its year ended December 31, 2010. As a result, 2009 comparative information has not been restated and is in accordance with previous GAAP.

    <<
    -------------------------------------------------------------------------
    2011 - Quarter ended
     (unaudited)
    ($000s, except per share
     amounts)                      March 31
    -------------------------------------------------------------------------
    Revenues before royalties and
     risk management                 40,535
    Cash flow from operating
     activities                      15,718
    Cash flow from operating
     activities per share
      Basic                           $0.16
      Diluted                         $0.15
    Funds flow from operations(1)    17,027
    Funds flow from operations
     per share(1)
      Basic                           $0.17
      Diluted                         $0.16
    Net loss                         (5,487)
    Net loss per share
      Basic and Diluted               $0.06
    Net capital expenditures (cash)  59,247
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    2010 - Quarter ended
     (unaudited)
    ($000s, except per share
     amounts)                      March 31    June 30   Sept. 30    Dec. 31
    -------------------------------------------------------------------------

    Revenues before royalties and
     risk management                 26,929     25,574     27,344     37,826
    Cash flow from operating
     activities                      13,456      6,065     13,466     11,285
    Cash flow from operating
     activities per share
      Basic                           $0.15      $0.07      $0.14      $0.12
      Diluted                         $0.15      $0.07      $0.14      $0.11
    Funds flow from operations(1)    10,198     10,610     16,342     15,892
    Funds flow from operations
     per share(1)
      Basic                           $0.12      $0.11      $0.17      $0.16
      Diluted                         $0.11      $0.11      $0.17      $0.15
    Net income (loss)                 3,969     (6,350)    (3,321)       (57)
    Net income (loss) per share
      Basic                           $0.04     $(0.07)    $(0.03)    $(0.00)
      Diluted                         $0.04     $(0.07)    $(0.03)    $(0.00)
    Net capital expenditures (cash)  18,393     17,656     30,416     25,716
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Previous GAAP
    2009 - Quarter ended
     (unaudited)
    ($000s, except per share
     amounts)                      March 31    June 30   Sept. 30    Dec. 31
    -------------------------------------------------------------------------
    Revenues before royalties and
     risk management                 31,345     29,805     23,860     24,004
    Cash flow from operating
     activities                       9,311      6,467     12,150      2,743
    Cash flow from operating
     activities per share
      Basic and Diluted               $0.12      $0.08      $0.15      $0.03
    Funds flow from operations(1)     6,489     10,765     11,090      7,681
    Funds flow from operations
     per share(1)
      Basic and Diluted               $0.08      $0.14      $0.14      $0.10
    Net loss                         (9,056)   (99,715)    (9,363)    (8,216)
    Net loss per share
      Basic and Diluted              $(0.12)    $(1.27)    $(0.12)    $(0.10)
    Net capital expenditures
     (cash)                           2,764     (7,138)   (81,986)     9,926
    Distributions declared            1,570          -          -          -
    Distributions per share           $0.02          -          -          -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to "Non-GAAP Measures" in respect of the term "funds flow from
        operations" and "funds flow from operations per share".



    BELLATRIX EXPLORATION LTD.
    CONSOLIDATED BALANCE SHEETS
    (unaudited, expressed in Canadian
     dollars)
    -------------------------------------------------------------------------
                                                 As at      As at      As at
                                              March 31,  December  January 1,
    ($000s)                                       2011   31, 2010       2010
    -------------------------------------------------------------------------
                                                         (note 22)  (note 22)
    ASSETS
    Current assets
      Accounts receivable                    $  36,400  $  39,500  $  20,722
      Deposits and prepaid expenses              5,241      4,619      4,940
      Commodity contract asset (note 20)         3,734          -      3,374
                                            ---------------------------------
                                                45,375     44,119     29,036
    Exploration and evaluation assets
     (note 6)                                   27,776     18,535     20,542
    Property, plant and equipment (note 7)     436,580    399,580    346,229
    Deferred taxes (note 16)                    15,848     14,820     14,602
                                            ---------------------------------
    Total assets                             $ 525,579  $ 477,054  $ 410,409
                                            ---------------------------------
                                            ---------------------------------

    LIABILITIES
      Current liabilities
      Accounts payable and accrued
       liabilities                           $  53,562  $  42,792  $  23,345
      Current portion of finance lease
       obligation (note 11)                        147        146          -
      Commodity contract liability (note 20)    16,694      3,732          -
                                            ---------------------------------
                                                70,403     46,670     23,345

    Deferred liability- flow-through shares
     (note 8)                                    3,288      3,768          -
    Long-term debt (note 9)                     70,298     41,172     27,902
    Convertible debentures (note 10)            47,951     47,599     81,684
    Finance lease obligation (note 11)           1,407      1,443          -
    Decommissioning Liabilities (note 12)       39,256     38,710     39,001
                                            ---------------------------------
    Total liabilities                          232,603    179,362    171,932
                                            ---------------------------------

    SHAREHOLDERS' EQUITY
      Shareholders' capital (note 13)          316,819    316,779    257,629
      Equity component of convertible
       debentures (note 10)                      4,378      4,378          -
      Contributed surplus (note 14)             31,220     30,489     28,186
      Deficit                                  (59,441)   (53,954)   (47,338)
                                            ---------------------------------
    Total shareholders' equity                 292,976    297,692    238,477
                                            ---------------------------------
    Total liabilities and shareholders'
     equity                                  $ 525,579  $ 477,054  $ 410,409
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    COMMITMENTS (note 19) and SUBSEQUENT EVENT (note 21)
    See accompanying notes to the consolidated financial statements.



    BELLATRIX EXPLORATION LTD.
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    For the three months ended March 31
    (unaudited, expressed in Canadian dollars)

    ($000s)                                                  2011       2010
    -------------------------------------------------------------------------
                                                                    (note 22)
    REVENUES
      Petroleum and natural gas sales                   $  40,112  $  26,382
      Other income                                            423        547
      Royalties                                            (6,471)    (5,250)
                                                       ----------------------
      Total revenues                                       34,064     21,679

      Gain (loss) on commodity contracts (note 20)        (10,184)     9,748
                                                       ----------------------
                                                           23,880     31,427

    EXPENSES
      Production                                           11,298      8,717
      Transportation                                        1,167        808
      General and administrative                            2,267      2,536
      Share-based compensation (notes 13 and 14)              495        192
      Depletion and depreciation                           13,759     10,146
      Loss (gain) on property dispositions                    (91)       322
                                                       ----------------------
                                                           28,895     22,721


    NET PROFIT (LOSS) BEFORE FINANCE AND TAXES             (5,015)     8,706

      Finance expenses (note 17)                            1,980      2,695
                                                       ----------------------

    NET PROFIT(LOSS) BEFORE TAXES                          (6,995)     6,011

    TAXES
      Deferred tax expense (recovery) (note 16)            (1,508)     2,042
                                                       ----------------------

    NET PROFIT (LOSS) AND COMPREHENSIVE INCOME (LOSS)      (5,487)     3,969
    -------------------------------------------------------------------------


    Net loss per share
      Basic                                                $(0.06)     $0.04
      Diluted                                              $(0.06)     $0.04
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    BELLATRIX EXPLORATION LTD.
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
    For the three months ended March 31,
    (unaudited, expressed in Canadian dollars)

    ($000s)                                                  2011       2010
    -------------------------------------------------------------------------
                                                                    (note 22)
    SHAREHOLDERS' CAPITAL
      Common shares
      Balance, beginning of period                        316,779    257,629
      Issued for cash, net of transaction costs                 -     43,168
      Issued on exercise of share options                      30         64
      Contributed surplus transferred on exercised
       options                                                 10         22
                                                         --------------------
      Balance, end of period                              316,819    300,883
                                                         --------------------


    EQUITY COMPONENT OF CONVERTIBLE DEBENTURES
                                                         --------------------
      Balance, beginning and end of period (note 10)        4,378          -
                                                         --------------------


    CONTRIBUTED SURPLUS
      Balance, beginning of period                         30,489     28,186
      Share-based compensation expense (note 13 and 14)       747        223
      Adjustment of share-based compensation expense
       for forfeitures of unvested share options               (6)         -
      Transfer to share capital for exercised options         (10)       (22)
                                                         --------------------
      Balance, end of period                               31,220     28,387
                                                         --------------------


    DEFICIT
      Balance, beginning of period                        (53,954)   (47,338)
      Net loss                                             (5,487)     3,969
                                                         --------------------
      Balance, end of period                              (59,441)   (43,369)
                                                         --------------------


    -------------------------------------------------------------------------
    TOTAL SHAREHOLDERS' EQUITY                          $ 292,976  $ 285,901
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    BELLATRIX EXPLORATION LTD.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the three months ended March 31
    (unaudited, expressed in Canadian dollars)

    ($000s)                                                  2011       2010
    -------------------------------------------------------------------------
                                                                    (note 22)
    Cash provided by (used in):

    CASH FLOW FROM OPERATING ACTIVITIES
    Profit (Loss)                                       $  (5,487) $   3,969
    Adjustments for:
      Depletion and depreciation                           13,759     10,146
      Finance expenses (note 17)                              631        783
      Share-based compensation (notes 13 and 14)              495        192
      Unrealized loss (gain) on commodity contracts
       (note 20)                                            9,228     (7,256)
      Loss (gain) on property dispositions                    (91)       322
      Deferred tax expense (recovery) (note 16)            (1,508)     2,042
      Decommissioning costs incurred (note 12)               (149)      (162)
      Change in non-cash working capital (note 15)         (1,160)     3,420
                                                         --------------------
                                                           15,718     13,456

    CASH FLOW FROM (USED IN) FINANCING ACTIVITIES
      Issuance of share capital, net of share issue
       costs                                                   30     42,514
      Advances from loans and borrowings                  104,376      3,095
      Repayment of loans and borrowings                   (75,250)   (30,997)
      Obligations under finance lease (note 11)               (35)         -
                                                         --------------------
                                                           29,121     14,612
      Change in non-cash working capital (note 15)            639      1,554
                                                         --------------------
                                                           29,760     16,166

    CASH FLOW FROM (USED IN) INVESTING ACTIVITIES
      Expenditure on exploration and evaluation assets     (9,996)      (143)
      Additions to property, plant and equipment          (49,121)   (18,203)
      Proceeds on sale of property, plant and equipment      (130)       (47)
                                                         --------------------
                                                          (59,247)   (18,393)
      Change in non-cash working capital (note 15)         13,769     (2,232)
                                                         --------------------
                                                          (45,478)   (20,625)

      Change in cash                                            -      8,997

      Cash, beginning of year                                   -          -
    -------------------------------------------------------------------------

      Cash, end of period                               $       -  $   8,997
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash paid:
      Interest                                          $     572  $     214
      Taxes                                                     -          -

    See accompanying notes to the consolidated financial statements.



    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited, expressed in Canadian dollars)
    -------------------------------------------------------------------------
    1.  CORPORATE INFORMATION

        Bellatrix Exploration Ltd. (the "Company" or "Bellatrix") is a growth
        oriented, public exploration and production company. The Company
        resulted from a reorganization (the "Reorganization) effective
        November 1, 2009 pursuant to a plan of arrangement (the
        "Arrangement") involving, among others, True Energy Trust (the
        "Trust" or "True"), Bellatrix Exploration Ltd. and securityholders of
        the Trust.

        The Arrangement involved the exchange, on a one-for-one basis of
        trust units and exchangeable shares, after accounting for the
        conversion factor applicable to the exchangeable shares, for common
        shares of Bellatrix. All outstanding incentive unit rights to acquire
        Trust units of True became share options to acquire an equal number
        of common shares of Bellatrix Exploration Ltd. on the same terms and
        conditions, including as to exercise price, vesting and expiry dates.

        In connection with the Reorganization, the unitholders' capital was
        reduced by the deficit of the Trust as of October 31, 2009 and trust
        units were exchanged for common shares of Bellatrix.

    2.  BASIS OF PREPARATION

        These consolidated interim financial statements are unaudited and
        have been prepared using accounting policies consistent with
        International Financial Reporting Standards ("IFRS") and in
        accordance with International Accounting Standard ("IAS") 34 -
        "Interim Financial Reporting" and IFRS 1 - "First-time Adoption of
        IFRS", as they are part of the period covered by the Company's first
        IFRS financial statements for the year ended December 31, 2011. The
        interim consolidated financial statements of the Company were
        authorized by the Board of Directors on May 11, 2011.

        Previously, the Company prepared its consolidated annual and
        consolidated interim financial statements in accordance with Canadian
        Generally Accepted Accounting Principles ("Previous GAAP"). Previous
        GAAP differs in some areas from IFRS. The comparative figures from
        2010 were restated to reflect these adjustments. Certain information
        and footnote disclosure which are considered material to the
        understanding of the Company's interim financial statements and which
        are normally included in annual financial statements prepared in
        accordance with IFRS are provided in note 22 along with
        reconciliation and descriptions of the effect of the transition from
        previous GAAP to IFRS on equity, earnings and comprehensive income.

        As these are the Company's first set of consolidated interim
        financial statements in accordance with IFRS, the Company's
        disclosures exceed the minimum requirements under IAS 34. The Company
        has elected to exceed the minimum requirements in order to present
        the Company's accounting policies in accordance with IFRS and the
        additional disclosures required under IFRS, which also highlight the
        changes from the Company's 2010 annual consolidated financial
        statements prepared in accordance with previous GAAP. In 2011 and
        beyond, the Company may not provide the same amount of disclosure in
        the Company's interim consolidated financial statements which will be
        prepared in accordance with IFRS.

        The preparation of financial statements in accordance with IAS 34
        requires the use of certain critical accounting estimates. It
        requires management to make estimates and assumptions that affect the
        amounts reported in the consolidated interim financial statements and
        accompanying notes. Actual results may differ from these estimates.

        The consolidated financial statements are presented in Canadian
        dollars, the Company's functional currency, and have been prepared on
        the historical cost basis except for derivative financial instruments
        measured at fair value. The consolidated financial statements have,
        in management's opinion, been properly prepared using careful
        judgment and reasonable limits of materiality and within the
        framework of the significant policies summarized in note 3. The areas
        involving a higher degree of judgment or complexity, or areas where
        assumptions and estimates are significant to the financial statements
        are disclosed in note 5.

    3.  SIGNIFICANT ACCOUNTING POLICIES

        a. Principles of Consolidation

           The consolidated financial statements include the accounts of the
           Company and its subsidiary. Any reference to the "Company"
           throughout these consolidated financial statements refers to the
           Company and its subsidiary. All inter-entity transactions have
           been eliminated.

        b. Revenue Recognition

           Revenues from the sale of petroleum and natural gas are recorded
           when title to the products transfers to the purchasers based on
           volumes delivered and contracted delivery points and prices.
           Royalty income is recognized as it accrues in accordance with the
           terms of the overriding royalty agreements and is included with
           petroleum and natural gas sales.

           Processing charges to other entities for use of facilities owned
           by the Company are recognized as revenue as they accrue in
           accordance with the terms of the service agreements and are
           presented as other income.

        c. Joint Interests

           A significant portion of the Company's exploration and development
           activities are conducted jointly with others as established by
           contractual agreements and requiring unanimous consent for
           strategic financial and operating decisions. The financial
           statements reflect only the Company's proportionate share of the
           assets, liabilities, revenues, expenses and cash flows from these
           activities.

        d. Property, plant and equipment and exploration and evaluation
           assets

           I.    Pre-exploration expenditures

                 Expenditures made by the Company before acquiring the legal
                 right to explore in a specific area do not meet the
                 definition of an asset and therefore are expensed by the
                 Company as incurred.

           II.   Exploration and evaluation expenditures

                 Costs incurred once the legal right to explore has been
                 acquired are capitalized as exploration and evaluation
                 assets. These costs include, but are not limited to,
                 exploration license expenditures, leasehold property
                 acquisition costs, evaluation costs, including drilling
                 costs directly attributable to an identifiable well and
                 directly attributable general and administrative costs.
                 These costs are accumulated in cost centres by property and
                 are not subject to depletion until technical feasibility and
                 commercial viability has been determined.

                 Exploration and evaluation assets are assessed for
                 impairment when facts and circumstances suggest that the
                 carrying amount exceeds the recoverable amount. For purposes
                 of impairment testing, exploration and evaluation assets are
                 grouped together with developing and producing assets and
                 are tested at an aggregated cash-generating unit ("CGU")
                 level.

                 The technical feasibility and commercial viability of
                 extracting a mineral resource is considered to be
                 determinable when proven and probable reserves are
                 determined to exist. A review of each exploration license or
                 field is carried out, at least annually, to ascertain
                 whether proven and probable reserves have been discovered.
                 Upon determination of proven and probable reserves,
                 exploration and evaluation assets attributable to those
                 reserves are tested for impairment and reclassified from
                 exploration and evaluation assets to oil and natural gas
                 interests.

           III.  Developing and production costs

                 Items of property, plant and equipment, which include oil
                 and gas development and production assets, are measured at
                 cost less accumulated depletion and depreciation and
                 accumulated impairment losses. Development and production
                 assets are grouped into CGU's for impairment testing. A
                 CGU's recoverable amount is the higher of its fair value
                 less costs to sell and its value in use. Where the carrying
                 amount of a CGU exceeds its recoverable amount, the asset
                 group is considered impaired and is written down to its
                 recoverable amount.

                 Gains and losses on disposal of an item of property, plant
                 and equipment, including oil and natural gas interests, are
                 determined by comparing the proceeds from disposal with the
                 carrying amount of property, plant and equipment and are
                 recognized net within the Consolidated Statements of
                 Comprehensive Income.

           IV.   Subsequent costs

                 Costs incurred subsequent to the determination of technical
                 feasibility and commercial viability and the costs of
                 replacing parts of property, plant and equipment are
                 recognized as oil and natural gas interests only when they
                 increase the future economic benefits embodied in the
                 specific asset to which they relate. All other expenditures
                 are recognized in profit or loss as incurred. Such
                 capitalized oil and natural gas interests generally
                 represent costs incurred in developing proved and/or
                 probable reserves and bringing in or enhancing production
                 from such reserves, and are accumulated on a field or
                 geotechnical area basis. The carrying amount of any replaced
                 or sold component is derecognized. The costs of the day-to-
                 day servicing of property, plant and equipment are
                 recognized in profit or loss as incurred.

           V.    Depletion and depreciation

                 Depletion of petroleum and natural gas properties is
                 provided using the unit-of-production method based on
                 production volumes in relation to total estimated proven and
                 probable reserves as determined annually by independent
                 engineers and determined in accordance with National
                 Instrument 51-101. Natural gas reserves and production are
                 converted at the energy equivalent of six thousand cubic
                 feet to one barrel of oil.

                 Calculations for depletion and depreciation of production
                 equipment are based on total capitalized costs plus
                 estimated future development costs of proven and probable
                 undeveloped reserves less the estimated net realizable value
                 of production equipment and facilities after the proved and
                 probable reserves are fully produced.

                 Proven and probable reserves are estimated using independent
                 reserve engineer reports and represent the estimated
                 quantities of crude oil, natural gas and natural gas liquids
                 which geological, geophysical and engineering data
                 demonstrate with a specified degree of certainty to be
                 recoverable in future years from known reservoirs and which
                 are considered commercially producible. There should be a 50
                 percent statistical probability that the actual quantity of
                 recoverable reserves will be more than the amount estimated
                 as proven and probable and a 50 percent statistical
                 probability that it will be less. The equivalent statistical
                 probabilities for the proven component of proven and
                 probable reserves are 90 percent and 10 percent,
                 respectively.

                 Such reserves may be considered commercially producible if
                 management has the intention of developing and producing
                 them and such intention is based upon:

                 -  a reasonable assessment of the future economics of such
                    production;

                 -  a reasonable expectation that there is a market for all
                    or substantially all the expected oil and natural gas
                    production; and

                 -  evidence that the necessary production, transmission and
                    transportation facilities are available or can be made
                    available.

                 Reserves may only be considered proven and probable if
                 supported by either actual production or conclusive
                 formation tests. The area of reservoir considered
                 proven includes (a) that portion delineated by drilling and
                 defined by gas-oil and/or oil-water contacts, if any, or
                 both, and (b) the immediately adjoining portions not yet
                 drilled, but which can be reasonably judged as economically
                 productive on the basis of available geophysical, geological
                 and engineering data. In the absence of information on fluid
                 contacts, the lowest known structural occurrence of oil and
                 natural gas controls the lower proved limit of the
                 reservoir.

                 Reserves which can be produced economically through
                 application of improved recovery techniques (such as fluid
                 injection) are only included in the proven and probable
                 classification when successful testing by a pilot project,
                 the operation of an installed program in the reservoir, or
                 other reasonable evidence (such as, experience of the same
                 techniques on similar reservoirs or reservoir simulation
                 studies) provides support for the engineering analysis on
                 which the project or program was based.

                 Depreciation of office furniture and equipment is provided
                 for on a 20% declining balance basis.

                 Depreciation methods, useful lives and residual values are
                 reviewed at each reporting date.

        e. Impairment

           I.    Financial assets

                 A financial asset is assessed at each reporting date to
                 determine whether there is any objective evidence that it is
                 impaired. A financial asset is considered to be impaired if
                 objective evidence indicates that one or more events have
                 had a negative effect on the estimated future cash flows of
                 that asset.

                 An impairment loss in respect of a financial asset measured
                 at amortized cost is calculated as the difference between
                 its carrying amount and the present value of the estimated
                 future cash flows discounted at the original effective
                 interest rate.

                 All impairment losses are recognized in profit or loss.

                 An impairment loss is reversed if the reversal can be
                 related objectively to an event occurring after the
                 impairment loss was recognized. For financial assets
                 measured at amortized cost the reversal is recognized in
                 profit or loss.

                 In relation to trade receivables, a provision for impairment
                 is made and an impairment loss is recognized in profit and
                 loss when there is objective evidence (such as the
                 probability of insolvency or significant financial
                 difficulties of the debtor) that the Company will not be
                 able to collect all of the amounts due under the original
                 terms of the invoice. The carrying amount of the receivable
                 is reduced through use of an allowance account. Impaired
                 debts are written off against the allowance account when
                 they are assessed as uncollectible.

           II.   Non-financial assets

                 Exploration and evaluation assets are assessed for
                 impairment when they are reclassified to developing and
                 producing assets, as oil and natural gas interests, and also
                 if facts and circumstances suggest that the carrying amount
                 exceeds the recoverable amount.

                 For the purpose of impairment testing, assets are grouped
                 together into the smallest group of assets that generates
                 cash inflows from continuing use that are largely
                 independent of the cash inflows of other assets or groups of
                 assets (the "cash-generating unit" or "CGU"). The
                 recoverable amount of an asset or a CGU is the greater of
                 its value in use and its fair value less costs to sell.

                 Fair value less costs to sell is determined to be the amount
                 for which the asset could be sold in an arm's length
                 transaction. Fair value less costs to sell can be determined
                 by using an observable market or by using discounted future
                 net cash flows of proved and probable reserves using
                 forecasted prices and costs. Value in use is determined by
                 estimated the present value of the future net cash flows
                 expected to be derived from the continued use of the asset
                 or cash generating unit.

                 Exploration and evaluation assets are grouped together with
                 the Company's CGU's when they are assessed for impairment,
                 both at the time of any triggering facts and circumstances
                 as well as upon their eventual reclassification to producing
                 assets (oil and natural gas interests in property, plant and
                 equipment).

                 An impairment loss is recognized if the carrying amount of
                 an asset or its CGU exceeds its estimated recoverable
                 amount. Impairment losses are recognized in profit or loss.
                 Impairment losses recognized in respect of CGU's are
                 allocated first to reduce the carrying amount of any
                 goodwill, if any, allocated to the units and then to reduce
                 the carrying amounts of the other assets in the unit (group
                 of units) on a pro rata basis.

                 Impairment losses recognized in prior years are assessed at
                 each reporting date for any indications that the loss has
                 decreased or no longer exists. An impairment loss is
                 reversed if there has been a change in the estimates used to
                 determine the recoverable amount. An impairment loss is
                 reversed only to the extent that the asset's carrying amount
                 does not exceed the carrying amount that would have been
                 determined, net of depletion and depreciation or
                 amortization, if no impairment loss had been recognized.

        f. Provisions

           Provisions are recognized when the Company has a present legal or
           constructive obligation as a result of a past event, it is
           probable that an outflow of economic benefits will be required to
           settle the obligation and a reliable estimate can be made of the
           amount of the obligation. Provisions are determined by discounting
           the expected cash flows at a pre-tax rate that reflects current
           market assessments of the time value of money and the risks
           specific to the liability if the risks have not been incorporated
           into the estimate of cash flows. The increase in the provision due
           to the passage of time is recognized within finance costs.

           I.    Decommissioning obligations

                 The Company's activities give rise to dismantling,
                 decommissioning and site disturbance re-mediation
                 activities. A provision is made for the estimated cost of
                 site restoration and capitalized in the relevant asset
                 category.

                 Decommissioning obligations are measured at the present
                 value of management's best estimate of the expenditure
                 required to settle the present obligation at the balance
                 sheet date. Changes in the present value of the estimated
                 expenditure are reflected as an adjustment to the provision
                 and the relevant asset. The unwinding of the discount on the
                 decommissioning provision is recognized as a finance cost.
                 Actual costs incurred upon settlement of the
                 decommissioning liability is charged against the provision
                 to the extent the provision was recognized.

           II.   Environmental Liabilities

                 The Company records liabilities on an undiscounted basis for
                 environmental remediation efforts that are likely to occur
                 and where the cost can be reasonably estimated. The
                 estimates, including associated legal costs, are based on
                 available information using existing technology and enacted
                 laws and regulations. The estimates are subject to revision
                 in future periods based on actual costs incurred or new
                 circumstances. Any amounts expected to be recovered from
                 other parties, including insurers, are recorded as an asset
                 separate from the associated liability.

        g. Share-based Compensation Plan

           Bellatrix accounts for options issued under the Company's share
           option plan to employees, directors, officers, consultants and
           other service providers by reference to the fair value of the
           equity instruments granted. The fair value of each share option is
           estimated on the date of the grant using the Black-Scholes options
           pricing model and charged to earnings over the vesting period with
           a corresponding increase to contributed surplus. The Company
           estimates a forfeiture rate on the grant date and the rate is
           adjusted to reflect the actual number of options that actually
           vest. The expected life of the options granted is adjusted, based
           on the Company's best estimate, for the effects of non-
           transferability, exercise restrictions and behavioural
           considerations.

        h. Income Taxes

           Income tax expense comprises of current and deferred tax. Income
           tax expense is recognized in profit or loss except to the extent
           that it relates to items recognized directly in equity, in which
           case it is recognized in equity.

           I.    Current income tax

                 Current income tax assets and liabilities for the current
                 and prior periods are measured at the amount expected to be
                 recovered from or paid to the taxation authorities. The tax
                 rates and tax laws used to compute the amount are those that
                 are enacted or substantively enacted by the date of the
                 statement of financial position.

           II.   Deferred income tax

                 Deferred tax is recognized using the balance sheet method,
                 providing for temporary differences between the carrying
                 amounts of assets and liabilities for financial reporting
                 purposes and the amounts used for taxation purposes.
                 Deferred tax is not recognized on the initial recognition of
                 assets or liabilities in a transaction that is not a
                 business combination. In addition, deferred tax is not
                 recognized for taxable temporary differences arising on the
                 initial recognition of goodwill. Deferred tax is measured at
                 the tax rates that are expected to be applied to temporary
                 differences when they reverse, based on the laws that have
                 been enacted or substantively enacted by the reporting date.
                 Deferred tax assets and liabilities are offset if there is a
                 legally enforceable right to offset, and they relate to
                 income taxes levied by the same tax authority on the same
                 taxable entity, or on different tax entities, but they
                 intend to settle current tax liabilities and assets on a net
                 basis or their tax assets and liabilities will be realized
                 simultaneously.

                 A deferred tax asset is recognized to the extent that it is
                 probable that future taxable profits will be available
                 against which the temporary difference can be utilized.
                 Deferred tax assets are reviewed at each reporting date and
                 are reduced to the extent that it is no longer probable that
                 the related tax benefit will be realized.

        i. Financial Instruments

           All financial instruments, including all derivatives, are
           recognized on the balance sheet initially at fair value.
           Subsequent measurement of all financial assets and liabilities
           except those held-for-trading and available for sale are measured
           at amortized cost determined using the effective interest rate
           method. Held-for-trading financial assets are measured at fair
           value with changes in fair value recognized in income. Available-
           for-sale financial assets are measured at fair value with changes
           in fair value recognized in comprehensive income and reclassified
           to income when derecognized or impaired. The Company has the
           following classifications:

           ------------------------------------------------------------------
           Financial Assets                                Subsequent
           and Liabilities             Category            Measurement
           ------------------------------------------------------------------
                                                           Fair value through
           Cash and cash equivalents   Held-for-trading    profit or loss
           ------------------------------------------------------------------
                                       Loans and
           Accounts receivable         receivables         Amortized cost
           ------------------------------------------------------------------
           Commodity risk                                  Fair value through
           management contracts        Held-for-trading    profit or loss
           ------------------------------------------------------------------
           Accounts payable and
           accrued liabilities         Other liabilities   Amortized cost
           ------------------------------------------------------------------
           Deferred liability          Other liabilities   Amortized cost
           ------------------------------------------------------------------
           Long-term debt              Other liabilities   Amortized cost
           ------------------------------------------------------------------
           Convertible debentures      Other liabilities   Amortized cost
           ------------------------------------------------------------------
           Capital lease obligation    Other liabilities   Amortized cost
           ------------------------------------------------------------------

           Transaction costs attributable to financial instruments classified
           as other than held-for-trading are included in the recognized
           amount of the related financial instrument and recognized over the
           life of the resulting financial instrument using the effective
           interest rate method.

           The Company utilizes financial derivatives and non-financial
           derivatives, such as commodity sales contracts requiring physical
           delivery, to manage the price risk attributable to anticipated
           sale of petroleum and natural gas production and foreign exchange
           exposures. The Company does not enter into derivative financial
           instruments for trading or speculative purposes. The Company has
           not designated its financial derivative contracts as effective
           accounting hedges, and thus not applied hedge accounting, even
           though the Company considers all commodity contracts to be
           economic hedges. As a result, financial derivatives are classified
           as fair value through profit or loss and are recorded on the
           balance sheet at fair value.

           The derivative financial instruments are initiated within the
           guidelines of the Company's commodity price risk management
           policy. This includes linking all derivatives to specific assets
           and liabilities on the balance sheet or to specific firm
           commitments or forecasted transactions.

           The Company accounts for its commodity sales and purchase
           contracts, which were entered into and continue to be held for the
           purpose of receipt or delivery of non-financial items in
           accordance with its expected purchase, sale or usage requirements
           as executory contracts. As such, physical sales and purchase
           contracts are not recorded at fair value on the balance sheet.
           Settlements on these physical sales contracts are recognized in
           petroleum and natural gas sales.

           Financial instruments measured at fair value on the balance sheet
           require classification into one of the following levels of the
           fair value hierarchy:

           Level 1 - Quoted prices (unadjusted) in active markets for
           identical assets or liabilities

           Level 2 - Inputs other than quoted prices included in level 1 that
           are observable for the asset or liability, either directly or
           indirectly.

           Level 3 - inputs for the asset or liability that are not based on
           observable market data.

           The fair value hierarchy level at which a fair value measurement
           is categorized is determined on the basis of the lowest level
           input that is significant to the fair value measurement in its
           entirety. The Company has categorized its financial instruments
           that are fair valued on the balance sheet according to the fair
           value hierarchy (note 20).

        j. Compound Financial Instruments

           The Company's compound financial instruments comprise of its
           convertible debentures that can be converted to common shares at
           the option of the holder, and the number of shares to be issued
           does not vary with changes in fair value.

           The liability component of the convertible debentures is
           recognized initially at the fair value of a similar liability that
           does not have an equity conversion option. The equity component is
           recognized initially as the difference between the fair value of
           the convertible debenture and the fair value of the liability
           component. Any directly attributable transaction costs are
           allocated to the liability and equity components in proportion to
           their initial carrying amounts.

           Subsequent to initial recognition, the liability component of the
           convertible debentures is measured at amortized cost using the
           effective interest method. The equity component the convertible
           debenture is not re-measured subsequent to initial recognition.

        k. Flow-through Shares

           Resource expenditures for income tax purposes related to
           exploration and development activities funded by flow-through
           share arrangements are renounced to investors in accordance with
           income tax legislation. A deferred liability is recognized for the
           premium on the flow-through shares and is subsequently reversed as
           the Company incurs qualifying expenditures. Any difference between
           the deferred liability set up for the premium on the flow-through
           shares and the tax effect on the renounced expenditures is
           recognized in profit or loss.

        l. Obligations Under Lease

           Leases which effectively transfer substantially all of the risks
           and rewards of ownership to the Company are classified as capital
           leases and are accounted for as an acquisition of an asset and an
           assumption of an obligation at the inception of the lease,
           measured as the present value of minimum lease payments to a
           maximum of the asset's fair value. The asset is amortized in
           accordance with the Company's depletion and depreciation policy.
           The obligations recorded under capital lease payments are reduced
           by the lease payments made.

        m. Basic and Diluted per Share Calculations

           Basic per share amounts are calculated using the weighted average
           number of shares outstanding during the period. The Company uses
           the treasury share method to determine the dilutive effect of
           share options. Under the treasury share method, only "in the
           money" dilutive instruments impact the diluted calculations in
           computing diluted per share amounts. The Company uses the "if-
           converted" method to determine the dilutive effect of convertible
           debentures.

        n. Finance income and expenses

           Finance income is recognized as it accrues in profit or loss,
           using the effective interest method. Finance expense comprises
           interest expense on borrowings, accretion of the discount rate on
           provisions, accretion of the liability component of the
           convertible debentures and impairment losses recognized on
           financial assets.

           Borrowing costs incurred for the construction of qualifying assets
           are capitalized during the period of time that is required to
           complete and prepare the assets for their intended use or sale.
           Qualifying assets are assets that necessarily take a substantial
           period of time to get ready for their intended use. All other
           borrowing costs are recognized in profit or loss using the
           effective interest method. The capitalization rate used to
           determine the amount of borrowing costs to be capitalized is the
           weighted average interest rate applicable to the Company's
           outstanding borrowings during the period.

        o. Cash and cash equivalents

           Cash and cash equivalents include cash and short-term investments
           with original maturities of three months or less.

    4.  NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

        Effective January 1, 2013, Bellatrix will be required to adopt IFRS
        9, "Financial Instruments", which is the result of the first phase of
        the IASB's project to replace IAS 39, "Financial Instruments:
        Recognition and Measurement". The new standard replaces the current
        multiple classification and measurement models for financial assets
        and liabilities with a single model that has only two classification
        categories: amortized cost and fair value.

    5.  CRITICAL JUDGMENTS AND ACCOUNTING ESTIMATES

        The consolidated financial statements of the Company have been
        prepared by management in accordance with International Financial
        Reporting Standards. The preparation of consolidated financial
        statements in conformity with IFRS requires management to make
        estimates and assumptions that affect the amounts reported in the
        consolidated financial statements and accompanying notes. By their
        nature, these estimates are subject to measurement uncertainty and
        the effect on the financial statements of changes in such estimates
        in future periods could be material. The consolidated financial
        statements have, in management's opinion, been properly prepared
        using careful judgment and reasonable limits of materiality and
        within the framework of the significant policies summarized below.

           I.    Accounts receivable

                 Accounts receivable are recorded at the estimated
                 recoverable amount which involves the estimate of
                 uncollectible accounts.

           II.   Derivatives

                 The fair value of commodity contracts are based on published
                 market prices as at the balance sheet date and may differ
                 from what will eventually be realized. Changes in the fair
                 value of the commodity contracts are recognized in profit or
                 loss. The actual gains and losses realized on eventual cash
                 settlement can vary due to subsequent fluctuations in
                 commodity prices.

           III.  Oil and gas reserves

                 Reserves and resources are used in the units of production
                 calculation for depreciation, depletion and amortization and
                 the impairment analysis which affect net income. There are
                 numerous uncertainties inherent in estimating oil and gas
                 reserves. Estimating reserves is very complex, requiring
                 many judgments based on geological, geophysical, engineering
                 and economic data. Changes in these judgments could have a
                 material impact on the estimated reserves. These estimates
                 may change, having either a negative or positive effect on
                 net earnings as further information becomes available and as
                 the economic environment changes.

           IV.   Depreciation and depletion

                 Depletion of petroleum and natural gas properties is
                 provided using the unit-of-production method based on
                 production volumes before royalties in relation to total
                 estimated proved and probable reserves as determined
                 annually by independent engineers and internal reserve
                 evaluations on a quarterly basis determined in accordance
                 with National Instrument 51-101. Natural gas reserves and
                 production are converted at the energy equivalent of six
                 thousand cubic feet to one barrel of oil.

                 Calculations for depletion and depreciation of production
                 equipment are based on total capitalized costs plus
                 estimated future development costs of proved and probable
                 undeveloped reserves less the estimated net realizable value
                 of production equipment and facilities after the proved
                 reserves are fully produced. The costs of acquiring and
                 evaluating unproved properties are excluded from depletion
                 calculations.

           V.    Recoverability of asset carrying values

                 The Company assesses its oil and gas properties, including
                 exploration and evaluation assets, for possible impairment
                 if there are events or changes in circumstances that
                 indicate that carrying values of the assets may not be
                 recoverable, or at least at every reporting date.

                 The assessment of any impairment of property, plant and
                 equipment is dependent upon estimates of recoverable amount
                 that take into account factors such as reserves, economic
                 and market conditions, timing of cash flows, the useful
                 lives of assets and their related salvage values.

           VI.   Liability component of convertible debentures

                 The Company's liability component of its convertible
                 debentures has been determined by estimating a market rate
                 of interest by reference to similar liabilities that do not
                 have a conversion option.

           VII.  Decommissioning obligations

                 Provisions for decommissioning obligations associated with
                 the Company's drilling operations are based on current legal
                 and constructive requirements, technology, price levels and
                 expected plans for remediation. Actual costs and cash
                 outflows can differ from estimates because of changes in
                 laws and regulations, public expectations, prices, discovery
                 and analysis of site conditions and changes in clean up
                 technology.

           VIII. Share-based compensation

                 The fair value of stock options granted is measured using a
                 Black Scholes model. Measurement inputs include share price
                 on measurement date, exercise price of the option, expected
                 volatility, expected life of the options, expected dividends
                 and the risk-free rate. The Company estimates volatility
                 based on historical share price excluding specific time
                 frames in which volatility was affected by specific
                 transactions that are not considered to be indicative of the
                 Company's expected share price volatility. The expected life
                 of the options is based on historical experience and general
                 option holder behavior. Dividends were not taken into
                 consideration as the Company does not expect to pay
                 dividends. Management also makes an estimate of the number
                 of options that will forfeit and the rate is adjusted to
                 reflect the actual number of options that actually vest.

           IX.   Income taxes

                 Related assets and liabilities are recognized for the
                 estimated tax consequences between amounts included in the
                 financial statements and their tax base using substantively
                 enacted future income tax rates. Timing of future revenue
                 streams and future capital spending changes can affect the
                 timing of any temporary differences, and accordingly affect
                 the amount of the deferred tax asset or liability calculated
                 at a point in time. These differences could materially
                 impact earnings.

    6.  EXPLORATION AND EVALUATION ASSETS

        ($000s)
        ---------------------------------------------------------------------

        ---------------------------------------------------------------------
        Deemed cost (note 22)
        Balance, January 1, 2010                                   $  20,542
        Additions                                                        481
        Transfer to oil and natural gas properties                    (1,809)
        Disposals                                                       (679)
        ---------------------------------------------------------------------
        Balance, December 31, 2010                                    18,535
        Additions                                                      9,996
        Transfer to oil and natural gas properties                      (755)
        Disposals                                                          -
        ---------------------------------------------------------------------
        Balance, March 31, 2011                                    $  27,776
        ---------------------------------------------------------------------

        Exploration and evaluation ("E&E") assets consist of the Company's
        exploration projects which are pending the determination of proven or
        probable reserves. For the three months ended March 31, 2011 $0.8
        million was transferred to property, plant, and equipment following
        the successful discovery of proven and probable reserves.

    7.  PROPERTY, PLANT AND EQUIPMENT
        ($000s)
        ---------------------------------------------------------------------
                                                         Office
                                           Oil and    furniture
                                       natural gas          and
                                        properties    equipment        Total
        ---------------------------------------------------------------------
        Deemed cost (note 22)
        Balance, January 1, 2010         $ 388,276    $   1,748    $ 390,024
        Additions                          112,145          488      112,633
        Transfer from exploration and
         evaluation assets                   1,809            -        1,809
        Disposals(1)                       (17,630)           -      (17,630)
        ---------------------------------------------------------------------
        Balance, December 31, 2010         484,600        2,236      486,836
        Additions                           53,114           59       53,173
        Transfer from exploration and
         evaluation assets                     755            -          755
        Disposals(1)                        (3,169)           -       (3,169)
        ---------------------------------------------------------------------
        Balance, March 31, 2011          $ 535,300    $   2,295    $ 537,595
        ---------------------------------------------------------------------

        Accumulated Depletion,
         Depreciation and Impairment
         losses
        Balance, January 1, 2010
         (note 22)                       $  43,193    $     602    $  43,795
        Charge for time period              47,650          251       47,901
        Impairment loss                      6,489          121        6,610
        Impairment reversal                 (9,648)        (200)      (9,848)
        Disposals(1)                        (1,202)           -       (1,202)
        ---------------------------------------------------------------------
        Balance, December 31, 2010       $  86,482    $     774    $  87,256
        ---------------------------------------------------------------------
        Charge for time period              13,687           72       13,759
        Impairment loss                          -            -            -
        Disposals(1)                             -            -            -
        ---------------------------------------------------------------------
        Balance, March 31, 2011          $ 100,169    $     846    $ 101,015
        ---------------------------------------------------------------------
        (1) Disposals include swaps.
        ---------------------------------------------------------------------
        Carrying amounts
        At January 1, 2010               $ 345,083    $   1,146    $ 346,229
        At December 31, 2010             $ 398,118    $   1,462    $ 399,580
        March 31, 2011                   $ 435,131    $   1,449    $ 436,580
        ---------------------------------------------------------------------

        Bellatrix has included $254.1 million (2010: $288.8 million) for
        future development costs and excluded $34.9 million (2010: $32.6
        million) for estimated salvage from the depletion calculation during
        the three months ended March 31, 2011.

        For the three months ended March 31, 2011, the Company capitalized
        $0.9 million (2010: $0.3 million) of general and administrative
        expenses and $0.2 million (2010: $.03 million) of share-based
        compensation expense directly related to exploration and development
        activities.

        Bellatrix's credit facilities are secured against all of the assets
        of the Corporation by a $400 million debenture containing a first
        ranking charge and security interest. The Corporation has provided a
        negative pledge and undertaking to provide fixed charges over major
        petroleum and natural gas reserves in certain circumstances.

        Exploration and evaluation ("E&E") assets consist of the Company's
        exploration projects which are pending the determination of proven or
        probable reserves. For the three months ended March 31, 2011 $0.8
        million was transferred to property, plant, and equipment following
        the successful discovery of proven and probable reserves.

    8.  DEFERRED LIABILITY

        On August 12, 2010, Bellatrix issued 4,710,000 common shares on a
        flow-through basis ("Flow-Through Shares") at $4.25 each. As a result
        of the Flow-Through Shares, the Company is committed to incur $20.0
        million of Canadian Eligible Expenses ("CEE") on or before December
        31, 2011.

        Bellatrix has recognized a deferred liability based on the premium
        received on the Flow-Through Shares compared to the Company's closing
        share price on the date of the issuance. The deferred liability is
        de-recognized as the CEE expenditures are incurred by the Company.
        For the three months ended March 31, 2011, the Company has satisfied
        approximately $2.5 million of its $20.0 million commitment; as a
        result, the deferred liability has been reduced to $3.3 million and a
        deferred tax expense of $0.2 million has been recognized.

    9.  LONG-TERM DEBT

        ---------------------------------------------------------------------
                                                       March 31, December 31,
        ($000s)                                            2011         2010
        ---------------------------------------------------------------------
        Operating facility                            $   4,298    $   6,172
        Revolving term facility                          66,000       35,000
        ---------------------------------------------------------------------
        Balance, end of year                          $  70,298    $  41,172
        ---------------------------------------------------------------------

        The Company's credit facilities consist of a $15 million demand
        operating facility provided by a Canadian bank and an $85 million
        extendible revolving term credit facility provided by a Canadian bank
        and a Canadian financial institution. Amounts borrowed under the
        credit facility will bear interest at a floating rate based on the
        applicable Canadian prime rate, U.S. base rate or LIBOR rate, plus
        between 1.25% and 4.25%, depending on the type of borrowing and the
        Company's debt to cash ratio. The credit facilities are secured by a
        $400 million debenture containing a first ranking charge and security
        interest. Bellatrix has provided a negative pledge and undertaking to
        provide fixed charges over major petroleum and natural gas reserves
        in certain circumstances. A standby fee is charged of between 0.55%
        and 1.02% on the undrawn portion of the credit facilities, depending
        on the Company's debt to cash flow ratio.

        The current revolving period of the existing credit facilities is
        June 28, 2011. Should the facility not be extended it will convert to
        a non-revolving term facility with the full amount outstanding due
        366 days after the last day of the revolving period of June 28, 2011.
        The Company's borrowing base will be subject to re-determination on
        May 30, 2011. Thereafter, a semi-annual re-determination of the
        borrowing base will occur, with the next such re-determination
        occurring on November 30, 2011. As of May 10, 2011, the banking
        syndicate has agreed, subject to and effective upon final
        documentation, to increase the borrowing base from $100 million to
        $140 million through to November 30, 2011 and extend the revolving
        period of the credit facility from June 28, 2011 to June 26, 2012.

        Payment will not be required under the revolving term facility for
        more than 365 days from March 31, 2011 and as there is sufficient
        availability under the revolving term credit facility to cover the
        operating facility, the entire amounts owing on the credit facilities
        have been classified as long-term.

        Pursuant to Bellatrix's credit facilities, the Company is permitted
        to pay the semi-annual interest payments on the Debentures, and
        payments by the Company to debenture holders in relation to the
        redemption of Debentures and in relation to debenture normal course
        issuer bids approved by the Toronto Stock Exchange, provided that the
        aggregate of all such normal course issuer bids and redemptions do
        not exceed $10.0 million in any fiscal year.

        As at March 31, 2011, approximately $29.7 million was not drawn under
        the existing facilities and Bellatrix was fully compliant with all of
        its operating debt covenants.

    10. CONVERTIBLE DEBENTURES

        The following table sets forth a reconciliation of the convertible
        debentures:

        Convertible debentures

        ---------------------------------------------------------------------
        ($000s except number of debentures)                            4.75%
        ---------------------------------------------------------------------
        Number of Debentures
        Balance, December 31, 2010                                    55,000
        Issued                                                             -
        Redeemed                                                           -
        ---------------------------------------------------------------------
        Balance, March 31, 2011                                       55,000
        ---------------------------------------------------------------------
        Debt Component
        Balance, December 31, 2010                                 $  47,599
        Accretion                                                        352
        Redeemed                                                           -
        ---------------------------------------------------------------------
        Balance, March 31, 2011                                    $  47,951
        ---------------------------------------------------------------------
        Equity Component
        Balance, December 31, 2010                                 $   4,378
        ---------------------------------------------------------------------
        Balance, March 31, 2011                                    $   4,378
        ---------------------------------------------------------------------

        On April 20, 2010, Bellatrix issued $55 million of convertible
        unsecured subordinated debentures (the "4.75% Debentures") on a
        bought deal basis. The 4.75% Debentures have a face value of $1,000
        each, bear interest at the rate of 4.75% per annum payable semi-
        annually in arrears on the last day of April and October of each year
        commencing on October 31, 2010 and mature on April 30, 2015 (the
        "Maturity Date"). The 4.75% Debentures are convertible at the
        holder's option and at any time prior to the close of business on the
        earlier of the close of business on the business day immediately
        preceding the Maturity Date and the date specified by the Corporation
        for redemption of the 4.75% Debentures into common shares of the
        Corporation at a conversion price of $5.60 per common share (the
        "Conversion Price"), subject to adjustment in certain events. The
        4.75% Debentures are not redeemable by the Corporation before April
        30, 2013. On and after April 13, 2013 and prior to April 30, 2014,
        the 4.75% Debentures are redeemable at the Corporation's option, in
        whole or in part, at par plus accrued and unpaid interest if the
        weighted average trading price of the common shares for the specified
        period is not less than 125% of the Conversion Price. On and after
        April 30, 2014, the 4.75% Debentures are redeemable at the
        Corporation's option, in whole or in part, at any time at par plus
        accrued and unpaid interest. The 4.75% Debentures are listed and
        posted for trading on the TSX under the symbol "BXE.DB.A".

        As the 4.75% Debentures are convertible into common shares, the
        liability and equity components are presented separately. The initial
        carrying amount of the financial liability is determined by
        discounting the stream of future payments of interest and principal
        and has been determined to be $48.8 million. A total of $2.2 million
        of issue costs has been allocated to the liability component of the
        debentures. Using the residual method, the carrying amount of the
        conversion feature is the difference between the principal amount and
        the carrying value of the financial liability. Within the
        Shareholder's Equity section of the consolidated financial
        statements, $4.4 million has been recorded as the carrying amount of
        the conversion feature of the debentures, net of $0.3 million of
        issue costs and $1.5 million of deferred taxes. The 4.75% Debentures,
        net of the equity component and issue costs, of $46.6 million, is
        accreted using the effective interest rate method over the term of
        the 4.75% Debentures such that the carrying amount of the financial
        liability will equal the principal balance at maturity.

        On April 20, 2010, Bellatrix deposited with Computershare Trust
        Company of Canada, the trustee (the "Trustee") for Bellatrix's
        previously outstanding series of debentures, being the 7.5%
        convertible unsecured subordinated debentures due June 30, 2011 (the
        "7.5% Debentures"), sufficient funds to satisfy the principal amount
        and interest owing on the 7.5% Debentures and on May 3, 2010 the
        trustee provided notice to the registered holders of the 7.5%
        Debentures of its intention to redeem the 7.5% Debentures on July 2,
        2010. The 7.5% Debentures were redeemed for an amount of $1,025 for
        each $1,000 principal amount of the 7.5% Debentures plus accrued and
        unpaid interest, or a total of $88.0 million. Proceeds from the
        issuance of the 4.75% Debentures have been used by Bellatrix to
        partially fund the redemption of the 7.5% Debentures and the balance
        of the redemption amount has been funded through bank indebtedness.
        The funds deposited with the Trustee on April 20, 2010 and
        acknowledgment by the Trustee thereof discharged and extinguished the
        Company's financial liability for the 7.5% Debentures as of that
        date.

    11. FINANCE LEASE OBLIGATION

        Bellatrix entered into an agreement with a certain joint venture
        ("Joint Venture") for the use of certain facilities which will expire
        in year 2030 or earlier if certain circumstances are met. At the end
        of the term of the agreement, ownership of the facilities is
        transferred to the Company. The agreement is accounted for as a
        finance lease in accordance with International Accounting Standard
        17 - "Leases". Assets under finance lease at March 31, 2011 totaled
        $1.6 million with accumulated depreciation of $0.1 million.

        The following is a schedule of future minimum lease payments under
        the finance lease obligation:

        ---------------------------------------------------------------------
        Period ending March 31,                                       ($000s)
        ---------------------------------------------------------------------
        2012                                                       $     375
        2013                                                             359
        2014                                                             343
        2015                                                             327
        Thereafter                                                     1,750
        ---------------------------------------------------------------------
        Total lease payments                                           3,154
        Amount representing implicit interest at 15.28%               (1,600)
        ---------------------------------------------------------------------
                                                                       1,554
        Current portion of capital lease obligation                     (147)
        ---------------------------------------------------------------------
        Capital lease obligation                                   $   1,407
        ---------------------------------------------------------------------

    12. DECOMMISSIONING LIABILITIES

        The Company's decommissioning liabilities result from net ownership
        interests in petroleum and natural gas assets including well sites,
        gathering systems and processing facilities. The Company estimates
        the total undiscounted amount of cash flows required to settle its
        decommissioning liabilities is approximately $41.6 million which will
        be incurred between 2013 and 2053. A risk-free rate between 1.82% -
        3.75% percent and an inflation rate of 2 percent were used to
        calculate the fair value of the decommissioning liabilities.

        ---------------------------------------------------------------------
                                                       March 31, December 31,
        ($000s)                                            2011         2010
        ---------------------------------------------------------------------
        Balance, beginning of period (note 22)        $  38,710    $  39,001
        Incurred on development activities                  660        2,140
        Revisions on estimates                             (213)       1,182
        Reversed on dispositions                            (31)      (3,302)
        Settled during the period                          (149)      (1,373)
        Accretion expense                                   279        1,062
        ---------------------------------------------------------------------
        Balance, end of period                        $  39,256    $  38,710
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    13. SHAREHOLDERS' EQUITY

        a. Common Shares

           Bellatrix is authorized to issue an unlimited number of common
           shares. All shares issued are fully paid and have no par value.
           The common shareholders are entitled to dividends declared by the
           Board of Directors; Bellatrix does not anticipate paying
           dividends.

           ------------------------------------------------------------------
                                     March 31, 2011        December 31, 2010
                                               Amount                 Amount
                                    Number     ($000s)     Number     ($000s)
           ------------------------------------------------------------------
           Common shares,
            opening balance     97,446,026  $ 316,779  78,809,039  $ 252,629
           Shares issued for
            cash, net of
            transaction costs
            and tax effect               -          -  18,350,000     62,358
           Premium on flow-
            through shares
            classified as a
            deferred liability           -          -           -     (3,768)
           Shares issued on
            exercise of options     17,276         30     286,987        434
           Contributed surplus
            transferred on
            exercised options            -         10           -        126
           ------------------------------------------------------------------
           Balance, end of
            period              97,463,302  $ 316,819  97,446,026   $316,779
           ------------------------------------------------------------------

           Subsequent to March 31, 2011, Bellatrix issued 9,822,000 common
           shares on a bought deal basis as discussed in note 21.

        b. Share Option Plan

           Bellatrix has a share option plan where the Company may grant
           share options to its directors, officers, employees and service
           providers. Under this plan, the exercise price of each share
           option is not less than the volume weighted average trading price
           of the Company's share price for the five trading days immediately
           preceding the date of grant. The maximum term of an option grant
           is five years. Option grants are non-transferable or assignable
           except in accordance with the share option plan and the holding of
           share options shall not entitle a holder to any rights as a
           shareholder of Bellatrix. Share options, entitling the holder to
           purchase common shares of the Company, have been granted to
           directors, officers, employees and service providers of Bellatrix.
           One third of the initial grant of share options normally vests on
           each of the first, second, and third anniversary from the date of
           grant.

           The following tables summarize information regarding Bellatrix's
           Share Option Plan:

           Share Options Continuity
           ------------------------------------------------------------------
                                               Weighted Average
                                                 Exercise Price       Number
           ------------------------------------------------------------------

           Balance, December 31, 2010                 $    2.69    5,823,377
           Granted                                    $    5.35      100,000
           Exercised                                  $    1.75      (17,276)
           Forfeited and cancelled                    $    5.06       (2,500)
           ------------------------------------------------------------------
           Balance, March 31, 2011                    $    2.74    5,903,601
           ------------------------------------------------------------------

           As of March 31, 2011, a total of 9,720,186 share options were
           reserved, leaving an additional 3,816,585 available for future
           grants.

           Share Options Outstanding, March 31, 2011
           ------------------------------------------------------------------
                            Outstanding                        Exercisable
                                              Weighted
                                 Weighted      Average
                            At    Average    Remaining         At
           Exercise   March 31,  Exercise  Contractual   March 31,  Exercise
            Price         2011      Price         Life       2011      Price
           ------------------------------------------------------------------
           $ 0.65 -
            $ 0.83     333,076     $ 0.70          3.0    179,050     $ 0.68
           $ 1.07 -
            $ 1.50     882,626     $ 1.36          3.1    476,830     $ 1.38
           $ 1.64 -
            $ 2.00   1,731,732     $ 1.88          3.1    975,153     $ 1.87
           $ 2.47 -
            $ 3.94   2,404,667     $ 3.64          3.7    378,333     $ 2.52
           $ 3.98 -
            $ 5.57     551,500     $ 4.97          2.2    392,000     $ 4.96
           ------------------------------------------------------------------
           ------------------------------------------------------------------
           $ 0.65 -
            $ 5.57   5,903,601     $ 2.74          3.2  2,401,366     $ 2.29
           ------------------------------------------------------------------
           ------------------------------------------------------------------

    14. CONTRIBUTED SURPLUS

        ---------------------------------------------------------------------
                                                       March 31, December 31,
        ($000s)                                            2011         2010
        ---------------------------------------------------------------------
        Balance, beginning of year                    $  30,489    $  28,186
        Share-based compensation expense                    747        2,429
        Transfer to share capital for exercised
         options                                            (10)        (126)
        Adjustment of share-based compensation
         expense for forfeitures of unvested options         (6)           -
        ---------------------------------------------------------------------
        Balance, end of year                          $  31,220    $  30,489
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Share-based Compensation Expense

        During the three months ended March 31, 2011, Bellatrix granted
        100,000 (2010: nil) share options. During the three months ended
        March 31, 2011, the Company recorded share-based compensation of $0.7
        million, of which $0.2 million was capitalized to property, plant and
        equipment.

        The fair values of all share options granted are estimated on the
        date of grant using the Black-Scholes option-pricing model. The
        weighted average fair market value of share options granted during
        the three months ended March 31, 2011 and the weighted average
        assumptions used in their determination are as noted below:

        ---------------------------------------------------------------------
                                                              March 31, 2011
        ---------------------------------------------------------------------
        Inputs:
        ---------------------------------------------------------------------
          Share price                                                   5.35
          Exercise price                                                5.35
          Risk free interest rate (%)                              1.7 - 2.0
          Option life (years)                                        2 - 3.5
          Option volatility (%)                                      64 - 66
        ---------------------------------------------------------------------
        Results:
          Weighted average fair value of each share option
           granted                                                      2.30
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Bellatrix calculates volatility based on historical share price
        excluding particular time frames in which specific transactions
        affected the company's share price. These time frames are excluded as
        they are not considered to be indicative of the Company's expected
        share price volatility. A forfeiture rate between 3% to 10% (2010: 3%
        to 10%) is used when recording stock based compensation. This
        estimate is adjusted to the actual forfeiture rate on the option's
        vesting date.

        In the three months ended March 31, 2011, a total of 17,276 options
        (2010: 25,333) were exercised; the weighted average share price for
        the quarter was $5.60 (2010: $3.88).

    15. SUPPLEMENTAL CASH FLOW INFORMATION

        Change in Non-cash Working Capital
        ---------------------------------------------------------------------
        ($000s)                                  Three months ended March 31,
        ---------------------------------------------------------------------
                                                           2011         2010
        ---------------------------------------------------------------------
        Changes in non-cash working capital items:
          Accounts receivable                         $   3,100    $  (4,654)
          Deposits and prepaid expenses                    (622)       1,387
          Accounts payable and accrued liabilities       10,770        6,009
        ---------------------------------------------------------------------
                                                      $  13,248    $   2,742
        ---------------------------------------------------------------------
        Changes related to:
          Operating activities                        $  (1,160)   $   3,420
          Financing activities                              639        1,554
          Investing activities                           13,769       (2,232)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
                                                      $  13,248    $   2,742
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    16. INCOME TAXES

        Bellatrix is a corporation as defined under the Income Tax Act
        (Canada) and is subject to Canadian federal and provincial taxes.
        Bellatrix is subject to provincial taxes in Alberta, British Columbia
        and Saskatchewan as the Company operates in those jurisdictions.

        Deferred taxes reflect the tax effects of differences between the
        carrying amounts of assets and liabilities for financial reporting
        purposes and the amounts reported for tax purposes. As March 31,
        2011, Bellatrix has approximately $489 million in tax pools available
        for deduction against future income. Included in this tax basis are
        estimated non-capital loss carry forwards of approximately $0.3
        million that expire in years through 2027.

        The provision for income taxes differs from the expected amount
        calculated by applying the combined Federal and Provincial corporate
        income tax rate of 26.5% (2010: 28.39%) to loss before taxes. This
        difference results from the following items:

        ---------------------------------------------------------------------
                                                 Three months ended March 31,
        ($000s)                                            2011         2010
        ---------------------------------------------------------------------
        Expected income tax recovery                  $  (1,854)   $   1,707
        Share based compensation expense                    131           55
        Change in tax rates                                 (59)         280
        Other                                               274            -
        ---------------------------------------------------------------------
        Deferred tax recovery                         $  (1,508)   $   2,042
        ---------------------------------------------------------------------

        The components of the net deferred tax asset at March 31 are as
        follows:

        ---------------------------------------------------------------------
        ($000s)                                                         2011
        ---------------------------------------------------------------------
        Deferred income tax liabilities:
          Equity component of 4.75% Debentures                     $  (1,330)

        Deferred income tax assets:
          Petroleum and natural gas properties                         1,575
          Commodity contract liability                                 3,434
          Future site restoration / decommissioning liabilities        9,866
          Share issue costs                                              564
          Non-capital losses                                              79
          Attributed Canadian Royalty Income                           1,209
          Other                                                          451
        ---------------------------------------------------------------------
        Deferred income tax asset                                  $  15,848
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    17. FINANCE INCOME AND EXPENSES

        ---------------------------------------------------------------------
                                                 Three months ended March 31,
        ($000s)                                            2011         2010
        ---------------------------------------------------------------------
        Finance expense
          Interest on long-term debt                        704          555
          Interest on convertible debentures                645        1,357
          Accretion on convertible debentures               352          502
          Provisions: accretion on decommissioning
           liabilities                                      279          281
        ---------------------------------------------------------------------
        Finance expense                               $   1,980    $   2,695
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    18. PER SHARE AMOUNTS

        The calculation of basic earnings per share at March 31, 2011 was
        based on a loss of $5.5 million (2010 profit: $4.0 million) and a
        weighted average number of common shares outstanding of 97,448,078
        (2010: 88,212,802).

        A total of 5,903,601 (2010: 4,133,533) share options and 9,821,429
        (2010: 5,305,250) common shares issuable pursuant to the conversion
        of convertible debentures were excluded from the calculation for the
        three months ended March 31, 2011 as they were not dilutive.

    19. COMMITMENTS

        The Company is committed to payments under fixed term operating
        leases which do not currently provide for early termination. The
        Company's commitment for office space is as follows:

        ---------------------------------------------------------------------
        ($000s)                              Gross     Expected
        Year                                Amount   Recoveries   Net amount
        ---------------------------------------------------------------------
        2011                             $   1,652    $     771    $     881
        2012                                 2,203        1,062        1,141
        2013                                 2,218        1,103        1,115
        2014                                 1,469          753          716
        ---------------------------------------------------------------------

        As at March 31, 2011, Bellatrix committed to drill 8 gross (6.4 net)
        wells pursuant to farm-in agreements. Bellatrix expects to satisfy
        these drilling commitments at an estimated cost of approximately
        $20.9 million. In addition, on February 1, 2011, Bellatrix entered
        into a joint venture agreement which includes a minimum commitment
        for the Company to drill 3 gross (3.0 net) wells per year for 2011
        to 2015 for a total estimated cost of approximately $52.5 million.

        As a result of the issuance of the Flow-Through Shares on August 12,
        2010, Bellatrix is committed to incur approximately $20.0 million in
        CEE on or before December 31, 2011. As of March 31, 2011, the Company
        has incurred approximately $2.5 million on CEE, reducing its
        remaining commitment to $17.5 million.

    20. FINANCIAL RISK MANAGEMENT

        a. Credit risk

           As at March 31, 2011, accounts receivable was comprised of the
           following:

           ------------------------------------------------------------------
                                      Not past due     Past due
                                        (less than     (90 days
           Aging ($000s)                   90 days)     or more)       Total
           ------------------------------------------------------------------
           Joint venture and other
           trade accounts receivable        11,131        2,727       13,858
           Amounts due from government
            agencies                           672        1,137        1,809
           Revenue and other accruals       18,186          318       18,504
           Cash call receivables                 -          607          607
           Plant revenue allocation
            receivable                           -        2,855        2,855
           Less: Allowance for doubtful
            accounts                             -       (1,233)      (1,233)
           ------------------------------------------------------------------
           Total accounts receivable        29,989        6,411       36,400
           ------------------------------------------------------------------
           Less:
           Accounts payable due to same
            partners                        (1,101)        (148)      (1,249)
           Subsequent receipts             (15,331)      (1,618)     (16,949)
           ------------------------------------------------------------------
                                            13,557        4,645       18,202
           ------------------------------------------------------------------

           Amounts due from government agencies include drilling royalty
           credits, Alberta Royalty Tax Credit, GST and royalty and other
           adjustments. Plant revenue allocation receivable includes amounts
           under dispute over plant revenue allocations, net of expenses,
           from an operator. The Company has commenced legal action for
           collection of these amounts. Accounts payable due to same partners
           includes amounts which may be available for offset against certain
           receivables.

           Cash calls receivables consist of advances paid to joint interest
           partners for capital projects.

           The carrying amount of accounts receivable and derivative assets
           represents the maximum credit exposure. The Company has an
           allowance for doubtful accounts as at March 31, 2011 of $1.2
           million.

        b. Liquidity risk

           The following are the contractual maturities of financial
           liabilities as at March 31, 2011:

           ------------------------------------------------------------------
           Financial        less than
            liability ($000s)  1 Year    1-2 Years    2-5 Years   Thereafter
           ------------------------------------------------------------------
           Accounts payable
            and accrued
            liabilities(1)  $  53,562    $       -    $       -    $       -
           Bank debt -
            principal(2)            -       70,298            -            -
           Convertible
            debentures -
            principal               -            -       55,000            -
           Convertible
            debentures -
            interest(3)         2,620        2,612        5,440            -
           Finance lease
            obligation            375          359          973        1,447
           ------------------------------------------------------------------
           Total            $  56,557    $  73,269    $  61,413    $   1,447
           ------------------------------------------------------------------

           (1) As at March 31, 2011, $1.1 million of accrued coupon interest
               payable in relation to the 4.75% Debentures and $0.01 million
               of accrued interest payable in relation to the credit
               facilities is included in Accounts Payable and Accrued
               Liabilities.
           (2) Bank debt is based on a revolving term which is reviewed
               annually and converts to a 366 day non-revolving facility if
               not renewed.
           (3) The 4.75% Debentures outstanding at March 31, 2011 bear
               interest at a coupon rate of 4.75%, which currently requires
               total annual interest payments of $2.6 million.

           Interest due on the bank credit facility is calculated based upon
           floating rates.

        c. Commodity price risk

           Commodity price risk is the risk that the fair value or future
           cash flows will fluctuate as a result of changes in commodity
           prices. Commodity prices for petroleum and natural gas are
           impacted by not only the relationship between the Canadian and
           United States dollar, as outlined above, but also world economic
           events that dictate the levels of supply and demand.

           The Company utilizes both financial derivatives and physical
           delivery sales contracts to manage commodity price risks. All such
           transactions are conducted in accordance with the commodity price
           risk management policy that has been approved by the Board of
           Directors.

           The Company's formal commodity price risk management policy
           permits management to use specified price risk management
           strategies including fixed price contracts, costless collars and
           the purchase of floor price options, other derivative financial
           instruments, and physical delivery sales contracts to reduce the
           impact of price volatility and ensure minimum prices for a maximum
           of eighteen months beyond the current date. The program is
           designed to provide price protection on a portion of the Company's
           future production in the event of adverse commodity price
           movement, while retaining significant exposure to upside price
           movements. By doing this, the Company seeks to provide a measure
           of stability to cash flows from operating activities, as well as,
           to ensure Bellatrix realizes positive economic returns from its
           capital developments and acquisition activities.

           As at March 31, 2011, the Company had entered into commodity price
           risk management arrangements as follows:

    -------------------------------------------------------------------------
                                                       Price     Price
    Type                     Period        Volume      Floor    Ceiling Index
    -------------------------------------------------------------------------
    Oil fixed    January 1, 2011 to
                      Dec. 31, 2011   1,000 bbl/d $88.18 CDN $88.18 CDN   WTI
    Oil fixed    January 1, 2011 to
                      Dec. 31, 2011     500 bbl/d $89.00 CDN $89.00 CDN   WTI
    Oil fixed    January 1, 2011 to
                      Dec. 31, 2011     500 bbl/d  $89.10 US  $89.10 US   WTI
    Oil fixed   February 1, 2011 to
                      Dec. 31, 2011     500 bbl/d  $95.00 US  $95.00 US   WTI
    Oil fixed      March 1, 2011 to
                      Dec. 31, 2011     500 bbl/d  $97.50 US  $97.50 US   WTI
    Oil call     January 1, 2012 to
     option           Dec. 31, 2012     833 bbl/d          - $110.00 US   WTI
    Natural gas    April 1, 2011 to
     fixed            Oct. 31, 2011    5,000 GJ/d  $3.87 CDN  $3.87 CDN  AECO
    Natural gas    April 1, 2011 to
     fixed            Oct. 31, 2011    5,000 GJ/d  $3.65 CDN  $3.65 CDN  AECO
    Natural gas    April 1, 2011 to
     fixed            Oct. 31, 2011    5,000 GJ/d $3.805 CDN $3.805 CDN  AECO
    Natural gas    April 1, 2011 to
     fixed            Oct. 31, 2011    5,000 GJ/d  $3.80 CDN  $3.80 CDN  AECO
    Natural gas      May 1, 2011 to
     fixed            Oct. 31, 2011    5,000 GJ/d  $6.30 CDN  $6.30 CDN  AECO
    -------------------------------------------------------------------------

           For three months ended March 31, 2011 and 2010, the gain (loss) on
           commodity contracts was comprised of the following:

           ------------------------------------------------------------------
           ($000s)                                         2011         2010
           ------------------------------------------------------------------
           Gain (loss) on commodity contracts
             Realized (1)                             $    (956)   $   2,492
             Unrealized (2)                              (9,228)       7,256
           ------------------------------------------------------------------
                                                      $ (10,184)   $   9,748
           ------------------------------------------------------------------
           (1) Realized gains and losses on commodity contracts represent
               actual cash settlements and other amounts paid under these
               contracts.
           (2) Unrealized gains and losses on commodity contracts represent
               non-cash adjustments for changes in the fair value of these
               contracts during the period. The estimated fair values of the
               contracts have been determined on the amounts the Company
               would pay to terminate the contracts as at March 31, 2011 and
               2010.

        d. Interest rate risk

           The Company had no interest rate swap or financial contracts in
           place as at or during the three months ended March 31, 2011.

        e. Capital management

           The Company's policy is to maintain a strong capital base so as to
           maintain investor, creditor and market confidence and to sustain
           the future development of the business. The Company manages its
           capital structure and makes adjustments to it in the light of
           changes in economic conditions and the risk characteristics of the
           underlying petroleum and natural gas assets. The Company considers
           its capital structure to include shareholders' equity, bank debt,
           convertible debentures and working capital. In order to maintain
           or adjust the capital structure, the Company may from time to time
           issue common shares, issue convertible debentures, adjust its
           capital spending, and/or dispose of certain assets to manage
           current and projected debt levels.

           The Company monitors capital based on the ratio of total net debt
           to annualized funds flow (the "ratio"). This ratio is calculated
           as total net debt, defined as outstanding bank debt, plus the
           liability component of convertible debentures, plus or minus
           working capital (excluding commodity contract assets and
           liabilities and deferred tax assets or liabilities), divided by
           funds flow from operations (cash flow from operating activities
           before changes in non-cash working capital and deductions for
           decommissioning costs) for the most recent calendar quarter,
           annualized (multiplied by four). The total net debt to annualized
           funds flow ratio may increase at certain times as a result of
           acquisitions, fluctuations in commodity prices, timing of capital
           expenditures and other factors. In order to facilitate the
           management of this ratio, the Company prepares annual capital
           expenditure budgets which are reviewed and updated as necessary
           depending on varying factors including current and forecast
           prices, successful capital deployment and general industry
           conditions. The annual and updated budgets are approved by the
           Board of Directors. Bellatrix does not pay dividends.

           Subsequent to March 31, 2011 (note 21), Bellatrix closed an equity
           issuance on a bought deal basis to further the Company's financial
           flexibility.

           The Company's long-term strategy is to target a total net debt to
           annualized funds flow ratio of 1.2 times.  As at March 31, 2011
           the Company's ratio of total net debt to annualized funds flow
           based on first quarter results was 1.9 times. The total net debt
           to annualized funds flow ratio as at March 31, 2011 increased from
           that at March 31, 2010 of 1.8 times due an increase in total net
           debt resulting from the timing of the Company's 2011 capital
           expenditure program, offset by higher annualized funds flow.
           Bellatrix expects the total net debt to annualized funds flow
           ratio to improve as a result of the May 2011 financing. The total
           net debt to annualized funds flow as at March 31, 2011, of 1.9
           times increased in comparison to the ratio of 1.4 times as at
           December 31, 2010 as total net debt levels increased, offset by
           slightly higher annualized funds flow. Bellatrix continues to take
           a balanced approach to the priority use of funds flows. The 4.75%
           Debentures have a maturity date of April 30, 2015. Upon maturity,
           the Company may settle the principal in cash or issuance of
           additional common shares.

           Excluding the 4.75% Debentures, net debt to annualized funds flow
           based on first quarter results was 1.2 times.

           Bellatrix's capital structure and calculation of total net debt
           and total net debt to funds flow ratios as defined by the Company
           is as follows:

           ------------------------------------------------------------------
                                                 Three months ended March 31,
                 ($000s, except where noted)               2011         2010
           ------------------------------------------------------------------
           Shareholders' equity                         292,976      285,901

           Long-term debt                                70,298            -
           Convertible debentures
            (liability component)                        47,951       82,186
           Working capital (surplus) deficiency          11,921       (8,572)
           ------------------------------------------------------------------
           Total net debt (1) at year end               130,170       73,614

           Debt to funds flow from operations
            ratio (annualized) (2)
           Funds flow from operations (annualized)       68,108       40,792
           Total net debt(1) to periods funds
            flow from operations ratio (annualized)        1.9x         1.8x

           Net debt(1) (excluding convertible
            debentures) at quarter end                   82,219            -
           Net debt to periods funds flow from
            operations ratio (annualized)                  1.2x            -

           Debt to funds flow from operations
            ratio (trailing) (3)
           Funds flow from operations ratio trailing     59,871       39,734
           Total net debt(1) to periods funds
            flow from operations trailing                  2.2x         1.9x

           Net debt(1) (excluding convertible
            debentures) to funds flow from operations
            for the year                                   1.4x            -
           ------------------------------------------------------------------
           (1) Net debt and total net debt are non-GAAP terms. Net debt
               includes the net working capital deficiency (excess) before
               short-term commodity contract assets and liabilities. Total
               net debt also includes the liability component of convertible
               debentures and excludes deferred liabilities, decommissioning
               liabilities and the deferred tax liability.
           (2) Funds flow from operations is a non-GAAP term. Debt to funds
               flow from operations ratio annualized is calculated based upon
               fourth quarter funds flow from operations annualized.
           (3) Trailing periods funds flow from operations is based on the
               twelve-months period ended March 31, 2011 and March 31, 2010

           The Company's credit facility is based on petroleum and natural
           gas reserves (see note 6). The credit facility outlines
           limitations on percentages of forecasted production, from external
           reserve engineer data, which may be hedged through financial
           commodity price risk management contracts.

        f. Fair value of financial instruments

           The Company's financial instruments as at March 31, 2011 include
           accounts receivable, deposits, commodity contract asset, accounts
           payable and accrued liabilities, long-term debt and convertible
           debentures. The fair value of accounts receivable, deposits,
           accounts payable and accrued liabilities approximate their
           carrying amounts due to their short-terms to maturity.

           The fair value of commodity contracts is determined by discounting
           the difference between the contracted price and published forward
           price curves as at the balance sheet date, using the remaining
           contracted petroleum and natural gas volumes. The fair value of
           commodity contracts as at March 31, 2011 was liability of
           $13.0 million (2010: $3.7 million). The commodity contracts are
           classified as level 2 within the fair value hierarchy.

           Long-term bank debt bears interest at a floating market rate and
           the credit and market premiums therein are indicative of current
           rates; accordingly the fair market value approximates the carrying
           value.

           The fair value of the convertible debentures of $64.0 million is
           based on exchange traded values. The convertible debentures are
           classified as level 1 within the fair value hierarchy.

    21. SUBSEQUENT EVENT

        On May 11, 2011, Bellatrix closed an equity issuance of 9.8 million
        common shares on a bought deal basis at a price of $5.60 per share
        for gross proceeds of $55.0 million (net proceeds of $52.3 million
        after underwriter fees and before other closing costs). In addition,
        Bellatrix has granted to the underwriters an over-allotment option
        exercisable in whole or in part from time to time until 30 days
        following closing of the issuance to purchase up to an additional
        1.5 million common shares at a price of $5.60 per common share for
        gross proceeds of $8.2 million (net proceeds of $7.8 million after
        underwriter fees). The net proceeds from this financing will be used
        to temporarily reduce outstanding indebtedness, thereby freeing up
        borrowing capacity that may be redrawn to fund the Company's ongoing
        capital expenditures program and general corporate purposes.

    22. TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

        On February 13, 2008 the CICA Accounting Standards Board announced
        that Canadian public reporting issuers will be required to report
        under IFRS, replacing Canadian GAAP for years beginning on or after
        January 1, 2011.

        The adoption date of January 1, 2011 requires restatement for
        comparative purposes, of the Company's opening balance sheet as at
        January 1, 2010, all interim quarterly periods in 2010 and for its
        year ended December 31, 2010.

        The Company has prepared reconciliations of equity as at January 1,
        2010, March 31, 2010 and December 31, 2010 and reconciliations of
        Total Comprehensive Income for the three months ended March 31, 2010
        and the year ended December 31, 2010, using the accounting policies
        in note 3 and the following IFRS 1 - "First-time Adoption of
        International Financial Reporting Standards" ("IFRS 1") exemptions:

        Key First-time Adoption Exemptions Applied and Comparative Period
        Adjustments

        IFRS 1 is the standard that governs mandatory exceptions and optional
        exemptions that an entity may elect for its transition to IFRS in
        order to assist the entity with the transition process. This standard
        is only applicable to the opening balance sheet of the entity on the
        transition date of January 1, 2010. All adjustments made as a result
        of adoption of IFRS are offset against Bellatrix's January 1, 2010
        deficit.

        a. Business Combinations

           An exemption under IFRS 1 provides the entity with relief on the
           restatement of business combinations prior to the transition date.
           Under IFRS 3 - "Business Combinations," the determination of the
           fair value of share consideration differs from the determination
           under Canadian accounting standards. Any difference in the fair
           value calculation would have a resulting impact on the carrying
           amount of net assets acquired, non-controlling interest and any
           goodwill. The Company has taken advantage of this election,
           allowing Bellatrix to be exempt from restating business
           combinations prior to the transition date to IFRS.

        b. Property, Plant and Equipment ("PP&E")

           The adopter has the option to elect fair value at the date of
           transition as the deemed cost for its PP&E or to use a revalued
           amount according to its previous Canadian GAAP if the revaluation,
           at the date of revaluation, is comparable to fair value or
           depreciated cost in accordance with IFRS or to measure oil and gas
           assets at the date of transition to IFRS at the amount previously
           determined under previous Canadian GAAP.

           Bellatrix has elected to value its PP&E as previously determined
           by previous Canadian GAAP. The measurement upon transition to IFRS
           is as follows:

           - exploration and evaluation assets were reclassified from the
             full cost pool to exploration and evaluation ("E&E") assets at
             the amount that was recorded under previous Canadian GAAP; and
           - the remaining full cost pool was allocated to development and
             producing assets on a pro rata basis using reserve values for
             its proved plus probable company interest reserves.

           This resulted in $20.5 million in exploration and evaluation
           assets and $390.1 million in property, plant and equipment.

        c. Share Based Payments

           Differences in the accounting for the Company's share option plan
           under previous Canadian GAAP and IFRS exist.  IFRS 2 -
           "Share-based Payments," requires the Company to estimate the
           number of options expected to vest when a grant of equity
           instruments do not vest immediately. IFRS 2 does not allow the
           recognition of the expense on a straight-line basis and requires
           each installment to be treated as a separate arrangement. Under
           previous Canadian GAAP, the Company accounted for forfeitures as
           they occurred and recognized share-based compensation expense
           using the graded method, which is the method required under IFRS.
           IFRS 1 provides an elective exemption, which the Company has
           elected, which allows Bellatrix to apply IFRS 2 to the unvested
           options outstanding on transition date.

           An adjustment of $0.05 million has been made on transition date to
           contributed surplus, with an offsetting entry to the January 1,
           2010 deficit, as a result of applying this exemption.

           As a result of applying IFRS 2, a reduction of share-based
           compensation of $0.07 million and $0.03 million has been made to
           the Statement of Comprehensive Income for the three months ended
           March 31, 2010 and the year ended December 31, 2010, respectively.

           Due to differences in the accounting for share-based compensation
           under previous Canadian GAAP and IFRS, adjustments are required in
           the amount of capitalized share-based compensation. For the three
           months ended March 31, 2010, the Company capitalized $0.02 million
           less for share-based compensation under IFRS when compared to
           previous Canadian GAAP. For the year ended December 31, 2010,
           Bellatrix capitalized $0.3 million less under IFRS when compared
           to previous Canadian GAAP.

        d. Decommissioning Liabilities

           IAS 37 - "Provisions, Contingent Liabilities and Contingent
           Assets," will govern how the Company accounts for its
           decommissioning liabilities (previously referred to as asset
           retirement obligations). The discount rate used for the
           decommissioning liability will be a risk free rate as the
           estimated provision is adjusted to reflect risks specific to the
           liability. Under previous Canadian GAAP, the Company used a
           credit-adjusted risk free rate. Therefore, under IFRS, the
           decommissioning liabilities are higher due to lower discount rates
           used. IFRS 1 provides an exemption that the Company has elected
           which allows Bellatrix to measure decommissioning liabilities as
           at the date of transition of January 1, 2010 to IFRS in accordance
           with IAS 37 and recognize directly in the Company's deficit any
           difference between that amount and the carrying amount of those
           liabilities at the date of transition to IFRS determined under
           previous Canadian GAAP.

           As a result of applying this exemption, an increase of
           $13.3 million has been made to decommissioning liabilities and
           Bellatrix's deficit on January 1, 2010.

           Under IFRS, the liability is to be re-measured each reporting
           period in order to reflect interest rates in effect at that time.
           As at March 31, 2010, Bellatrix re-measured the decommissioning
           liabilities based on an average increase in discount rates from
           2.82% to 2.90% which decreased PP&E and decommissioning
           liabilities by $0.8 million. As a result of lower interest rates
           used for the discounting and unwinding of decommissioning
           liabilities, accretion expense for the three months ended
           March 31, 2010 decreased by $0.2 million when compared to
           accretion expense under previous GAAP.

           As a result of re-measuring the decommissioning liabilities each
           reporting period, on a cumulative basis in 2010, PP&E and
           decommissioning liabilities decreased $0.2 million for the year
           ended December 31, 2010. The decrease in discount rates used under
           IFRS versus previous GAAP caused a decrease of $1.1 million in
           accretion expense for the year ended December 31, 2010.

        e. Depletion Policy

           Previous GAAP provided specific guidelines on the depletion
           calculation for oil and natural gas properties. Depletion was
           calculated based on proved reserves. Under IFRS, the Company has a
           choice as to the reserve base to use for its depletion
           calculations. Bellatrix has adopted a policy of depleting its oil
           and natural gas properties using its proved plus probable reserve
           base. In addition, depletion calculations under previous GAAP were
           done on a cost centre basis, for which under previous GAAP, the
           Company only had one. Under IFRS, the Company is required to
           calculate depletion based on individual components for which the
           company has identified to be at the area level.

           The adoption of this policy was effective January 1, 2010.

           As a result of using proved plus probable reserves for its
           depletion calculation, depreciation and depletion expense
           decreased by $5.3 million and $24.8 million for the three months
           ended March 31, 2010 and the year ended December 31, 2010,
           respectively.

        f. Impairment Test

           IFRS requires an asset impairment test to be conducted on
           transition date and when indicators of impairment are present.
           Under previous GAAP, impairment of long-lived assets is assessed
           on the basis of an asset's estimated undiscounted future cash
           flows compared with the asset's carrying amount and if impairment
           is indicated, discounted cash flows are prepared to quantify the
           amount of impairment. The impairment test under previous GAAP is
           done at the cost centre level. Under previous GAAP, Bellatrix had
           one cost centre for impairment test purposes.

           IFRS requires the impairment test to occur at the asset level or
           at the cash generating unit ("CGU") level when long-lived assets
           exist that do not generate largely independent cash inflows. The
           carrying amount of the asset or CGU is compared to its recoverable
           amount which is the higher of value in use or fair value less
           costs to sell.

           Bellatrix performed an impairment test on transition to IFRS on
           January 1, 2010 based on fair value less costs to sell. Fair value
           less costs to sell was based on merger and acquisition
           transactions on oil and gas properties similar to those owned by
           Bellatrix. The Company experienced transitional write-downs on its
           non-core and certain heavy oil properties with an offsetting entry
           to Bellatrix's January 1, 2010 deficit.

           Based on the assessment, the carrying amount of the following
           CGU's were impaired, with an offsetting entry to the January 1,
           2010 deficit:

           ($000's)
                                                                Transitional
           Cash Generating Unit       Product (1)              Impairment (2)
           ------------------------------------------------------------------
           South East Alberta         100% Natural Gas             $   5,366
           North East Alberta         89% Natural Gas                 10,895
           Meekwap                    75% Oil and NGL's                4,093
           Saskatchewan               100% Heavy Oil                  23,441
           ------------------------------------------------------------------
           Total                                                   $  43,795
           ------------------------------------------------------------------
           (1) Based on 2009 year end proved and probable reserves.
           (2) Includes impairment related to corporate assets assigned to
               each CGU on a pro-rata basis.

           Due to the continued weakening of natural gas prices, Bellatrix
           performed impairment tests on its oil and gas properties for all
           of the quarterly reporting periods in 2010. Fair value less costs
           to sell was used as the recoverable amount, using market
           transactions and the company's proved and probable reserves. The
           following impairments and impairment reversals were recorded in
           2010:

           ($000's)
                                                                  Impairment
           Cash Generating Unit        Product (1)              (Reversal)(2)
           ------------------------------------------------------------------
           Meekwap                     75% Oil and NGL's           $     336
           Meekwap                     70% Oil and NGL's               1,286
           South East Alberta          100% Natural Gas                4,988
           North East Alberta          81% Natural Gas                (9,848)
           ------------------------------------------------------------------
           Total reversal                                          $  (3,238)
           ------------------------------------------------------------------
           (1) Based on applicable year end proved and probable reserves.
           (2) Includes impairment (reversal) related to corporate assets
               assigned to each CGU on a pro-rata basis.

           Natural gas properties were further impaired in 2010, as well as
           another non-core oil property. Bellatrix experienced an impairment
           reversal in the fourth quarter of 2010 in its North East AB CGU as
           recent transactions in the CGU have increased the fair value of
           the properties written down on transition. In the case of an
           impairment reversal, the carrying amount of the asset or CGU is
           limited to the original carrying amount less depreciation,
           depletion and amortization as if no impairment had been recognized
           for the asset or CGU for prior periods.

        g. Asset Divestitures

           Under previous GAAP, proceeds of a divestiture are deducted from
           the country cost centre pool without recognition of a gain or loss
           unless such a deduction resulted in a change to the depletion rate
           of 20% or greater. Under IFRS, proceeds of a divestiture are
           deducted from the carrying value of the asset and a gain or loss
           is recognized in earnings.

           As a result of divestitures during 2010, including property swaps
           and prior period adjustments relating to divested properties,
           Bellatrix recognized a loss on dispositions of $0.3 million for
           the three months ended March 31, 2010 and a net gain on
           dispositions of $1.4 million for the year ended December 31, 2010.

        h. Flow-through Shares

           Under previous GAAP, the accounting treatment of flow-through
           shares was addressed by EIC 146 - "Flow-Through Shares". Under
           previous GAAP, the proceeds received for the flow-through shares
           are credited to shareholders' capital and the deferred tax
           liability is recognized when the Company files the renouncement
           documents with the tax authorities to renounce the tax credits
           associated with the expenditures.

           Under IFRS, Bellatrix set up a liability for the difference
           between the proceeds received and the market price of the shares
           on the date of the transaction (the "premium"). As the
           expenditures are made, Bellatrix will record the related tax
           liability associated with the renouncement of the tax benefits and
           remove the deferred liability originally set up. The difference
           between the deferred tax liability and the original liability set
           up will go through profit or loss.

           As a result of the issuance of Flow-Through Shares in the third
           quarter of 2010, the Company set up a deferred liability of
           $3.7 million with an offsetting adjustment to share capital. No
           qualifying CEE was made in 2010.

        i. Convertible Debentures

           Convertible debentures have both a debt and equity component under
           IFRS and previous GAAP. As a consequence of the Company having
           status as an income trust in 2009, and no IFRS 1 exemption
           related to the conversion feature of convertible debentures for
           trust units, the Company has treated the 7.5% debentures as a
           financial derivative instrument (the "instrument"). As a result,
           the fair value of the instrument was determined to be nil. The
           offsetting entry was made to share capital as a result of the
           Company's deficit elimination effective November 1, 2009. In
           addition, this IFRS difference has caused a $1.6 million increase
           to the Company's deficit as a result of the 7.5% Debenture
           redemption in the second quarter of 2010, as opposed to the
           $2.9 million reduction in the deficit under previous GAAP.

           Also, the allocation of deferred tax on the convertible debentures
           differs under previous GAAP and IFRS. Under previous GAAP, the tax
           basis of the liability is considered to be the same as its
           carrying amount; therefore, no temporary difference exists. IFRS
           does not contain this special exemption and requires the temporary
           difference to be recognized. The deferred tax adjustment is
           charged directly to the carrying amount of the equity component of
           the convertible debentures.

           Bellatrix recorded a deferred tax adjustment of $0.5 million
           related to its 7.5% Debentures on transition to IFRS with an
           offsetting entry to the January 1, 2010 deficit.

           Upon the issuance of its 4.75% Debentures in the second quarter of
           2010, the Company recognized an adjustment of $1.5 million to the
           equity component of its 4.75% Debentures with an offsetting entry
           to the deferred tax asset.

        j. Income Taxes

           IFRS does not use the terminology of future income taxes; IFRS
           refers to deferred income taxes.

           Under IFRS, all tax assets and liabilities must be classified as
           non-current. All of the recognized IFRS conversion adjustments as
           discussed in this transition note have related effects on deferred
           taxes. The tax impact of the above changes increased (decreased)
           the deferred tax asset as follows:
           ------------------------------------------------------------------
                                                        For the
                                                     year ended        As at
                                         January 1,    December     December
           ($000's)                           2010     31, 2010     31, 2010
           ------------------------------------------------------------------
           Impairment (reversal) of
            assets                       $  11,251    $    (908)   $  10,343
           Depletion and depreciation            -       (7,033)      (7,033)
           Convertible debentures             (491)        (864)      (1,355)
           Decommissioning liabilities       3,434         (308)       3,126
           Gain on property dispositions         -          399          399
           ------------------------------------------------------------------
           Increase in deferred tax
            liability                    $  14,194    $  (8,714)   $   5,480
           ------------------------------------------------------------------

        k. Presentation

           Certain presentation and classification differs under IFRS in
           comparison with the Company's previous GAAP as follows:

           - Interest and finance charges - the net finance income or expense
             is presented separately from operating expenses. These charges
             also include the unwinding of the discount rate on
             decommissioning liabilities that were presented as part of
             depletion, depreciation and accretion under previous GAAP.
           - Deferred income taxes - all tax assets and liabilities are
             classified as non-current. The amount of income taxes paid
             during a period must be disclosed on the face of the statements
             of cash flows instead of within the notes to the financial
             statements.
           - Loans and borrowings - the cash inflow and outflow associated
             with loans and borrowings have been disclosed separately on the
             statements of cash flows. Previously, the Company netted these
             amounts.
           - No material changes have occurred in the Consolidated Statements
             of Cash Flows as a result of the adoption of IFRS.


    BELLATRIX EXPLORATION LTD.
    RECONCILIATION OF EQUITY
    As at January 1, 2010 (Date of Transition to IFRS) (unaudited)
    -------------------------------------------------------------------------
                                                      Effect of
                                          Previous   transition
    ($000s)                                   GAAP      to IFRS         IFRS
    -------------------------------------------------------------------------
    ASSETS
    Current assets
      Accounts receivable                $  20,722    $       -    $  20,722
      Deposits and prepaid expenses          4,940            -        4,940
      Commodity contract asset               3,374            -        3,374
                                         ------------------------------------
                                            29,036            -       29,036
    Exploration and evaluation assets            -       20,542       20,542
    Property, plant and equipment          410,566                   346,229
      Transfer to exploration and
       evaluation assets (note b)                       (20,542)
      Transitional impairment to property,
       plant and equipment (note f)                     (43,795)
    Deferred taxes                           1,368                    14,602
      Re-class from current liabilities
       (note k)                                            (960)
      Due to transitional adjustments
       (note j)                                          14,194
                                         ------------------------------------
    Total assets                         $ 440,970    $ (30,561)   $ 410,409
                                         ------------------------------------
                                         ------------------------------------

    LIABILITIES
    Current liabilities
      Accounts payable and accrued
       liabilities                       $  23,345    $       -    $  23,345
      Deferred taxes (note k)                  960         (960)           -
                                         ------------------------------------
                                            24,305         (960)      23,345

    Long-term debt                          27,902            -       27,902
    Convertible debentures                  81,684            -       81,684
    Decommissioning liabilities (note d)    25,728       13,273       39,001
                                         ------------------------------------
    Total liabilities                      159,619       12,313      171,932
                                         ------------------------------------

    SHAREHOLDERS' EQUITY
      Shareholders' capital                252,592        5,037      257,629
      Equity component of convertible
       debentures (note i)                   5,037       (5,037)           -
      Contributed surplus (note c)          28,232          (46)      28,186
      Deficit                               (4,510)     (42,828)     (47,338)
                                         ------------------------------------
    Total shareholders' equity             281,351      (42,874)     238,477
                                         ------------------------------------
    Total liabilities and shareholders'
     equity                              $ 440,970    $ (30,561)   $ 410,409
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    BELLATRIX EXPLORATION LTD.
    RECONCILIATION OF EQUITY
    As at March 31, 2010 (unaudited)
    -------------------------------------------------------------------------
                                                      Effect of
                                          Previous   transition
    ($000s)                                   GAAP      to IFRS         IFRS
    -------------------------------------------------------------------------
    ASSETS
      Current assets
       Cash and cash equivalents         $   8,997    $       -    $   8,997
       Accounts receivable                  25,376                    25,376
       Deposits and prepaid expenses         3,553            -        3,553
       Commodity contract asset             10,630            -       10,630
                                         ------------------------------------
                                            48,556            -       48,556
    Exploration and evaluation assets            -       20,490       20,490
    Property, plant and equipment          413,945                   354,641
      Transfer to exploration and
       evaluation assets (note b)                       (20,490)
      Transitional impairment to property,
       plant and equipment (note f)                     (43,795)
      Q1 2010 adjustments
       (notes c, d, e, g)                                 4,981
    Deferred taxes                           3,296                    13,277
      Re-class from current liabilities
       (note k)                                          (3,020)
      Due to transitional adjustments
       (note j)                                          14,194
      Q1 2010 adjustments                                (1,193)
                                         ------------------------------------
    Total assets                         $ 465,797    $ (28,833)   $ 436,964
                                         ------------------------------------
                                         ------------------------------------

    LIABILITIES
    Current liabilities
      Accounts payable and accrued
       liabilities                       $  29,354    $       -    $  29,354
      Deferred taxes (note g and h)          3,020       (3,020)           -
                                         ------------------------------------
                                            32,374       (3,020)      29,354

    Convertible debentures                  82,186            -       82,186
    Decommissioning liabilities             26,480                    39,523
      Opening adjustment (note d)                        13,273
      Q1 2010 adjustments (note d)                         (230)
                                         ------------------------------------
    Total liabilities                      141,040       10,023      151,063
                                         ------------------------------------

    SHAREHOLDERS' EQUITY
      Shareholders' capital                295,846        5,037      300,883
      Equity component of convertible
       debentures (note i)                   5,037       (5,037)           -
      Contributed surplus                   28,377                    28,387
        Opening adjustment (note c)                         (46)
        Q1 2010 adjustment (note c)                          56
      Deficit                               (4,503)                  (43,369)
        Opening adjustment                              (42,828)
        Q1 2010 adjustments to profit                     3,962
                                         ------------------------------------
    Total shareholders' equity             324,757      (38,856)     285,901
                                         ------------------------------------
    Total liabilities and shareholders'
     equity                              $ 465,797    $ (28,833)   $ 436,964
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    BELLATRIX EXPLORATION LTD.
    RECONCILIATION OF EQUITY
    As at December 31, 2010 (unaudited)

    -------------------------------------------------------------------------
                                                      Effect of
                                          Previous   transition
    ($000s)                                   GAAP      to IFRS         IFRS
    -------------------------------------------------------------------------
    ASSETS
    Current assets
      Accounts receivable                $  39,500    $       -    $  39,500
      Deposits and prepaid expenses          4,619            -        4,619
      Deferred taxes (note g)                  989         (989)           -
                                         ------------------------------------
                                            45,108         (989)      44,119
    Exploration and evaluation assets            -       18,535       18,535
    Property, plant and equipment          433,697                   399,580
      Transfer to exploration and
       evaluation assets (note b)                       (18,535)
      Transitional impairment to property,
       plant and equipment (note f)                     (43,795)
      2010 adjustments (notes c, d, e, g)                28,213
    Deferred taxes (note g)                  8,351                    14,820
      Re-class from current assets
       (note k)                                             989
      Due to transitional adjustments
       (note j)                                          14,194
      2010 adjustments                                   (8,714)
                                         ------------------------------------
    Total assets                         $ 487,156    $ (10,102)     477,054
                                         ------------------------------------
                                         ------------------------------------

    LIABILITIES
    Current liabilities
      Accounts payable and accrued
       liabilities                       $  42,792    $       -    $  42,792
      Current portion of capital lease
       obligation                              146            -          146
      Commodity contract liability           3,732            -        3,732
                                         ------------------------------------
                                            46,670            -       46,670

    Deferred liability, Flow-through
     Shares (note h )                            -        3,768        3,768
    Long-term debt                          41,172            -       41,172
    Convertible debentures                  47,599            -       47,599
    Capital lease obligation                 1,443            -        1,443
    Decommissioning liabilities             27,483            -       38,710
      Opening adjustment (note d)                        13,273
      2010 adjustments (note d)                          (2,046)
                                         ------------------------------------
    Total liabilities                      164,367       14,995      179,362
                                         ------------------------------------

    SHAREHOLDERS' EQUITY
      Shareholders' capital (note h)       315,510                   316,779
        Opening adjustment (note i)                       5,037
        Flow-through shares (note h)                     (3,768)
      Equity component of convertible
       debentures                            5,881                     4,378
        Opening adjustment (note i)                      (5,037)
        2010 adjustments (note i)                         3,534
      Contributed surplus (note c)          30,526                    30,489
        Opening adjustment (note c)                         (46)
        2010 adjustment (note c)                              9
      Deficit                              (29,128)                  (53,954)
        Opening adjustment                              (42,828)
        Adjustment for repurchase
         of 7.5% Debentures (note i)                     (4,546)
        2010 adjustments to profit                       22,548
                                         ------------------------------------
    Total shareholders' equity             322,789      (25,097)     297,692
                                         ------------------------------------
    Total liabilities and shareholders'
     equity                              $ 487,156    $ (10,102)   $ 477,054
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    BELLATRIX EXPLORATION LTD.
    RECONCILIATION OF TOTAL COMPREHENSIVE INCOME
    For the three months ended March 31, 2010
    (unaudited, expressed in Canadian dollars)

                                                      Effect of
                                          Previous   transition
    ($000s)                                   GAAP      to IFRS         IFRS
    -------------------------------------------------------------------------

    REVENUES
      Petroleum and natural gas sales    $  26,929    $    (547)   $  26,382
      Other income                                          547          547
      Royalties                             (5,250)           -       (5,250)
                                         ------------------------------------
      Total Revenues                        21,679                    21,679
      Gain on commodity contracts (note k)   9,748            -        9,748
                                         ------------------------------------
                                            31,427            -       31,427

    EXPENSES
      Production                             8,717            -        8,717
      Transportation                           808            -          808
      General and administrative             2,536            -        2,536
      Interest and financing charges
       (note k)                              2,414       (2,414)           -
      Share-based compensation (note c)        120           72          192
      Depletion and depreciation and
       accretion                            15,976            -       10,146
        Q1 2010 depletion and depreciation
         adjustments (note e)                            (5,318)
        Re-class of unwinding of
         decommissioning liabilities
         (note k)                                          (512)
      Loss on dispositions (note g)              -          322          322
                                         ------------------------------------
                                            30,571       (7,850)      22,721


    NET PROFIT BEFORE FINANCE AND TAXES        856        7,850        8,706

      Finance expenses                                                 2,695
       Interest and financing charges
        (note k)                                 -        2,414
       Unwinding of decommissioning
        liabilities (note d,k)                              281
                                         ------------------------------------
    NET PROFIT BEFORE TAXES                    856        5,155        6,011

    TAXES
      Deferred tax expense (note j)            849        1,193        2,042
                                         ------------------------------------
    NET PROFIT AND COMPREHENSIVE INCOME          7        3,962        3,969
    -------------------------------------------------------------------------



    BELLATRIX EXPLORATION LTD.
    RECONCILIATION OF TOTAL COMPREHENSIVE INCOME
    For the year ended December 31, 2010
    (unaudited, expressed in Canadian dollars)

                                                      Effect of
                                          Previous   transition
    ($000s)                                   GAAP      to IFRS         IFRS
    -------------------------------------------------------------------------

    REVENUES
      Petroleum and natural gas sales    $ 117,673    $  (1,997)   $ 115,676
      Other income                                        1,997        1,997
      Royalties                            (22,914)           -      (22,914)
                                         ------------------------------------
      Total revenues                        94,759            -       94,759
      Gain on commodity contracts (note k)   8,282            -        8,282
                                         ------------------------------------
                                           103,041            -      103,041

    EXPENSES
      Production                            37,964            -       37,964
      Transportation                         3,723            -        3,723
      General and administrative             9,414            -        9,414
      Interest and financing charges
       (note k)                              7,403       (7,403)           -
      Share-based compensation (note c)      1,618           31        1,649
      Depletion and depreciation and
       accretion                            74,856                    47,901
        2010 depletion and depreciation
         adjustments (note e)                           (24,801)
        Re-class of unwinding of
         decommissioning liabilities
         (note k)                                        (2,154)
      Provision for uncollectible
       accounts                                250            -          250
      Loss on redemption of 7.5%
       Debentures                            3,514            -        3,514
      Writedown (reversal) of property,
       plant and equipment (note i)              -       (3,238)      (3,238)
      Net gain on dispositions
       (note g)                                  -       (1,425)      (1,425)
                                         ------------------------------------
                                           138,742      (38,990)      99,752


    NET INCOME (LOSS) BEFORE FINANCE
     AND TAXES                             (35,701)      38,990        3,289

      Finance expenses                           -                     8,465
       Interest and financing charges
        (note k)                                          7,403
       Unwinding of decommissioning
        liabilities (note d,k)                            1,062
                                         ------------------------------------
    NET LOSS BEFORE TAXES                  (35,701)      30,525       (5,176)

    TAXES
      Deferred tax expense (note j)         (8,168)       7,977         (191)
                                         ------------------------------------
    NET LOSS AND COMPREHENSIVE LOSS        (27,533)      22,548       (4,985)
    -------------------------------------------------------------------------
    >>

The Company's updated corporate presentation is available at www.bellatrixexploration.com.

Bellatrix Exploration Ltd. is a Western Canadian based growth oriented oil and gas company engaged in the exploration for, and the acquisition, development and production of oil and natural gas reserves in the provinces of Alberta, British Columbia and Saskatchewan. Common shares and convertible debentures of Bellatrix trade on the Toronto Stock Exchange ("TSX") under the symbols BXE and BXE.DB.A, respectively.

SOURCE Bellatrix Exploration Ltd.

For further information: Raymond G. Smith, P.Eng., President and CEO, (403) 750-2420 or Edward J. Brown, CA, Vice President, Finance and CFO, (403) 750-2655 or Troy Winsor, Investor Relations, (800) 663-8072; Bellatrix Exploration Ltd., 2300, 530 - 8th Avenue SW, Calgary, Alberta, Canada, T2P 3S8, Phone: (403) 266-8670, Fax: (403) 264-8163, www.bellatrixexploration.com


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