Bellatrix Exploration Reports Resource Drilling Drives 59% Reserve Growth in 2011 and Reports Lower Average Finding Costs

TSX: BXE

CALGARY, Feb. 28, 2012 /CNW/ - Bellatrix Exploration Ltd. ("Bellatrix" or the "Company") announces the results of a 2011 year-end reserves evaluation by Sproule Associates Limited ("Sproule"),  an independent reserves evaluator, for 100% of Bellatrix's oil and gas properties prepared in accordance with National Instrument 51-101- Standards of Disclosure for Oil and Gas Activities ("NI 51-101").

As an organic growth-oriented corporation, Bellatrix continues to deliver significant increases in reserves and production in 2011 as compared to year-end 2010 and further expanded its proven catalogue of low risk, highly economic Cardium and Notikewin resource-play inventory.

OPERATING HIGHLIGHTS

  Twelve months ended December,  
  2011 2010 Change
Reserves (Company interest , 2P )      
  Oil & Liquids (mbbls) 25,180 17,114 +47%
  Gas (mmcf) 254,218 152,677 +67%
  Combined (mboe) 67,550 42,560 +59%
FD&A costs      
  Proved, including FDC ($/boe) $13.00 $15.94 -18%
  2P, including FDC ($/boe) $9.29 $12.89 -28%
  3 year average 2P, including FDC ($/boe) $10.59 N/A  
Recycle Ratios      
  Proved, excluding FDC 3.01 x 2.52 x  
  2P, excluding FDC 4.16 x 4.31x  
Exit Production Rate (boe/d) 16,141 10,500 +54%
Q4 Average Sales Volumes (boe/d) 14,209 10,002 +42%
Annual Average Sales Volumes (boe/d) 11,954 8,519 +40%
Funds Flow From Operations ($ millions) (unaudited) $94.2 $53.0 +78%
  Per basic share (unaudited) $0.91 $0.57 +60%
Drilling Activity      
  Gross Wells 54 48  
  Net Wells 34.8 28.8  
  Success Rate 100% 98%  
Undeveloped Land      
  Gross acres 354,351 351,042 +1%
  Net Acres 224,559 211,893 +6%
  • As at December 31, 2011 approximately $113.3 million or 67% was undrawn under the existing $170 million credit facilities and is available to fund Bellatrix's ongoing capital spending and operational requirements.
  • Bellatrix commenced drilling the Company's first 100% W.I. horizontal Duvernay test at Ferrier in mid February 2012. Completion and testing is expected in March 2012.
  • Inventory has increased to 900 net low risk development drilling locations which includes 377 net horizontal Cardium locations and 174 net horizontal Notikewin locations.
  • Bellatrix has put in price protection on approximately 42% of annual production volumes and 54% of Q2 and Q3 2012 production volumes based on December 2011 production annualized for 2012.
  • In Q4, 2011 the Company drilled and completed 7 wells in the Cardium consisting of 2 wells in Willesden Green, 3 wells in Brazeau, 1 well in Pembina and 1 well in West Pembina. The following average initial production ("IP") rates for the first 7 days ("IP 7"), for the first 15 days ("IP15") and the first 30 days ("IP 30") were achieved:
Time # of wells Boe/d
IP 7 7 693
IP 15 7 613
IP 30 6 574
  • The first quarter of 2012 drilling program is currently underway with four rigs that commenced drilling in early January 2012. An initial capital budget of $180 million has been set for fiscal 2012. Based on the timing of proposed expenditures, downtime for anticipated plant turnarounds, resolution of infrastructure constraints and normal production declines, execution of the 2012 budget is anticipated to provide 2012 average daily production of approximately 16,500 boe/d to 17,000 boe/d and an exit rate of approximately 18,000 boe/d to 18,500 boe/d.

RESERVES UPDATE

Bellatrix engaged Sproule to complete a reserve report in accordance with NI 51-101, on 100% of Bellatrix's oil and gas properties effective December 31, 2011.

Highlights of Bellatrix's December 31, 2011 reserves and 2011 reserve additions include:

  • 41.818 mmboe total company interest (working interest plus royalty interest prior to deductions of royalty burdens) proved reserves and 67.550 mmboe total company interest proved plus probable reserves, as at December 31, 2011, representing  58.7% year over year growth in 2011.
  • $722.5 million net present value of future net revenue of working interest reserves at 10% discount rate up from $481.54 million posted as of December 31, 2010. This growth contributes to a 50% increase in Bellatrix's net asset value, as at December 31, 2011 to $7.01 per basic share outstanding based on the Sproule evaluation of proved and probable reserves at a 10% discount rate ($9.73 per basic share outstanding at an 5% discount rate).
  • 673% replacement of production with proved and probable company interest reserve additions in year ended 2011.
  • $8.37/boe FD&A for proved reserves excluding changes to future development capital and $13.00/boe FD&A for proved reserves including changes to future development capital for the year ended 2011.
  • $6.06/boe FD&A for total proved plus probable reserves excluding changes to future development capital and FD&A of $9.29/boe for total proved plus probable reserves including changes to future development for the year  ended 2011.
  • 10.0 year reserve life index on a total company interest proved and probable basis at December 31, 2011 based on Sproule's 2012 forecasted average production of 18,512 boe/d.
  2011
Reserves1 
  2010
Reserves 1, 2
 
  Oil & Liquids Natural Gas Total   Total Variance
  (mbbls) (mmcf) (mboe)   (mboe) %
             
Proved 15,418 158,398 41,818   24,930 +68 %
Probable 9,762 95,820 25,732   17,630 +46 %
Proved Plus Probable 1 25,180 254,218 67,550   42,560 +59 %

1 Based on company interest  reserves (working interest plus royalty interest prior to deductions of royalty burdens)
2 As evaluated by GLJ Petroleum Consultants Ltd. ("GLJ") 

FINDING, DEVELOPMENT AND ACQUISITION COSTS ("FD&A")  HIGHLIGHTS
($/boe) 2011 2010 2009-2011
Average
Proved (excluding FDC) $8.37 $8.47 $8.23
Proved (including FDC) $13.00 $15.94 $13.69
       
Proved Plus Probable (excluding FDC) $6.06 $4.96 $5.65
Proved Plus Probable (including FDC) $9.29 $12.89 $10.59

COMMODITY RISK MANAGEMENT CONTRACTS

Bellatrix has the following crude oil and natural gas commodity price risk management contracts in place for 2012.  The conversion of $/GJ to $/mcf is based on an average corporate heat content rate of 39Mj/m3.

Product Term Volume Average Price
Crude Oil Jan 1, 2012 to Dec. 31, 2012 3,000 bbl/d $92.30 CDN/bbl
Natural gas Apr 1, 2012 to Oct. 31, 2012 27.3 mmcf/d $4.51CDN/mcf

Based on estimated month of December 2011 production volumes of approximately 16,000 boe/d annualized for 2012, Bellatrix has put in price protection on approximately 42% of annual production volumes and 54% of Q2 and Q3 2012 production volumes.

CAPITAL EXPENDITURES

           
    Years ended December 31,  
($000s)     2011
(unaudited)
2010
Lease acquisitions and retention     16,367 480
Geological and geophysical     433 737
Drilling and completion costs     141,051 90,914
Facilities and equipment     18,471 9,384
      176,322 101,515
Drilling Incentive Credits     (827) (3,128)
  Exploration and development1     175,495 98,387
Corporate     268 521
Property acquisitions     3,798 7,840
  Total capital expenditures - cash     179,561 106,748
Property dispositions - cash     (4,203) (14,567)
  Total net capital expenditures - cash     175,358 92,181
Capital lease additions - non cash     3,700 1,600
Other - non-cash 2     6,875 (573)
  Total - non - cash     10,575 1,027
  Total capital expenditures     185,933 93,208

1 Excludes capitalized costs related to decommissioning liabilities expenditures incurred during the year.
2 Corporate includes furniture, fixtures and other costs
3 Other includes non-cash  adjustments  for current year's decommissioning liabilities and share based compensation.

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. On closing, these assets consisted 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 ¼ 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.

During the second quarter of 2011, Bellatrix closed two transactions consisting of the sale of a minor property interest in Saskatchewan (160 gross and 14 net acres) and a swap of interests where Bellatrix increased its Cardium exposure in 3.5 gross (1.7 net) sections in the Greater Pembina area.  There was no production associated with the acreages sold in the second quarter of 2011.

Effective September 22, 2011, Bellatrix sold the Meekwap, Alberta property for $4.2 million, after purchase adjustments and closing costs.  The property sold included approximately 65 boe/d of production.  The net proceeds were used to temporarily reduce the Company's outstanding indebtedness.

TAX POOLS

At December 31, 2011, the Company had approximately $514 million in tax pools available for deduction against future income as follows:

         
($000s)   Rate %
2011
(unaudited)
2010
Canadian exploration expenses 100 47,600 44,000
Canadian development expenses 30 326,900 286,500
Canadian oil and gas property expenses 10 25,100 9,100
Foreign resource expenses 10 800 900
Attributed Canadian Royalty Income (Alberta) 100 16,100 16,100
Undepreciated capital cost(1) 6-55 83,100 89,100
Non capital losses  (expire through 2027) 100 10,000 300
Financing  costs 20 S.L 4,700 3,000
Total Tax Pools   514,300 449,000

(1) Approximately $76 million of undepreciated capital cost pools are class 41, which is claimed at a 25% rate.

As a result of the issuance of the Flow-Through Shares on August 12, 2010, Bellatrix was committed to incur approximately $20 million in qualifying Canadian exploration expense prior to December 31, 2011. Bellatrix has satisfied this commitment as of December 31, 2011.

Reconciliation of Cash Flow from Operating Activities and Funds Flow from Operations
    Years ended December 31,
($000's)     2011

(unaudited)
2010
Cash flow from operating activities      98,089 44,272
Realization of imputed interest costs on 7.5% Debentures     - 5,050
Decommissioning costs incurred     569 1,373
Change in non-cash working capital
    (4,421) 2,347
Funds flow from operations
    94,237 53,042

Bellatrix's cash flow from operating activities of $98.1 million or $0.94 per basic share ($0.87 per diluted share) for the year ended December 31, 2011 increased approximately 121% from the $44.3 million or $0.47 per basic share ($0.46 per diluted share) generated in the 2010 year.  Bellatrix generated funds flow from operations of $94.2 million or $0.91 per basic share ($0.84 per diluted share) for the year ended December 31, 2011, up 78% from $53.0 million or $0.57 per basic share ($0.54 per diluted share) for the 2010 year.  The increase is principally due to higher operating netbacks for crude oil, condensate and NGLs as the weighting toward light oil, condensate and natural gas liquids sales volumes increased in combination with improved pricing for crude oil, condensate and NGLs and a reduction in interest and finance charges.  The increase between years was partially offset by a significant reduction in net realized gains on the Company's commodity risk management contracts, as well as an increase in general and administrative expenses.

RESERVES TABLES

Reserves included herein are stated on a company interest basis (working interst plus royalty interests prior to deductions of royalty burdens) unless noted otherwise as well as on a gross (working interest excluding royalty interests and burdens) and net (working interest plus royalty interest less royalty burdens) bases as defined in NI 51-101. "Company interest" is not a term defined by NI 51-101 and as such the estimates of company interest reserves herein may not be comparable to estimates prepared in accordance with NI 51-101 or to other issuers' estimates of company interest reserves.

At December 31, 2011 the Company's proved and probable company interest reserves as evaluated by Sproule, using forecast prices and costs, were 67,550 mboe, an increase of 58.7% compared to 42,560 mboe at December 31, 2010 as evaluated by GLJ.  There was a minor reserve property disposition in third quarter of 2011. By commodity type, natural gas makes up 62.7%, light oil and natural gas liquids 35.5% and heavy oil 1.8% of total reserves.  At December 31, 2011, the Company's total proved company interest reserves were 41,818 mboe, an increase of 67.7% compared to 24,930 mboe at December 31, 2010 as evaluated by GLJ (calculated after taking into account 2011 production of  4,363 mboe).

In addition to the information disclosed herein, more detailed information on the Company's reserves will be included in the Company's Annual Information Form.

Reserves, at December 31, 2011, as evaluated by Sproule, are summarized below and in the following tables.


Summary of Oil and Gas Company Interest1 Reserves2 (Gross + Royalties Receivable)
Forecast Prices and Costs
    As at Dec. 31, 2011 As at Dec. 31, 2010 4




Natural Gas3

(mmcf)
Heavy Oil

(mbbl)
Light and
Medium Oil
(mbbl)
Natural Gas
Liquids
(mbbl)
Total

(mboe, 6:1)
Total

(mboe, 6:1)
Proved              
  Developed producing 71,351 651 4,380 2,414 19,336 14,380
  Developed non-producing 2,125 - 35 50 438 1,099
  Undeveloped 84,922 210 4,425 3,254 22,043 9,451
Total proved 158,398 861 8,840 5,718 41,818 24,930
Probable 95,820 382 5,703 3,677 25,732 17,630
Proved plus probable, producing 98,964 912 6,613 3,386 27,405 19,666
Total proved plus probable 254,218 1,242 14,543 9,395 67,550 42,560
1 "Company Interest" means Bellatrix's working interest (operated or non-operated) share before deduction of royalties but after
including any royalty interests of Bellatrix.
2 May not add due to rounding.
3 Includes 1,137 mmcf of total proved and  1,509 mmcf total proved plus probable assigned to natural gas from coal bed methane reserves.
4 As evaluated by GLJ
 
 
Summary of Oil and Gas Working Interest1 Reserves2 (Gross)
Forecast Prices and Costs
    As at Dec. 31, 2011 As at Dec. 31, 2010 4




Natural Gas3

(mmcf)
Heavy Oil

(mbbl)
Light and
Medium Oil
(mbbl)
Natural Gas
Liquids
(mbbl)
Total

(mboe, 6:1)
Total

(mboe, 6:1)
Proved              
  Developed producing 71,207 646 4,380 2,409 19,302 14,299
  Developed non-producing 2,125 - 35 50 438 1,099
  Undeveloped 84,812 210 4,425 3,250 22,021 9,445
Total proved 158,144 856 8,840 5,709 41,761 24,842
Probable 95,561 375 5,704 3,668 25,674 17,600
Proved plus probable, producing 98,589 901 6,613 3,373 27,318 19,573
Total proved plus probable 253,705 1,231 14,543 9,377 67,435 42,442
1 "Working Interest" means Bellatrix's working interest (operated or non-operated) share before deduction of royalties and without including any royalty interests of  Bellatrix.
Also referred to as "Gross" reserves under NI 51-101.
2 May not add due to rounding.
3 Includes 1,137 mmcf of total proved and 1,509 mmcf total proved plus probable assigned to natural gas from coal bed methane reserves.
4 As evaluated by GLJ.       
 
 
Summary of Oil and Gas Net Reserves1, 2 (Net)
Forecast Prices and Costs
    As at Dec. 31, 2011 As at Dec. 31, 2010 4
 
 
 
 
 
 
Natural Gas3

(mmcf)
Heavy Oil

(mbbl)
Light and
Medium Oil
(mbbl)
Natural Gas
Liquids
(mbbl)
Total

(mboe, 6:1)
Total

(mboe, 6:1)
Proved              
  Developed producing 56,934 550 3,333 1,534 14,906 11,408
  Developed non-producing 1,646 - 32 31 337 904
  Undeveloped 62,325 149 3,541 2,201 16,279 7,593
Total proved 120,904 699 6,905 3,766 31,522 19,904
Probable 72,191 311 4,238 2,389 18,970 13,836
Proved plus probable, producing 77,891 768 4,929 2,114 20,792 15,430
Total proved plus probable 193,096 1,010 11,143 6,156 50,492 33,740
1 "Net" means Bellatrix's working interest (operated or non-operated) share after deduction of royalty obligations, plus Bellatrix's royalty interests in reserves.
2 May not add due to rounding.
3 Includes 1,137] mmcf of total proved and 1,509 mmcf total proved plus probable assigned to natural gas from coal  bed methane reserves.
4 As evaluated by GLJ.

RESERVES RECONCILIATION
COMPANY INTEREST1, 2 (Gross + Royalties Receivable)
  Light and
Medium
Crude Oil
(mbbl)

Heavy
Crude Oil
(mbbl)

Total
Crude Oil
(mbbl)

NGLs
(mbbl)

Conventional
Natural Gas
(mmcf)

Natural Gas
from Coal
(mmcf)

Total
Natural Gas
(mmcf)

Oil Equivalent
(mboe)
PROVED PRODUCING                
Opening Balance3 2,671 408 3,080 1,583 56,793 1,511 58,304 14,380
  Discoveries - - - - - - - -
  Extensions 910 62 972 427 9,863   9,863 3,043
  Infill Drilling 276 - 276 11 269 - 269 332
  Improved Recovery - - - - - - - -
  Technical Revisions 1,638 196 1,834 890 19,423 (175) 19,247 5,932
  Acquisitions 44 100 144 3 59 - 59 157
  Dispositions (113) - (113) (5) (154) - (154) (144)
  Economic Factors - - - - - - - -
  Production (1,046) (115) (1,161) (496) (16,039) (199) (16,238) (4,363)
Closing Balance4 4,380 651 5,031 2,414 70,214 1,137 71,351 19,336
TOTAL PROVED                
Opening Balance3 6,465 470 6,935 2,612 90,666 1,632 92,298 24,930
  Discoveries - - - - - - - -
  Extensions 2,949 122 3,071 2,214 57,252 - 57,252 14,827
  Infill Drilling 889 - 889 301 7,175 - 7,175 2,386
  Improved Recovery - - - - - - - -
  Technical Revisions (333) 195 (138) 1,089 18,308 (296) 18,012 3,953
  Acquisitions 44 190 234 3 59 - 59 247
  Dispositions (129) - (129) (5) (160) - (160) (161)
  Economic Factors - - - - - - - -
  Production (1,046) (115) (1,161) (496) (16,039) (199) (16,238) (4,363)
Closing Balance4 8,840 861 9,701 5,718 157,261 1,137 158,398 41,818
PROBABLE                
Opening Balance3 5,570 216 5,786 1,781 60,020 359 60,379 17,630
  Discoveries - - - - - - - -
  Extensions 2,640 26 2,666 1,810 48,896 - 48,896 12,625
  Infill Drilling 556 - 556 362 7,121 - 7,121 2,105
  Improved Recovery - - - - - - - -
  Technical Revisions (3,000) 92 (2,908) (274) (20,541) 13 (20,533) (6,601)
  Acquisitions 18 47 65 1 25 - 25 71
  Dispositions (81) - (81) (3) (73) - (73) (96)
  Economic Factors - - - - - - - -
  Production - - - - - - - -
Closing Balance4 5,703 382 6,085 3,677 95,448 372 95,820 25,734
PROVED PLUS PROBABLE                
Opening Balance3 12,035 686 12,721 4,393 150,686 1,991 152,677 42,560
  Discoveries - - - - - - - -
  Extensions 5,589 147 5,736 4,025 106,148 - 106,148 27,452
  Infill Drilling 1,444 - 1,444 663 14,296 - 14,296 4,490
  Improved Recovery - - - - - - - -
  Technical Revisions (3,332) 288 (3,044) 815 (2,233) (283) (2,521) (2,649)
  Acquisitions 63 237 300 4 84 - 84 318
  Dispositions (210) - (210) (9) (233) - (233) (257)
  Economic Factors - - - - - - - -
  Production (1,046) (115) (1,161) (496) (16,039) (199) (16,238) (4,363)
Closing Balance4 14,543 1,242 15,785 9,395 252,709 1,509 254,218 67,550
1 "Company Interest" means Bellatrix's working interest (operated or non-operated) share before deduction of royalties but after including any royalty interests of  Bellatrix.
2 Based on forecast prices and costs. May not add due to rounding.
3 As at December 31, 2010 as evaluated by GLJ.
4 As at December 31, 2011 as evaluated by Sproule.

RESERVES RECONCILIATION
WORKING INTEREST1 (Gross)
  Light and
Medium
Crude Oil
(mbbl)

Heavy
Crude Oil
(mbbl)

Total
Crude Oil
(mbbl)

NGLs
(mbbl)

Conventional
Natural Gas
(mmcf)

Natural Gas
from Coal
(mmcf)

Total
Natural Gas
(mmcf)

Oil
Equivalent
(mboe)
PROVED PRODUCING                
Opening Balance2 2,671 385 3,056 1,573 56,507 1,511 58,017 14,299
  Discoveries - - - - - - - -
  Extensions 910 35 945 427 9,863 - 9,863 3,016
  Infill Drilling 276 - 276 11 269 - 269 332
  Improved Recovery - - - - - - - -
  Technical Revisions 1,638 241 1,879 893 19,494 (175) 19,319 5,992
  Acquisitions 39 100 139 3 59 - 59 152
  Dispositions (111) - (111) (5) (151) - (151) (142)
  Economic Factors - - - - - - - -
  Production (1,043) (115) (1,158) (494) (15,970) (199) (16,169) (4,347)
Closing Balance3 4,380 646 5,026 2,409 70,071 1,137 71,208 19,302
TOTAL PROVED                
Opening Balance2 6,465 445 6,910 2,601 90,353 1,632 91,984 24,842
  Discoveries - - - - - - - -
  Extensions 2,949 65 3,014 2,066 53,045 - 53,045 13,921
  Infill Drilling 889 - 889 301 7,175 - 7,175 2,386
  Improved Recovery - - - - - - - -
  Technical Revisions (333) 272 (61) 1,237 22,503 (296) 22,207 4,877
  Acquisitions 39 190 229 3 59 - 59 242
  Dispositions (127) - (127) (6) (157) - (157) (159)
  Economic Factors - - - - - - - -
  Production (1,043) (115) (1,158) (494) (15,970) (199) (16,169) (4,347)
Closing Balance3 8,840 856 9,696 5,709 157,007 1,137 158,144 41,761
PROBABLE                
Opening Balance2 5,569 208 5,777 1,778 59,932 360 60,291 17,600
  Discoveries - - - - - - - -
  Extensions 2,615 14 2,629 1,623 42,423 - 42,423 11,323
  Infill Drilling 556 - 556 362 7,121 - 7,121 2,104
  Improved Recovery - - - - - - - -
  Technical Revisions (2,973) 106 (2,867) (94) (14,249) 13 (14,236) (5,329)
  Acquisitions 16 47 63 1 25 - 25 68
  Dispositions (79) - (79) (3) (63) - (63) (93)
  Economic Factors - - - - - - - -
  Production - - - - - - - -
Closing Balance3 5,703 376 6,079 3,668 95,189 372 95,561 25,674
PROVED PLUS PROBABLE                
Opening Balance2 12,031 653 12,684 4,379 150,284 1,991 152,275 42,442
  Discoveries - - - - - - - -
  Extensions 5,564 79 5,643 3,689 95,468   95,468 25,243
  Infill Drilling 1,444 - 1,444 663 14,296 - 14,296 4,490
  Improved Recovery - - - - - - - -
  Technical Revisions (3,302) 378 (2,924) 1,144 8,254 (283) 7,971 (452)
  Acquisitions 55 236 291 4 84 - 84 310
  Dispositions (206) - (206) (9) (221) - (221) (251)
  Economic Factors - - - - - - - -
  Production (1,043) (115) (1,158) (494) (15,970) (199) (16,169) (4,347)
Closing Balance3 14,543 1,231 15,774 9,377 252,196 1,509 253,705 67,435
1 "Working Interest" means Bellatrix's working interest (operated or non-operated) share before deduction of royalties and without including any royalty interest of Bellatrix. Also referred to as "Gross" reserves under NI 51-101. May not add due to rounding.
2 As at December 31, 2010 as evaluated by GLJ.
3 As at December 31, 2011 as evaluated by Sproule.

NET PRESENT VALUE OF FUTURE NET REVENUE

The forecast prices used in Sproule's reserve report effective December 31, 2011 (the "Sproule Report") were an average of the forecast prices published by Sproule, GLJ and McDaniel & Associates Consultants Ltd., as at January 1, 2012 (the "Consultants' Average Forecast Prices")  and cost inflation factors as at January 1, 2012 prior to provision for interest, debt service charges and general and administrative expenses.  It should not be assumed that the net present values of future net revenues estimated by Sproule represent the fair market value of the reserves.

Estimated future net revenues are stated before deducting future estimated site restoration costs but are reduced for estimated future abandonment costs, the Saskatchewan Capital Tax and estimated capital for future development associated with the reserves.  In the Sproule Report, the net total future capital over the life of the reserves associated with the proved reserves is $264.2  million ($235.6 million discounted at 10%) and $376.8 million ($337.0 million discounted at 10%) for the total proved plus probable reserves. The change in 2011 net total future capital  over the life of the reserves associated with the proved reserves is $106.2  million ($99.2  million discounted at 10%) and $88.0  million ($99.5 million discounted at 10%) for the total proved plus probable reserves.

Summary of Net Present Values of Future Net Revenue1
Forecast Prices and Costs ($000s)
Before Income Taxes, Discounted at (%/ year)
As at December 31, 2011     0%   5%   10%   15%   20%
Proved                      
  Developed producing     478,719   368,145   303,900   261,766   231,921
  Developed non-producing     7,321   5,380   4,190   3,416   2,886
  Undeveloped     398,527   248,347   163,001   109,404   73,334
Total proved     884,567   621,873   471,092   374,586   308,141
Probable     733,346   392,434   251,454   177,814   133,231
Proved Plus Probable Producing     743,083   501,976   388,095   321,862   278,256
Total proved plus probable     1,617,913   1,014,307   722,546   552,400   441,373

Summary of Net Present Values of Future Net Revenue1
Forecast Prices and Costs ($000s)
After Income Taxes, Discounted at (%/ year)
As at December 31, 2011     0%   5%   10%   15%   20%
Proved                      
  Developed producing     478,719   368,145   303,900   261,766   231,921
  Developed non-producing     7,321   5,380   4,190   3,416   2,886
  Undeveloped     301,592   193,288   128,714   86,660   57,527
Total proved     787,632   566,814   436,804   351,843   292,334
Probable     550,005   292,691   186,034   130,253   96,418
Proved Plus Probable Producing     681,520   478,337   377,435   316,536   275,402
Total proved plus probable     1,337,637   859,505   622,838   482,095   388,815

1May not add due to rounding.
2 The after-tax net present value of Bellatrix's oil and gas properties here reflects the tax burden on the properties on a stand-alone basis and utilizes corporate tax pools.  It does not consider the business-entity -level tax situation, or tax planning.  It does not provide an estimate of the value at the level of the business entity, which may be significantly different.  Bellatrix's consolidated financial statements and management's discussion and analysis should be consulted for information at the business entity level.

The following is a summary of the Consultants' Average Forecast Prices as at January 1, 2012:

    OIL                

Year
Forecast
 
WTI
Cushing
Oklahoma
($US/Bbl)
 
Edmonton Par
Price
40° API
($Cdn/Bbl)
 
Hardisty
Heavy
12° API
($Cdn/Bbl)
 
NATURAL
GAS AECO
Price
($Cdn/MMBtu)
  NATURAL
GAS
LIQUIDS at
Edmonton3
($Cdn/Bbl)
 
INFLATION
RATES1
%/Year
 
EXCHANGE
RATE2
($US/$Cdn)
                             
2012   97.52   97.94   74.59   3.38   105.78   2.0   0.985
2013   97.47   97.92   72.19   4.04   104.14   2.0   0.985
2014   97.33   97.80   69.98   4.47   102.28   2.0   0.985
2015   99.41   99.85   74.10   5.23   104.48   2.0   0.985
2016   100.36   100.79   75.58   5.57   105.47   2.0   0.985
2017   101.35   101.78   77.09   5.88   106.53   2.0   0.985
2018   102.78   103.21   78.64   6.12   108.06   2.0   0.985
2019   104.44   104.88   80.21   6.26   109.81   2.0   0.985
2020   106.14   106.58   81.81   6.43   111.61   2.0   0.985
2021   108.29   108.77   83.45   6.57   113.92   2.0   0.985
2022   110.44   110.92   85.12   6.69   116.17   2.0   0.985
2023   112.65   113.13   86.82   6.81   118.47   2.0   0.985
2024   114.89   115.40   88.56   6.95   120.85   2.0   0.985
2025   117.19   117.70   90.33   7.10   123.27   2.0   0.985
2026   119.56   120.07   92.13   7.25   125.26   2.0   0.985
Thereafter   + 2.0%/year   + 2.0%/year   + 2.0%/year   + 2.0%/year   + 2.0%/year   2.0   0.985
                             
1 Inflation rates for forecasting prices and costs
2 Exchange rates used to generate the benchmark reference prices in this table
3 Natural Gas Liquids is represented by the pentanes plus price

Weighted average historical prices realized by Bellatrix (before commodity price risk management contracts) for the year ended December 31, 2011, were $3.77/mcf for natural gas, $92.51 /bbl for light, medium gravity crude oil and condensate, $68.23 /bbl for heavy oil and $53.54/bbl for natural gas liquids.

NET ASSET VALUE - Proved Plus Probable

The following table of net asset value, as at December, 31, 2011, is based on the Sproule evaluation of future net revenue, which does not represent fair market value and does not take into account possible reserve additions from reinvestment of cash flow in existing properties.

 
($000's except acre, unit and per unit amounts)
  PW 0% PW 5% PW 10% PW 15% PW 20%
Proved plus Probable Reserves1 1,617,913 1,014,307 722,546 552,400 441,373
Undeveloped Lands2 130,143 130,143 130,153 130,143 130,143
Value of Seismic3 19,500 19,500 19,500 19,500 19,500
Net Debt4 (119,250) (119,250) (119,250) (119,250) (119,250)
Net Asset Value 6 1,684,306 1,044,700 752,939 582,793 471,766
           
Per Common Share 5
- Per Basic Share
$15.35 $9.73 $7.01 $5.43 $4.39
1 As evaluated by Sproule as at December 31, 2011  based on forecast prices and costs before income  tax
2  As estimated by Bellatrix as at  December 31, 2011  on  224,559  net acres of undeveloped land at an average price of  $579.55   per acre.
3 Based on 27.6% of $70.5 million replacement value based on seismic costs on an average of $1,500/km for 2d and $10,000/km2 to buy data.
4 Long term debt net of working capital excluding unrealized commodity contract losses as at December 31, 2011, including the liability portion of
convertible debenture ($49.1  million). As at December 31, 2011, the principal amount of convertible debentures outstanding was $55.0 million.
5 Based on 107.407 million common shares outstanding as at  December 31, 2011.
6Certain of the information used in the foregoing calculation, including net debt and number of common shares outstanding, is based on unaudited financial information.

FINDING, DEVELOPMENT AND ACQUISITION COSTS 1,3,4
PROVED PLUS PROBABLE

           
  2011 2010 2009 2009 - 2011 Avg.
Excluding Future Development Costs        
FD&A Costs Proved Plus Probable ($/boe)        
  Exploration and development2 5.99 4.68 7.35 5.52
  Acquisitions (excluding dispositions) 12.24 20.96 - 14.12
  Total (including acquisitions) 6.06 4.96 6.90 5.65
Including Future Development Costs2        
FD&A Costs - Proved Plus Probable ($/boe)        
  Exploration and development 9.26 12.74 6.32 10.54
  Acquisitions (excluding dispositions) 12.24 20.96 - 14.12
  Total (including acquisitions) 9.29 12.89 5.93 10.59
1 NI 51-101 specifies how finding and development costs should be calculated if they are reported.  Essentially NI 51-101 requires that the exploration and development
costs incurred in the year along with the change in estimated future development costs be aggregated and then divided by the applicable reserve additions.  The calculation
specifically excludes the effects of acquisitions and dispositions on both reserves and costs.  By excluding the effects of acquisitions and dispositions Bellatrix believes that
the provisions of the NI 51-101 do not fully reflect Bellatrix's ongoing reserve replacement costs.  Since acquisitions can have a significant impact on Bellatrix's annual
reserve replacement costs, excluding these amounts could result in an inaccurate portrayal of Bellatrix's cost structure.  Accordingly, Bellatrix also provides finding,
development and acquisition costs that incorporate all acquisitions net of any dispositions during the year. The foregoing calculation is based on working interest reserves.
2 The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development
costs generally will not reflect total finding and development costs related to reserve additions for that year.
3Certain of the information used in the foregoing calculation, including exploration and development expenditures and acquisition expenditures is based on unaudited
financial information. 2010 and 2009 numbers do not reflect any changes to accounting rules that may have occurred and are based on generally accepted accounting
principles prior to adoption of International Financial Reporting Standards ("IFRS") and have not been restated.
4Proved plus probable reserves are based on the Sproule Report for the year ended December 31, 2011 and evaluations by GLJ for the years ended December 31, 2010
and 2009.

FINDING, DEVELOPMENT AND ACQUISITION COSTS 1,3,4
PROVED

           
  2011 2010 2009 2009 - 2011 Avg.
Excluding Future Development Costs        
FD&A Costs Proved ($/boe)        
  Exploration and development2 8.28 8.03 6.26 8.06
  Acquisitions (excluding dispositions) 15.71 27.41 - 18.36
  Total (including acquisitions) 8.37 8.47 6.01 8.23
Including Future Development Costs2        
FD&A Costs - Proved ($/boe)        
  Exploration and development 12.97 15.67 8.97 13.61
  Acquisitions (excluding dispositions) 15.71 27.41 - 18.36
  Total (including acquisitions) 13.00 15.94 8.61 13.69
1 NI 51-101 specifies how finding and development costs should be calculated if they are reported.  Essentially NI 51-101 requires that the exploration and development
costs incurred in the year along with the change in estimated future development costs be aggregated and then divided by the applicable reserve additions.
The calculation specifically excludes the effects of acquisitions and dispositions on both reserves and costs.  By excluding the effects of acquisitions and dispositions
Bellatrix believes that the provisions of the NI 51-101 do not fully reflect Bellatrix's ongoing reserve replacement costs.  Since acquisitions can have a significant impact on
Bellatrix's annual reserve replacement costs, excluding these amounts could result in an inaccurate portrayal of Bellatrix's cost structure.  Accordingly, Bellatrix also provides
finding, development and acquisition costs that incorporate all acquisitions net of any dispositions during the year. The foregoing calculation is based on working interest reserves.
2 The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs
generally will not reflect total finding and development costs related to reserve additions for that year.
3Certain of the information used in the foregoing calculation, including exploration and development expenditures and acquisition expenditures is based on unaudited
financial information and is subject to audit and may be subject to change as a result. 2010 and 2009 numbers do not reflect any changes to accounting rules that may
have occurred and are based on generally accepted accounting principles prior to adoption of International Financial Reporting Standards ("IFRS") and have not been restated.

  4Proved plus probable reserves are based on the Sproule Report for the year ended December 31, 2011 and evaluations by GLJ for the years ended December 31, 2010 and 2009.

FUTURE DEVELOPMENT COSTS USING FORECAST PRICES AND COSTS

         
($000's)   Proved
Future Development
Costs
  Proved plus Probable
Future Development
Costs
2012   109,208   165,689
2013   98,738   137,266
2014   55,494   72,647
2015 and subsequent   725   1,169
Undiscounted total   264,166   376,771
Discounted @ 10%/yr   235,552   336,958

RECYCLE RATIO (OPERATING NETBACK1/FD&A COST)

As at December 31, 2011 Proved Proved  Plus
Probable
Operating netback before commodity price risk management contracts ($/boe) 1  (unaudited) $25.09 $25.09
Recycle ratio (excluding future development costs) 3.00x 4.14x
     
Operating netback after commodity price risk management contracts ($/boe) (unaudited) $25.22 $25.22
Recycle ratio (excluding future development costs) 3.01x 4.16x

1Operating netback is calculated by deducting transportation, royalties and operating costs from revenue.

The recycle ratio is a measure for evaluating the effectiveness of a company's re-investment program. The ratio measures the efficiency of capital investment. It accomplishes this by comparing the operating netback per BOE to that year's reserve FD&A cost per BOE. Since its inception Bellatrix has successfully achieved a recycle ratio in excess of the 2.74 times recorded in 2009. In 2011 and 2010 the recycle ratio was 4.16 times and 4.31 times, respectively.

RESERVE LIFE INDEX

Bellatrix's reserve life index has been determined for proved plus probable working interest reserves using forecast prices and costs.  The reserve life index for 2011 below is calculated by dividing reserves as at the effective date of the Sproule Report, December 31, 2011, by the first year production as set forth in the Sproule Report, representing a measure of the amount of time production could be sustained at the production rates based on the reserves at the applicable point in time.

Reserve Life Index                    
    2011   2010   2009   2008   2007
Proved   8.0   7.2   6.4   6.4   5.6
Proved plus probable   10.0   11.2   9.4   10.1   7.9

RESERVES COMMITEE

Bellatrix has a reserves committee, comprised of independent board members, that reviews the qualifications and appointment of the independent reserve evaluators. The committee also reviews the procedures for providing information to the evaluators.  All booked reserves are based upon annual evaluations by the independent qualified reserve evaluators conducted in accordance with the COGE (Canadian Oil and Gas Evaluation) Handbook and National Instrument 51-101. The evaluations are conducted using all available geological and engineering data. The reserves committee has reviewed the reserves information and approved the reserve report.

LAND

As at December 31, 2011, Bellatrix had over 224,559  net undeveloped acres in Alberta, British Columbia and Saskatchewan.

Land Statistics

               
        2011       2010
Average working interest                
  Developed       57%       56%
  Undeveloped       63%       60%
Total       60%       58%

Land Holdings1

               
    2011   2010
    Gross   Net   Gross   Net
Developed                
  British Columbia   19,850   7,315   20,558   7,527
  Alberta   370,653   209,786   379,066   210,780
  Saskatchewan   13,327   12,720   13,487   12,734
  Total   403,830   229,821   413,111   231,041
Undeveloped                
  British Columbia   143,968   60,590   144,632   61,195
  Alberta   198,777   152,363   194,030   138,318
  Saskatchewan   11,606   11,606   12,380   12,380
  Total   354,351   224,559   351,042   211,893
Developed and Undeveloped                
  British Columbia   163,818   67,905   165,190   68,722
  Alberta   569,429   362,149   573,096   349,098
  Saskatchewan   24,934   24,326   25,867   25,113
Total   758,181   454,380   764,153   442,934
1 May not add due to rounding              

An updated corporate presentation is available on www.bellatrixexploration.com.

Bellatrix Exploration Ltd. is a growth oriented exploration and production company based in Calgary, Alberta, Canada.

READER ADVISORIES:

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. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

UNAUDITED 2011 FINANCIAL INFORMATION: As Bellatrix  plans to announce its audited 2011 financial results on or about March 8, 2012, certain financial information for the year ended December 31, 2011 disclosed herein, or used in various calculations herein, is based on unaudited information and has been utilized by Bellatrix in this release to facilitate the discussion with respect to the performance of our capital program. Readers are advised that these financial estimates are subject to audit and may be subject to change as a result, and such changes could be material.

NON-GAAP MEASURES:  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 Canadian 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 document.  Funds flow from operations per share is calculated using the weighted average number of common shares for the period.

Management believes that this measure is a useful supplemental measure of cash flow from operations.  Readers are cautioned, however, that these measures should not be construed as an alternative to cash flow from operations determined in accordance with GAAP as a measure 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.

FORWARD LOOKING STATEMENTS:  Statements in this document may contain forward-looking information including management's assessment of future plans and operations, expected 2012 average production and exit production, reserve estimates and the total future capital associated with development of reserves,2012 capital expenditures, timing of completion and testing of wells and timing of release of 2011 financial results. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company. These risks include, but are not limited to: the risks associated with the oil and gas industry; commodity prices, and; exchange rate changes. Industry related risks could include, but are not limited to: operational risks in exploration; development and production; delays or changes in plans; risks associated to the uncertainty of reserve estimates; health and safety risks, and; the uncertainty of estimates and projections of production, costs and expenses. 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. 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. 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 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 lists of factors and assumptions are not exhaustive. Additional information on these and other factors that could effect the Company'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 the Company's website (www.bellatrixexploration.com.). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company 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.

 

 

 

 

 

SOURCE Bellatrix Exploration Ltd.

For further information:

BELLATRIX EXPLORATION LTD. 

Raymond G. Smith, P.Eng.
President & CEO
(403) 750-2420

Edward J. Brown, CA
Vice President, Finance & CFO
(403) 750-2655

Troy Winsor
Investor Relations
(800) 663-8072


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