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Bellatrix Exploration - Investor Presentation 2014

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Bellatrix Exploration Ltd. is a growth oriented oil and gas company operating in Western Canada’s Sedimentary Basin. The Company focuses on operating with integrity and conducting operations in a safe …

Bellatrix Exploration Ltd. is a growth oriented oil and gas company operating in Western Canada’s Sedimentary Basin. The Company focuses on operating with integrity and conducting operations in a safe and environmentally responsible manner while providing sustained shareholder growth in value. Our land base is focused in west central Alberta, Canada.

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  • 1. CORPORATE PRESENTATION April 9, 2014 TSX: BXE NYSE MKT: BXE
  • 2. 2 Bellatrix Corporate Presentation Bellatrix Drill bit driven growth oriented company Focus on profit not product Low cost finder and operator Strong balance sheet Employ modern technology coupled with innovation Targeted Accretive Acquisitions BELLATRIX STRATEGY
  • 3. 3 Bellatrix Corporate Presentation CORPORATE SNAPSHOT Liquidity (past 3 months) +/- 1.7 mm shares/d Annual Average Production guidance (2014e) 42,500 – 43,500 boe/d Exit rate guidance (2014e) +/- 47,000 boe/d Oil / liquids weighting (2014e) +/- 37 % Capital structure Common shares – basic +/- 171 mm Common shares – diluted +/- 182 mm Insider ownership (fully diluted) 10% Approximate Combined Tax pools $1,228 mm
  • 4. 4 Bellatrix Corporate Presentation TRACK RECORD OF PRODUCTION GROWTH AVERAGE ANNUAL PRODUCTION INCREASE ProductionpermmShares 25% 30% 38% 33% 30% 6,572 8,519 11,954 16,686 21,830 43,000 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 Q4 2009 2010 2011 2012 2013e 2014e Average Production (boe/d) +/- 554%
  • 5. 5 Bellatrix Corporate Presentation 0 2 4 6 8 10 12 14 16 18 20 Q4 2008 2009 2010 2011 2012 2013 2014e 59% OPERATING EXPENSES TOTAL OPERATING EXPENSE ($/BOE)
  • 6. 6 Bellatrix Corporate Presentation 0 100 200 300 400 500 600 700 2009 2010 2011 2012 2013 2014e 515% $670 REVENUE ($mm’s) $292 $219 $202 $118$109 62% Liquids 60% Liquids 71% Liquids 69% Liquids 52% Liquids 48% Liquids
  • 7. 7 Bellatrix Corporate Presentation CASH FLOW / BASIC SHARE $0.39 $0.57 $0.91 $1.03 $1.27 $2.10 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 2009 2010 2011 2012 2013 2014e 438%
  • 8. 8 Bellatrix Corporate Presentation RESERVES GROWTH 0 20 40 60 80 100 120 140 160 180 200 220 Proved P+P Proved P+P Proved P+P Proved P+P Proved P+P Oil and liquids Natural Gas 2009 20112010 mmboe 2012 2013 16.5 25.8 24.8 42.4 41.8 67.6 55.5 104 124 212 722% 37% 36% 30% 35% 38% 37%40% 38%28% 29%
  • 9. 9 Bellatrix Corporate Presentation INDUSTRY LEADING OPERATIONS METRICS December 31, 2013 (P&P) FD&A costs (including FDC) $9.67/boe Reserve life index (P&P) (as at December 31, 2013) 13.7 years December 31, 2013 Recycle ratio (excluding FDC and Acquisitions, P&P) 2.90x December 31, 2013 Recycle ratio (excluding FDC, proved) 1.88x
  • 10. 10 Bellatrix Corporate Presentation TOTAL RETURN COMPARISON $0 $100 $200 $300 $400 $500 $600 $700 $800 31-Dec-08 31-Dec-09 31-Dec-10 31-Dec-11 31-Dec-12 31-Dec-13 Bellatrix Exploration Ltd. S&P/TSX Energy Index S&P/TSX Composite Index Data provided by National Bank Financial Markets Valueofa$100Investment
  • 11. 11 Bellatrix Corporate Presentation 2014 ESTIMATED FINANCIAL FORECAST 2013 2014e Variance Cash from operations ($mm) $143 +/- $360 +152% Cash per share $1.27 +/- $2.10 +65% Net Cash Capital expenditures ($mm) $303 +/- $370 +22% Total Net Debt ($mm) $395 +/- $400 - Debt Capacity ($mm) $500 $500 - Light Oil & Condensate ($CDN/bbl) $92.66 $92.50 AECO ($CDN/GJ) $3.03 $3.78
  • 12. 12 Bellatrix Corporate Presentation GROWING BELLATRIX 68% 27% 5% 2014 ESTIMATED NET BXE CAPITAL BUDGET (+/- $370 MM) (+/- $610 Million Gross including JV Partner Capital) Drilling and Completions Facilities Land and Seismic
  • 13. 13 Bellatrix Corporate Presentation COMMODITY RISK MANAGEMENT Jan. 1 – Dec. 31, 2014 6,000 bbls/d $97.07 CDN/bbl Feb. 1 – Dec. 31, 2014 95.7 mmcfd $4.21 CDN/mcf Oil Gas* o * Assumes conversion of a $/GJ to $/mcf is based on an average corporate heat content of 40.8 Mj/m3
  • 14. 14 Bellatrix Corporate Presentation FORMULA FOR GROWTH o Inventory of low risk development locations − 2,000 net locations o Extensive undeveloped land base of 416,631 net acres o Stacked Hydrocarbon Bearing Reservoirs in WCA: Belly River +/- 1,300 m Cardium +/- 2,100 m Second White Specs +/- 2,200 m Viking +/- 2,300 m Notikewin +/- 2,400 m Falher +/- 2,500 m Lower Mannville +/- 2,550 m Rock Creek +/- 2,600 m Duvernay +/- 3,400 m
  • 15. 15 Bellatrix Corporate Presentation BALANCED RESOURCE PLAY INVENTORY Net Remaining Inventory Cost per well ($ mm) Net Remaining Investment ($mm) Belly River (HZ) 23 $2.5 58 Second White Specks (Vrt) 200 $0.25 50 Cardium (HZ) 742 $3.6 2,671 Viking (HZ) 80 $4.2 338 Notikewin/Falher (HZ) 381 $4.6 1,753 Mannville (HZ) 128 $4.2 538 Rock Creek (HZ) 31 $4.6 143 Duvernay (HZ) 415 $11.0 4,565 2,000 $10,116 Based upon internal estimates
  • 16. 16 Bellatrix Corporate Presentation CARDIUM LIGHT OIL RESOURCE PLAY o Largest accumulation of light oil in the WCSB o Approximately 20,000 square miles o Approximately 1.8 Billion bbls produced to date o Currently producing 155,000 bbl/d & 1.31 bcf/d o LOE < $8.00/boe o BXE Drilling Inventory • 1,190 Gross • 742 Net o Planned wells for 2014 • 115 Gross • 66 Net o BXE Cardium Sections • 453 Gross • 338 Net Edson Pembina Ferrier Strachan Harmattan
  • 17. CARDIUM INDUSTRY LAND SUMMARY 338 300 295 275 204 194 149 134 110 102 100 94 92 90 80 78 75 61 60 52 49 48 47 45 40 38 35 25 20 0 100 200 300 400 PennWest Bellatrix Bonavista Lightstream Pengrowth ConocoPhillips Bonterra Vermilion ARC TamarackValley Santonia Sinopec Whitecap NuVista TORC Talisman TriOil Imperial Yangarra Suncor TAQANorth Apache Devon Enerplus Crew Perpetual KNOC Crocotta Husky BP NetCardiumSections 938
  • 18. 18 Bellatrix Corporate Presentation CARDIUM FOCUS AREAS Ferrier Strachan Harmattan
  • 19. 19 Bellatrix Corporate Presentation HORIZONTAL PLACEMENT IN CARDIUM SECTION GR MLSP
  • 20. 20 Bellatrix Corporate Presentation CARDIUM OIL TYPE CURVE HORIZONTAL CARDIUM OIL WELL PRODUCTION 0 10 20 30 40 50 60 70 80 90 100 0 100 200 300 400 500 600 700 800 0 10 20 30 40 50 ContributingWells WeeklyAverageProduction(boed) Producing Weeks Cardium Weekly Production Well Count Estimated6-10% decline 2013 Type Curve 2012 Type Curve (Basedon 54 Wells) Incremental 31mboe overprevioustype curve. Cardium Type Economics Drill,Case,Complete & Tie-In $3.6M NPVBT @ 10% $6.1M Rate of Return 159% Payout 0.8 yr Economics based upon $90 CDN/bbl and $3.00 CDN/mmBTU gas
  • 21. 21 Bellatrix Corporate Presentation CARDIUM TYPE CURVES Internal estimates based upon January 1, 2013 Sproule Evaluation and GLJ Evaluations Economics based upon 2013 $90 CDN/bbl and $3.00 CDN/mmBTU gas 0 100 200 300 400 500 600 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 CumulativeProduction,mboe Ferrier Cardium, 30% Liquids Cardium High GOR, 65% liquids Cardium Low GOR, 77% liquids Southern Cardium, 92% liquids
  • 22. 22 Bellatrix Corporate Presentation NOTIKEWIN/FALHER LIQUIDS RICH GAS o BXE Land Sections • 181 Gross • 91 Net o BXE Drilling Inventory • 750 Gross • 381 Net o Regional Stacked Mannville Channels deposited in broad valleys o 64 BXE and industry Notikewin/Falher gas wells average IP 9.6 Mmcfe/d o Planned wells for 2014 • 31 Gross • 11 Net o 2 mile Hz produced2.1 Bcf gas with liquids in first 120 days o 14 out of 15 best gas wells in Spirit River, Alberta in 2013
  • 23. 23 Bellatrix Corporate Presentation NOTIKEWIN/FALHER LIQUIDS RICH GAS NEW FRAC TECHNIQUE 7.5 Bcf Performance Curve: NPV 10% BIT = $15.4 MM IRR = >500% Payout = 0.4 Years 5 Bcf Performance Curve LOE < $0.60/mcfe F&D (2P) $0.58/mcfe NPV 10% BIT = $11.4 MM IRR = 216% Payout = 0.6 years @ 2013 $3.00/mmBTU gas ($3.44/mcf based on corporate heat content) & $90 CDN/bbl C5+ 0 2000 4000 6000 8000 10000 12000 0 2 4 6 8 10 12 14 16 18 20 22 24 MonthlyAverageGasProduction(mcf/d) Producing Months
  • 24. 24 Bellatrix Corporate Presentation LOWER MANNVILLE LIQUIDS RICH GAS o Stacked play potential o BXE Drilling Inventory • 110 Gross • 100 Net o BXE Land Sections • 311 Gross • 287 Net o Liquids-rich gas plays; approximately 200 bbls/mmcf o 31 horizontal Ellerslie wells drilled o Ellerslie HZ oil discovery at Davey Lake; 300 boed IP30 Schematic Log GR Porosity
  • 25. 25 Bellatrix Corporate Presentation DUVERNAY UNCONVENTIONAL RESOURCE o BXE Land Sections • 122 Gross • 120 Net o BXE Inventory • 415 – 600+ locations o Potential BXE resource: over 10 Tcf OGIP o Estimated 4 to 6 BCFE recoverable per well o BXE 09-24 HZ highest recorded IP3 at 3.7 mmcf/d; 0.75 Bcf cum to date o +75 Duvernay wells licensed in Greater Ferrier and Edson o 5 wells currently on production o Reported offset NGL yields of 70-150 Bbls/mmcf o Highly over-pressured at 15.8 kPa/m
  • 26. 26 Bellatrix Corporate Presentation BXE FERRIER INFRASTRUCTURE Access to 9 plants o Total capacity 1,162 mmcf/d Planned BXE Gas plant o 110 mmcf/d capacity o C3+ Recovery99% o C4+ Recovery100% o In service July 1, 2015 o Cost+/- $90 MM
  • 27. 27 Bellatrix Corporate Presentation GRAFTON JV $244 MM Initial Joint Venture June 21, 2013 with $61 MM Extension Election April 9, 2014 o 58 Net Notikewin/Falher and Cardium o horizontal wells in initial program o 13 Net Mannville wells in extension o BXE contribution - $55 MM o Grafton contribution - $250 MM o Effective July 1, 2013 – June 21, 2016 JV Partner earning terms: o Pay 82% to earn 54% BPO o Reversion to 33% APO on payout o Payout: $250MM @ 8% IRR o One time election to convert 33% WI to 17.5% GORR
  • 28. 28 Bellatrix Corporate Presentation TROIKA JV $240 MM Joint Venture o 63 Gross Cardium horizontal wells o BXE contribution - $120 MM o Effective January 1, 2013 – December 31, 2014. o 20 additional Cardium wells planned in 2013; 43 Cardium Hz wells in 2014 JV Partner earning terms: o Pay 50% to earn 35% BPO o Reverting to 25% APO o Payout: $ 120 MM + 15% IRR
  • 29. 29 Bellatrix Corporate Presentation PROVIDING PER SHARE VALUE TO INVESTORS THROUGH DRILLING, DEVELOPMENT AND TARGETED ACQUISITION SUMMARY o Knowledgeable management team with a long history and proven track record of growing companies through the drill bit o Prudent business management focused on per share growth, hedging and debt maintenance o Top tier asset base with a significant high IRR inventory of drill ready locations ($10.1 billion) o Low cost operator, low cost finder o Near term growth catalysts with forecast 2014 exit rate of +/- 47,000
  • 30. 30 Bellatrix Corporate Presentation CORPORATE INFORMATION BOARD OF DIRECTORS W.C. (Mickey) Dunn Chairman Doug N. Baker, FCA Murray L. Cobbe John H. Cuthbertson, QC Melvin M. Hawkrigg, BA, FCA, LLD (Hon.) Robert A. Johnson, P.Geol. Keith E. Macdonald, CA Raymond G. Smith, P. Eng. Murray B. Todd, B.Sc., P. Eng. Keith S. Turnbull, B.Sc., CA OFFICERS Raymond G. Smith, P.Eng. President & CEO Edward J. Brown, C.A. Executive Vice President, Finance & CFO Brent A. Eshleman, P.Eng. Executive Vice President Tim A. Blair Vice President, Land Leanne K. Gress-Blue, C.A. Vice President, Finance Kelly M. Nichol Vice President, Business Development Russell G. Oicle, P. Geol. Vice President, Exploration Garrett K. Ulmer, P.Eng. Vice President, Engineering Ving Y. Woo, P.Eng. Vice President Engineering & COO BANKERS National Bank of Canada Alberta Treasury Branches HSBC Bank Canada Canadian Imperial Bank of Commerce The Bank of Nova Scotia Bank of Montreal The Toronto Dominion Bank Union Bank, Canada Branch Wells Fargo Bank N.A., Canadian Branch Corporation Canada EVALUATION ENGINEERS Sproule Associates Limited REGISTRAR & TRANSFER AGENT Computershare Trust Company of Canada LEGAL COUNSEL Burnet, Duckworth & Palmer LLP AUDITORS KPMG LLP EXCHANGE LISTING The Toronto Stock Exchange - BXE NYSE MKT - BXE
  • 31. 31 Bellatrix Corporate Presentation Analyst Firm Jeremy McCrea AltaCorp Capital Steve Toth Canaccord Genuity Adam Gill CIBC Brian Kristjansen Dundee Capital Grant Daunheimer GMP Securities Christina Lopez Macquarie Capital Dan Payne National Bank Financial Jared Lewis Northland Capital Markets Ken Lin Paradigm Capital Jason Bouvier Scotia Capital Juan Jarrah TD Securities Inc ANALYST COVERAGE
  • 32. 32 Bellatrix Corporate Presentation ADVISORY FORWARD LOOKING STATEMENTS: In the interest of providing Bellatrix’s shareholders and potential investors with information regarding Bellatrix, including management’s assessment of Bellatrix’s future plans and operations, certain statements made by the presenter and contained in these presentation materials (collectively, this “presentation”) are “forward looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and “forward-looking statements”. The forward-looking statements contained in this presentation speak only as of the date of this presentation and are expresslyqualified bythis cautionary statement. 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 2014 average production and exit rate, estimates of commodity prices and exchange rates, estimated recovery from wells to be drilled in 2014 capital expenditures and nature of expenditures and method of financing thereof and drilling inventory and costs and time to develop, estimated 2014 Revenues, expected 2014 operating costs and estimated 2014 cash from operations, cash per share and estimated 2014 debt 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, actual results from wells to be drilled may not be similar to the results from previous wells drilled, 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 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. 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 the U.S. Securities Exchange Commission, may be accessed through the SEDAR website (www.sedar.com) the SEC’s website (www.sec.gov) or at Bellatrix's website (www.bellatrixexploration.com). Estimated 2014 cash from operations, cash per share and 2014 year end debt levels may constitute financial outlooks under applicable securities laws and were approved by management on March 12, 2014. 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. NON-GAAP MEASURES: This presentation contains the term "cash 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 GAAP as an indicator of the Company's performance. Therefore reference to cash from operations or cash from operations per share may not be comparable with the calculation of similar measures for other entities. Management uses cash from operations to analyze operating performance and leverage and considers cash 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 (the Company calculates funds flow from operations in the same manner as cash from operations) can be found in the Company's Management's Discussion and Analysis. Cash from operations per share is calculated using the weighted average number of shares for the period.
  • 33. 33 Bellatrix Corporate Presentation ADVISORY FD&A COSTS: This presentation includes calculations of finding, development and acquisition ("FD&A") costs for the year ended December 31, 2013. National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") requires that written disclosure of finding and development costs to be calculated in accordance with Section 5.15 of NI 51-101 which does not include the reserves additions associated with acquisitions or the costs of acquisitions in the calculation. The calculations of FD&A in this presentation include the reserves additions associated with acquisitions and the costs of acquisitions as the Company believes that including the effect of acquisitions provides useful information to investors. FD&A costs for the year ended December 31, 2013 and 2012 are $9.67/boe and $6.95/ proved plus probable boe respectively and the average FD&A for the last three completed years is $9.01/ proved plus probable boe. The finding and developments costs calculated in accordance with Section 5.15 of NI 51-101 for the years ended December 31, 2013 and 2012 are $10.67/proved boe ($9.65/proved plus probable boe) and $11.73/proved boe ($7.31/proved plus probable boe) and the average finding and development costs for the last three completed years is $11.47/proved boe ($8.86/proved plus probable boe). 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. BOE PRESENTATION 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. 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. All boe conversions in this presentation are derived from converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil. INITIAL PRODUCTION RATES: Initial Production rates discloses herein may not be indicative of long-term performance or ultimate recovery. ESTIMATED ULTIMATE RECOVERY (EUR): In this presentation, estimated ultimate recovery for Cardium oil wells is a representative value within the range of estimates of proved plus probable reserves per well as evaluated by Sproule Associates Limited effective December 31, 2013 based on forecast prices and costs. Estimated ultimate recovery for Notikewin wells is a representative value within the range of estimates of proved plus probable reserves per well as evaluated by Sproule Associates Limited effective December 31, 2013 based on forecast prices and costs. Estimated ultimate recovery for Duvernay wells does not represent an estimate of resources but has been provided to show management's assumptions used for its internal projections and plans. There is no certainty that any resources will be discovered for such Duvernay wells. If discovered, there is no certainty that it will be commerciallyviable to produce any portion of the resources. CURRENCY: All dollar amounts in this presentation are Canadian dollars unless otherwise identified.
  • 34. 34 Bellatrix Corporate Presentation 1920, 800 – 5th Avenue SW Calgary, Alberta Canada T2P 3T6 Tel: (403) 266-8670 Fax: (403) 264-8163 www.bellatrixexploration.com