CALGARY – Bellatrix Exploration Ltd. (TSX:BXE) is cutting its already reduced 2015 capital budget by a further $100 million, dropping it by 25 per cent to $300 million, and scaling back its production growth plan.
The Calgary-based company says the budget cut reflects a decision to delay Phase 2 of a gas plant by about six months to the fourth quarter of 2016 amid low resource prices.
The remaining budget will be spent primarily to complete Phase 1 construction of the gas plant in the Alder Flats of Alberta by next summer and drilling of wells that can supply it.
Bellatrix had announced on Nov. 4 that its initial 2015 capital spending estimate was $450 million, which was reduced to $400 million on Dec. 1 when it completed a $118-million cash acquisition of assets in the Alder Flats area and a cost-sharing arrangement with Keyera Corp. (TSX:KEY), which will receive a 35 per cent ownership stake in the plant.
Since then, several energy producers and oilfield service companies have cut their capital spending plans in response to a sharp drop in crude oil prices — currently near five-year lows.
In addition, Bellatrix announced last week that it had reached a one-year standstill agreement with Orange Capital, a New York-based private equity firm that has increased its holdings in the company to 14.3 per cent.
Orange had said in August, when oil prices were much higher and it had only about 5.3 per cent of the Bellatrix stock, that it would seek ways to “maximize shareholder value.”
Bellatrix said Monday that about 61 per cent of the revised 2015 budget will be spent on drilling in the Alder Flats area to will supply the new gas plant, 35 per cent on the plant and four per cent on land and seismic assets.
It said Phase 1 of the plant remains on schedule for a start up in July. However, Bellatrix is reducing its 2015 average production guidance range to the equivalent of between 47,000 and 48,000 barrels per day, made up 70 per cent of natural gas. At the mid-point that would be 23 per cent above the 2014 average daily production of 38,500 barrels per day.