Baupost Group Added Stake in Bellatrix Exploration



Baupost Group and Bellatrix Exploration

The Baupost Group added a new position in Bellatrix Exploration (BXE), as revealed by the fund’s fourth quarter 13F. The position accounted for 1.29% of the fund’s total fourth quarter portfolio. The 11.38% stake was disclosed through a 13G filing in February.

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Overview of Bellatrix Exploration

Bellatrix Exploration is based in western Canada. It’s an oil and gas company. It’s engaged in the exploration for and the acquisition, development, and production of oil and natural gas reserves in Alberta, British Columbia, and Saskatchewan.

A corporate presentation noted that Bellatrix is among the holders of the biggest positions in the Cardium industry in Alberta. It’s second to Penn West Petroleum Ltd. (PWE). It’s ahead of ConocoPhillips (COP), Talisman Energy Inc. (TLM) and Vermilion Energy (VET). ConocoPhillips has a 3.6% exposure to the Energy Select Sector SPDR Fund (XLE).

Bellatrix posted robust results for 4Q14

In 2014, Bellatrix had earnings of 163.1 million Canadian dollars. This was up 128% over 71.7 million Canadian dollars in 2013. In 4Q14, its earnings were 54.8 million Canadian dollars—an increase of 147% from 22.2 million Canadian dollars for the same period in 2013.

In 2014, revenue grew 99% to 574.3 million Canadian dollars—compared to 288.3 million Canadian dollars in 2013. A statement from Bellatrix noted that “Over the past five years, the company has achieved compound annual growth on a per share basis of 23% in production, 32% in reserves, 27% in funds flow from operations, and 71% in net earnings.”

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Average production increased 79%

The company’s full-year average production was 38,065 boepd (barrel of oil equivalent per day)—up 74% compared to 2013. For 4Q14, sales volumes averaged 42,945 boepd—up 79% from an average of 23,968 boepd in the same quarter last year. The increase in total sales volumes was due to a $234.1 million increase in net cash capital expenditures—including property acquisitions, ongoing drilling activity in the Cardium and Mannville resource plays, and additional volumes from the takeover of Angle Energy in December 2013. The company’s Grafton joint venture, the Daewoo and Devonian partnership, and the Troika joint venture also enabled it to “accelerate and expand its drilling activity” in 2014.

Reduced 2015 net capital budget plans

At the end of January, Bellatrix revised its 2015 net capital budget to $200 million. This was a decline from the $300 million declared previously. This was in “response to continued volatility of oil and gas prices” It said the “revised capital budget is designed to preserve Bellatrix’s favorable financial position in the current commodity price environment.” It also said, “The $100 million reduction in spending relative to previous guidance reflects a reduced drilling budget and an acute focus on wells that deliver superior rates of return at current commodity prices.”

In the next part of this series, we’ll discuss Baupost Group’s updated position in eBay.


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