Financier doubles bet on Bellatrix to $500M

By Dan Healing, Calgary Herald, Sept. 30, 2014

Bellatrix Exploration Ltd., headed by president and CEO Ray Smith, has had private joint venture funding topped up to a total of $500 million.

CALGARY — Oilpatch financier Richard Grafton has doubled up his bet on Calgary producer Bellatrix Exploration Ltd., pledging $250 million to take his total backing to $500 million.

In a news release Tuesday, the company said the new money is being granted based on the success of the first joint venture with equity fund Grafton Energy Co. I Ltd., which started with a $100-million commitment last year and grew it to $250 million last spring.

The new investment is being made through Canadian Non-Operated Resources Corp. or CNOR, an oil and gas company managed by Grafton Asset Management Inc. and led by Richard Grafton.

The company was launched in August after securing $675 million in funding from New York-based Riverstone Holdings LLC, an undisclosed United Arab Emirates state-owned investor and Grafton Asset Management Inc., according to a Financial Post article.

“Over the next 18 months we want to deploy the capital. Our target is to deploy between $150-million (and) $250-million on each of the deals,” Grafton was quoted as saying in August.

Neither Grafton nor Bellatrix CEO Ray Smith responded to requests for comment Tuesday.

Under terms of the latest agreement, CNOR will pay 50 per cent of the capital costs under development plans to be proposed by Bellatrix and approved by the two companies.

CNOR would earn a 33 per cent working interest before payout, automatically converting to a 10.67 per cent gross overriding royalty on Bellatrix’s pre-joint venture working interest after payout.

In its release, Bellatrix said the joint venture funding is available immediately but the funds will be spent primarily from 2016 through 2018.

The terms differ from the earlier deal, under which Grafton would provide 82 per cent of the capital needed to develop Notikewin/Falher and Cardium wells in the Willesden Green and Brazeau areas on Alberta.

In return, it earns a 54 per cent working interest until its investment plus eight per cent is returned, then drops to a 33 per cent interest.

Analyst Juan Jarrah of TD Securities said in a note to investors the headline numbers look different but the terms of the carry are similar.

He pointed out the difference in commitment (50 per cent versus 84 per cent) is designed to ensure that Bellatrix is able to process more of its own gas.

Bellatrix said earlier this year it has an inventory of about 1,250 drilling locations.

Analyst Jeremy McCrea of AltaCorp Capital said he is maintaining his outperform rating and 12-month target price of $13, noting its joint venture partnerships and well paybacks of under 12 months which are “some of the best paybacks in the industry.”

Bellatrix shares fell 28 cents or nearly four per cent to close at $6.88 on Tuesday. The stock’s 52-week high of $11.65 was set in May.

In mid-September, it reported outages at two third-party operated gas plants would result in an aggregate net production drop of 30,000 barrels of oil equivalent, roughly 1,000 boe per day for the month.

It said daily production is expected to average 40,500 boe/d in the third quarter. Current daily production was about 42,000 boe/d and Bellatrix said its 2014 exit rate would be unchanged at 48,000 boe/d.

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