SHLE Source Energy Services Ltd

Bellatrix Exploration Ltd. (“Bellatrix” or the “Company”) (TSX: BXE) today announced the completion of the recapitalization transaction (the “Recapitalization Transaction”) described in the Company’s management information circular dated April 18, 2019 (the “Information Circular”) and implemented pursuant to the court-approved plan of arrangement under the Canada Business Corporations Act (the “Plan of Arrangement”).

“We are pleased to announce the completion of the Recapitalization Transaction, significantly reducing our outstanding debt obligations and annual cash interest payments and strengthening our financial position” said Brent Eshleman, President & Chief Executive Officer of Bellatrix. “The Company believes that our successful closing of the Recapitalization Transaction will better position Bellatrix to effectively pursue our ongoing business and strategic objectives. We thank all stakeholders and employees for their continued commitment to Bellatrix.”

The Recapitalization Transaction includes, among others, the following key elements:

• the Company’s total debt has been reduced by approximately $110 million;
• the Company’s previously outstanding 8.5% senior unsecured notes due 2020 (“Senior Unsecured Notes”) in the aggregate principal amount of approximately US$145.8 million, plus all accrued and unpaid interest, have been exchanged for, in the aggregate and taking into account early consent consideration, (i) approximately US$50 million of new second lien notes due September 2023 (the “New Second Lien Notes”), (ii) approximately US$54.8 million of new third lien notes due December 2023 (the “New Third Lien Notes”), and (iii) new common shares of Bellatrix representing approximately 51% of the common shares of Bellatrix outstanding upon implementation of the Recapitalization Transaction;
• the Company’s previously outstanding 6.75% convertible debentures due 2021 in the aggregate principal amount of $50 million, plus all accrued and unpaid interest, have been exchanged for, in the aggregate and taking into account early consent consideration, new common shares of Bellatrix representing approximately 32.5% of the common shares of Bellatrix outstanding upon implementation of the Recapitalization Transaction;
• the Company’s common shareholders prior to the implementation of the Recapitalization Transaction retained their common shares, subject to a 1-for-12 common share consolidation (the “Share Consolidation”), such that such common shareholders own approximately 16.5% of the common shares of Bellatrix outstanding upon implementation of the Recapitalization Transaction;
• Bellatrix and its wholly-owned subsidiary, 11260049 Canada Limited, amalgamated pursuant to the Plan of Arrangement;
• pursuant to the Plan of Arrangement and the final order of the Ontario Superior Court of Justice (Commercial List) granted on May 28, 2019 (the “Final Order”), claims relating to, among other things, the Recapitalization Transaction and the CBCA proceedings have been released as against the Company and the other parties set out in the Plan of Arrangement on the terms set out in the Plan of Arrangement and Final Order;
• pursuant to the Plan of Arrangement and the Final Order, defaults resulting from, among other things, the Recapitalization Transaction and the CBCA proceedings, and third party change of control provisions that may have been triggered by the implementation of the Recapitalization Transaction, have been permanently waived on the terms set out in the Plan of Arrangement and Final Order; and
• obligations to employees, suppliers, customers and governmental authorities were not affected by the Recapitalization Transaction.

The Share Consolidation completed as part of the Recapitalization Transaction reduced the number of issued and outstanding Bellatrix common shares to approximately 6,742,244 (prior to taking into account the issuance of the new common shares pursuant to the Plan of Arrangement).  Together with the new common shares issued pursuant to the Plan of Arrangement, the Company has a total of approximately 40,863,008 issued and outstanding common shares, which are expected to commence trading on the Toronto Stock Exchange (the “TSX”) on or about June 7, 2019, under the symbol BXE.

In connection with the implementation of the Recapitalization Transaction, Bellatrix has extended the revolving period under its senior secured bank facilities (the “Credit Facilities”) by one year with the term-out period expiring one year after the end of the revolving period, in each case pursuant to a second amended and restated credit agreement (the “Second Amended and Restated Credit Agreement”). Under the terms of the Second Amended and Restated Credit Agreement, the revolving period under the Credit Facilities will expire on May 30, 2020, and is extendible annually thereafter at the option of the Company, subject to lender approval. As part of the renewal of the Credit Facilities, the borrowing base under the Credit Facilities has been reconfirmed at $100 million (unchanged), with total commitments set at $90 million. The next semi-annual redetermination pursuant to the Second Amended and Restated Credit Agreement is scheduled for November 2019.  Other than as described herein, the terms of the Second Amended and Restated Credit Agreement are substantially similar to those in place prior to implementation of the Recapitalization Transaction.

The Company has also amended the exercise price of the warrants previously issued to the holders (the “Existing Second Lien Noteholders”) of the Company’s 8.5% second lien notes due September 2023 outstanding prior to the implementation of the Recapitalization Transaction (the “Existing Second Lien Notes”, and together with the New Second Lien Notes, the “Second Lien Notes”) to reflect an exercise price of $3.03 per common share (post-Share Consolidation), and has issued additional warrants to the Existing Second Lien Noteholders which, together with those warrants originally held by Existing Second Lien Noteholders, are exercisable for an aggregate of 2,043,162 post-Share Consolidation common shares of Bellatrix. 

Also as a condition pursuant to the support agreement entered into with certain holders of previously outstanding Senior Unsecured Notes (the “Initial Consenting Noteholders”) and in connection with the implementation of the Recapitalization Transaction, the Company and the Initial Consenting Noteholders have entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Company has granted the Initial Consenting Noteholders certain customary demand and “piggy-back” registration rights in respect of Company’s common shares held by them, on the terms set out in the Registration Rights Agreement.

Copies of the final executed versions of the Second Amended and Restated Credit Agreement, the indentures governing the Second Lien Notes and the New Third Lien Notes, and the Registration Rights Agreement will be posted on the Company’s website at www.bxe.com and under the Company’s profile on SEDAR at www.sedar.com.

Board of Directors

As part of the Recapitalization Transaction, and in accordance with the Plan of Arrangement, certain of Bellatrix’s directors resigned effective upon implementation of the Plan of Arrangement and four new directors have been appointed to the board of directors of Bellatrix pursuant to the Plan of Arrangement, resulting in a board of directors comprised of 7 individuals.

“We would like to thank each of John Cuthbertson, W.C. (Mickey) Dunn, Lynn Kis, Keith Turnbull and Murray Todd for all of their hard work and support for Bellatrix over the years, as well as their help and assistance with the Company’s recapitalization transaction efforts,” said Mr. Eshleman.

Bellatrix’s new directors are:

Todd Dillabough

Mr. Dillabough has over 35 years of experience as a business leader including his current role as Board Observer for Preferred Proppants, LLC, a private U.S. based oil and gas services and technology company. Throughout his career, he has held executive, director and crisis management roles at various energy and industrial companies with global operations.

His board and governance experience includes serving as Chairman of San Antonio Oil and Gas Services Ltd. (2017 – 2018), Director and Interim Chairman of Catalyst Paper Corporation (2012 – 2019), Chairman of Collaborative Energy Services Inc. (2017 – 2019), President, Chief Executive Officer, Chief Operating Officer of both Trident Resources Corp. (2007 – 2014), and Pioneer Natural Resources Canada Inc. (2004 – 2007) and Director of Aveos Fleet Performance (Air Canada’s former Maintenance Division, 2012).

Mr. Dillabough is a Registered Public Company Director in Canada, Registered Company Director in Bermuda, current member of Association of Professional Engineers and Geoscientists of Alberta (APEGA), Society of Petroleum Engineers (SPE) and Turnaround Management Association (TMA), and former governor of Canadian Association of Petroleum Producers (CAPP). He holds a Bachelor of Science in Geology from the University of Calgary.

Cody Church

Mr. Church has over 25 years of experience as a business leader including as Co-founder and Senior Managing Director of TriWest Capital Partners (TriWest), a leading private equity firm in Canada, from 1997 until his retirement in 2018.  During his tenure, he served on TriWest’s Board of Directors and Investment Committee and was involved in raising over $1.25 billion of equity capital over the course of five funds. 

His board and governance experience includes serving as Chairman of several of TriWest’s portfolio companies including Source Energy Services Ltd. (TSX: SHLE; 2013 – 2019), NCSG Crane & Heavy Haul Services (2014 – 2018), Edgefront Real Estate Investment Trust (TSX: NXR; 2014 – 2018), and RTL WestCan Bulk Transport Ltd. (2003 – 2007).  In addition, Mr. Church served on a further 17 Boards of TriWest portfolio companies across a wide spectrum of industries.

Prior to co-founding TriWest, Mr. Church held roles at Credit Suisse First Boston and Exor America, a New York based private equity firm. He graduated cum laude with a Bachelor of Economics from Harvard University.   Mr. Church was awarded the Top 40 under 40 in Canada in 2010. 

Brian Frank

Brian Frank has over 35 years of experience in the oil and gas sector, including executive and director roles at various energy and industrial companies in Canada, the U.S. and U.K. His board and governance experience spans two decades and includes numerous joint venture boards, private companies, public companies, not-for-profit organizations and Chairing Special Committees of large transactions.  Mr. Frank currently serves as an independent director for Corval Energy, LLC (a private oil and gas company), and until recently, was an independent director with the Enbridge Income Fund (a large mid-stream company). Mr. Frank also serves on the boards of several not-for-profit organizations.

As an executive, Mr. Frank's experience includes President and CEO of TimberWest Forest Corp. (2012 -2014), Chief Executive of Global Oil and Finance Europe (2010-2011), President of BP North American Gas & Power (2006 – 2010), Chairman and CEO of BP Canada (2003 – 2006), and President of BP Canada Gas & Power (1999-2003). Mr. Frank also held several roles with Amoco Canada (1995 – 1999) and as a Director in the Energy Commodities Branch at Natural Resources Canada (Government of Canada 1984 – 1994). He started his career with Nova Corporation in Calgary.

He holds a Bachelor of Arts, Economics & Law and Master of Arts, Public Administration, from Carleton University in Ottawa.

Mark Smith

Mr. Smith is a Professional Engineer with over 35 years of oil and gas industry experience primarily focused on the Western Canadian Sedimentary Basin.  Throughout his career, he has held operational and executive leadership roles in several Canadian exploration and production companies.

His board and governance experience includes Chief Operating Officer of Trident Exploration (2017 – 2018), Director and Chief Operating Officer of Candour Resources Development Corp. (2015 – 2017), and Chief Operating Officer of Arcan Resources Ltd. (2012 – 2015). Prior experience includes exploration and development roles at Baytex Energy Ltd., and Burlington Resources Canada Ltd.

Mr. Smith holds a Bachelor of Science of Chemical Engineering from University of Western Ontario and is a Professional Engineer in Alberta.  

The following individuals are continuing as Bellatrix directors:

Brent Eshleman

Mr. Eshleman is a Professional Engineer with over 30 years of oil and gas experience and is President and Chief Executive Officer of Bellatrix, a role he has held since February 15, 2017.  Mr. Eshleman has held senior executive roles with Bellatrix since July 2012, including Interim President and Chief Executive Officer, Chief Operating Officer and Executive Vice-President.

Prior to joining Bellatrix, Mr. Eshleman was Vice-President Engineering and Exploitation of Daylight Energy Ltd., from December 2004 to January 2012, Director Northern Alberta of Calpine Canada, from May 2000 to November 2004 and Manager Engineering of Ulster Petroleum Ltd. from May 1998 to April 2000.

Keith MacDonald 

Mr. MacDonald is a Chartered Accountant and has over 30 years’ experience in senior financial and directorship roles within the oil and gas industry.  He served as a director of Surge Energy Inc, a TSX listed intermediate exploration and development company, from 2010 until 2019 and was previously a director of Madalena Energy Inc. from 2010 to 2017 and Mountainview Energy Ltd. from 2010 to 2017.

Mr. MacDonald is President of Bamako Investment Management Ltd., a private holding and financial consulting company, since July 1994, and is the Chairman and CEO of Drakkar Energy Ltd., a private oil and gas company, since 2015. Mr. Macdonald was the Chief Executive Officer and a director of EFLO Energy Inc. from March 2011 to January 2015.

Tom MacInnisMr. MacInnis is a seasoned energy-focused financial executive.  Most recently Mr. MacInnis was Head of Financial Markets for National Bank Financial where he was responsible for leading the firm's global energy practice.  Prior thereto, Mr. MacInnis was a founder and Managing Director of Tristone Capital, an energy focused boutique investment banking practice in Calgary, Alberta. 

Mr. MacInnis holds an MBA from the Richard Ivey School of Business and an ICD.D. Certification from the Institute of Corporate Directors.  Mr. MacInnis is currently a director of Crestwynd Exploration Ltd., and Canadian Premium Sand Inc.

The Company’s legal advisors in connection with the Recapitalization Transaction were Goodmans LLP and Vinson & Elkins L.L.P. and its financial advisor was National Bank Financial Inc.  Burnet, Duckworth & Palmer LLP acted as legal counsel to the special committee of Bellatrix’s board of directors.

About Bellatrix

Bellatrix Exploration Ltd. is a publicly traded Western Canadian based growth oriented oil and gas company engaged in the exploration for, and the acquisition, development and production of oil and natural gas reserves, with highly concentrated operations in west central Alberta, principally focused on profitable development of the Spirit River liquids rich natural gas play.

For further information, please contact:

Steve Toth, CFA, Vice President, Investor Relations & Corporate Development (403) 750-1270

Bellatrix Exploration Ltd. 1920, 800 – 5th Avenue SW Calgary, Alberta, Canada T2P 3T6 Phone: (403) 266-8670 Fax: (403) 264-8163 www.bxe.com

FORWARD LOOKING STATEMENTS: Certain information contained in this press release may contain forward looking statements within the meaning of applicable securities laws. The use of any of the words “continue”, “plan”, “propose”, “would”, “will”, “believe”, “expect”, “position”, “anticipate”, “improve”, “enhance” and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this document contains forward-looking statements concerning: the effect and benefits of the Recapitalization Transaction; Bellatrix’s ability to effectively pursue its business and strategic objectives; the continued listing and trading of Bellatrix’s common shares on the TSX and the expected timing in respect thereof; and the public posting of certain documents entered into by Bellatrix in connection with the Recapitalization Transaction.

Forward-looking statements necessarily involve risks, including, without limitation, risks associated with the ability of the Company to achieve its financial goals including with respect to the nature of any agreement with its debtholders; the ability of the Company to continue to realize its assets and discharge its liabilities and commitments; the ability of the Company to comply with its contractual obligations, including, without limitation, its obligations under debt arrangements; the general regulatory environment in which the Company operates; the tax treatment of the Company and the materiality of any legal and regulatory proceedings; the general economic, financial, market and political conditions impacting the industry and markets in which the Company operates; the ability of the Company to generate sufficient cash flow from operations; the impact of competition; the ability of the Company to obtain and retain qualified staff, equipment and services in a timely and efficient manner; and the ability of the Company to retain members of the senior management team, including but not limited to, the officers of the Company.

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. 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 and which have been used to develop such statements and information in order to provide stakeholders with a more complete perspective on Bellatrix’s future operations. Such information may prove to be incorrect and readers are cautioned that the information may not be appropriate for other purposes. 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 general stability of the economic and political environment in which Bellatrix operates; the timely receipt of any required regulatory approvals; future commodity prices; currency, exchange and interest rates; and the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Bellatrix operates.  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 affect Bellatrix’s operations and financial results are included in reports, including under the heading “Risk Factors” in the Information Circular and the Company’s annual information form for the year ended December 31, 2018, on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) and at Bellatrix’s website (www.bxe.com). Furthermore, 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.