6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of March 2019

Commission File Number: 001-35644

___________________

Bellatrix Exploration Ltd.

(Translation of registrant's name into English)

1920, 800 5th Avenue SW

Calgary, Alberta  T2P 3T6

Canada

(Address of principal executive offices)

___________________

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☐                                           Form 40-F ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1)  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7)  ☐

DOCUMENTS INCLUDED AS PART OF THIS FORM 6-K 

See the Exhibit Index hereto. Exhibits 13.1 and 13.2 to this report, furnished on Form 6-K, shall be incorporated by reference into the Company’s Registration Statement on Form F-10 (File No: 333-225841).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Bellatrix Exploration Ltd.
Date: March 14, 2019	By:	/s/ Charles R. Kraus
	Name:	Charles R. Kraus
	Title:	Executive Vice President, General Counsel & Corporate Secretary

EXHIBIT INDEX 

Exhibit	Description
13.1	Audited Consolidated Financial Statements for the fiscal year ended December 31, 2018, prepared in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board
13.2	Management’s Discussion and Analysis for the fiscal year ended December 31, 2018
23.1	Consent of KPMG LLP

EX-13.1

Exhibit 13.1

MANAGEMENT'S REPORT TO SHAREHOLDERS

Management’s Responsibility for Financial Statements

The management of Bellatrix Exploration Ltd. (“Bellatrix” or the “Company”) is responsible for the preparation and integrity of the accompanying financial statements and all other information contained in this report. The financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and include amounts that are based on management's informed judgments and estimates where necessary.

The Company has established internal accounting control systems which are designed to safeguard assets from loss or unauthorized use and ensure the accuracy of the Company’s accounting records. The Board of Directors, through its Audit Committee, monitors management's financial and accounting policies and practices and the preparation of these financial statements. The Audit Committee meets periodically with the external auditors and management to review the work of each and the propriety of the discharge of their responsibilities.

The Audit Committee reviews the financial statements of the Company with management and the external auditors prior to submission to the Board of Directors for final approval. The external auditors have full and free access to the Audit Committee to discuss auditing and financial reporting matters. The Audit Committee reviews the independence of the external auditors and pre-approves audit and permitted non-audit services. The shareholders have appointed KPMG LLP as the external auditors of the Company. The Report of Independent Registered Public Accounting Firm to the Board of Directors and shareholders, which describes the scope of their examination and expresses their opinion, is included with the financial statements for the year ended December 31, 2018.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13(a) – 15 under the US Securities Exchange Act of 1934 and as defined in Canada by National Instrument 52-109, Certification and Disclosure in Issuer's Annual and Interim filings. Internal control over financial reporting is designed by, or designed under the supervision of, our President and CEO and our Executive Vice President and CFO, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Under the supervision and with the participation of our management, including our President and CEO and our Executive Vice President and CFO, an evaluation of the design and effectiveness of our internal control over financial reporting was conducted as of December 31, 2018 based on the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). Based on this evaluation, management concluded that as of December 31, 2018 the Company did maintain effective internal control over financial reporting.

The effectiveness of internal control over financial reporting as of December 31, 2018 was audited by KPMG LLP, an independent registered public accounting firm, as stated in their Report of Independent Registered Public Accounting Firm, which is included with the financial statements for the year ended December 31, 2018.

(signed) “Brent A. Eshleman”	(signed) “Maxwell (Max) Lof”
Brent A. Eshleman, P.Eng.	Maxwell (Max) Lof
President and CEO	Executive Vice President and CFO

March 14, 2019

Bellatrix Exploration Ltd. 1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

Bellatrix Exploration Ltd.:

Opinion on Internal Control Over Financial Reporting

We have audited Bellatrix Exploration Ltd.’s (the Company) internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheets of the Company as of December 31, 2018 and 2017, the related statements of profit (loss) and comprehensive income (loss), shareholders’ equity, and cash flows for the years ended December 31, 2018 and 2017, and the related notes (collectively, the financial statements), and our report dated March 14, 2019 expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting included in Management`s Discussion and Analysis. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

(signed) "KPMG LLP"

Chartered Professional Accountants

Calgary, Canada

March 14, 2019

Bellatrix Exploration Ltd. 2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

Bellatrix Exploration Ltd.:

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Bellatrix Exploration Ltd. (the Company) as of December 31, 2018 and 2017, the related statements of profit (loss) and comprehensive income (loss), shareholders’ equity, and cash flows for the years ended December 31, 2018 and 2017, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years ended December 31, 2018 and 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 14, 2019 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has significant uncertainties relating to its ability to meet its financial obligations on scheduled debt maturities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

(signed) "KPMG LLP"

Chartered Professional Accountants

We have served as the Company’s auditor since 1996.

Calgary, Canada

March 14, 2019

Bellatrix Exploration Ltd. 3

BELLATRIX EXPLORATION LTD.

BALANCE SHEETS

(expressed in Canadian dollars)

As at December 31,

($000s)	2018			2017
ASSETS
Current assets
Accounts receivable (note 6)	$	36,955		$	45,672
Deposits and prepaid expenses	3,516			3,709
Current portion of risk management asset (note 6)	9,852			31,910
	50,323			81,291
Risk management asset (note 6)	3,291			1,213
Deferred taxes (note 15)	—			48,298
Exploration and evaluation assets (note 8)	17,707			22,731
Property, plant and equipment (note 9)	1,164,422			1,187,390
Total assets	$	1,235,743		$	1,340,923
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	$	61,211		$	73,307
Current portion of other deferred liabilities (note 11)	1,909			20,790
Current portion of risk management liability (note 6)	917			4,468
Current portion of Credit Facilities (note 7)	47,763			—
Current portion of decommissioning liability (note 10)	2,387			1,924
	114,187			100,489
Credit Facilities (note 7)	—			52,066
Second Lien Notes (note 7)	137,097			—
Senior Notes (note 7)	196,000			305,409
Convertible Debentures (liability component) (note 7)	41,732			39,426
Risk management liability (note 6)	1,652			3,422
Other deferred liabilities (note 11)	10,863			7,402
Decommissioning liabilities (note 10)	61,487			58,687
Total liabilities	563,018			566,901
SHAREHOLDERS’ EQUITY
Shareholders’ capital (note 12)	1,112,619			1,068,377
Warrants (note 7)	1,652			—
Convertible Debentures (equity component) (note 7)	7,818			7,818
Contributed surplus	56,499			56,092
Retained earnings (deficit)	(505,863		)	(358,265		)
Total shareholders’ equity	672,725			774,022
Total liabilities and shareholders’ equity	$	1,235,743		$	1,340,923

GOING CONCERN (note 2)

COMMITMENTS(note 19)

See accompanying notes to the financial statements.

On behalf of the Board of Directors

(signed) “Keith S. Turnbull”	(signed) “W.C. (Mickey) Dunn”
Keith S. Turnbull, B.Sc., CPA, CA	W.C. (Mickey) Dunn
Director, Chairman Audit Committee	Director, Chairman of the Board

Bellatrix Exploration Ltd. 4

BELLATRIX EXPLORATION LTD.

STATEMENTS OF PROFIT (LOSS) AND COMPREHENSIVE INCOME (LOSS)

(expressed in Canadian dollars)

For the years ended December 31,

($000s, except per share amounts)	2018			2017
REVENUES
Petroleum and natural gas sales (note 13)	$	223,136		$	243,825
Royalties	(23,789		)	(23,961		)
Other income (note 13)	5,576			5,574
Total revenues net of royalties	204,923			225,438
Realized gain on commodity contracts (note 6)	30,536			31,324
Unrealized gain (loss) on commodity contracts (note 6)	(18,082		)	45,238
Revenues net of royalties and commodity contracts	217,377			302,000
EXPENSES
Production	97,526			111,816
Transportation	27,285			23,549
General and administrative	28,389			29,377
Loss on marketable securities	—			461
Share-based compensation (note 14)	(503		)	532
Depletion, depreciation and impairment (note 9)	107,426			133,802
Loss on onerous contracts (note 11)	5,362			—
(Gain) loss on dispositions (note 9)	(8,164		)	56,672
(Gain) loss on Senior Notes settlements (note 7)	(6,145		)	—
	251,176			356,209
NET PROFIT (LOSS) BEFORE FINANCE AND TAXES	(33,799		)	(54,209		)
Finance expenses (note 16)	40,754			39,240
Realized (gain) loss on foreign exchange (note 17)	8,296			797
Unrealized (gain) loss on foreign exchange (note 17)	15,195			(18,298		)
NET PROFIT (LOSS) BEFORE TAXES	(98,044		)	(75,948		)
TAXES
Deferred tax expense (recovery) (note 15)	48,295			15,415
NET PROFIT (LOSS) AND COMPREHENSIVE INCOME (LOSS)	$	(146,339	)	$	(91,363	)
Net profit (loss) per share (note 18)
Basic	$(2.45)			$(1.85)
Diluted	$(2.45)			$(1.85)

See accompanying notes to the financial statements.

Bellatrix Exploration Ltd. 5

BELLATRIX EXPLORATION LTD.

STATEMENTS OF SHAREHOLDERS’ EQUITY

(expressed in Canadian dollars)

For the year ended December 31,

($000s)	2018			2017
SHAREHOLDERS’ CAPITAL
Common shares (note 12)
Balance, beginning of year	$	1,068,377		$	1,068,084
Issued for property acquisition, net of tax effect	12,053			—
Issued on Senior Notes settlements	31,306			—
Flow through shares issued	1,143			—
Share issue costs on equity issue, net of tax effect	(387		)	4
Share-based compensation awards	127			289
Balance, end of year	1,112,619			1,068,377
CONVERTIBLE DEBENTURES (EQUITY COMPONENT) (note 7)
Balance, beginning of year	7,818			7,818
Balance, end of year	7,818			7,818
CONTRIBUTED SURPLUS
Balance, beginning of year	56,092			54,418
Share-based compensation expense (note 14)	525			2,233
Adjustment of share-based compensation expense for forfeitures of unvested share options	(118		)	(559		)
Balance, end of year	56,499			56,092
WARRANTS
Balance, beginning of year	—			—
Warrants issued, net of tax (note 7)	1,652			—
Balance, end of period	1,652			—
RETAINED EARNINGS (DEFICIT)
Balance, beginning of year	(358,265		)	(266,902		)
Settlement of Senior Notes, net of tax effect (note 7)	(1,259		)	—
Net profit (loss)	(146,339		)	(91,363		)
Balance, end of year	(505,863		)	(358,265		)
TOTAL SHAREHOLDERS’ EQUITY	$	672,725		$	774,022

See accompanying notes to the financial statements.

Bellatrix Exploration Ltd. 6

BELLATRIX EXPLORATION LTD.

STATEMENTS OF CASH FLOWS

(expressed in Canadian dollars)

For the year ended December 31,

($000s)	2018			2017
Cash provided from (used in):
CASH FLOW FROM (USED IN) OPERATING ACTIVITIES
Net profit (loss)	$	(146,339	)	$	(91,363	)
Adjustments for:
Depletion, depreciation and impairment (note 9)	107,426			133,802
(Gain) loss on dispositions (note 7)	(8,164		)	56,672
Loss on onerous contracts (note 11)	5,362			—
Accretion on decommissioning obligations (note 10)	1,328			1,287
Non-cash financing and accretion	5,035			4,803
Share-based compensation (note 14)	(393		)	699
Unrealized (gain) loss on commodity contracts (note 6)	18,082			(45,238		)
Unrealized foreign exchange (gain) loss (note 17)	15,195			(18,298		)
Loss on marketable securities	—			461
Deferred tax expense (recovery) (note 15)	48,295			15,415
(Gain) loss on Senior Notes settlements	(6,145		)	—
Realized foreign exchange on Senior Note Settlements (note 7)	8,343			—
Decommissioning costs incurred (note 10)	(2,242		)	(2,758		)
Change in non-cash working capital (note 21)	16,692			(272		)
	62,475			55,210
CASH FLOW FROM (USED IN) FINANCING ACTIVITIES
Issuance of Second Lien Notes (note 7)	39,815			—
Transaction costs on Senior Note exchange	(3,617		)	—
Issuance of share capital, net of issue costs (note 12)	615			4
Settlement of share based payments	(457		)	(1,246		)
Advances from (repayment of) loans and borrowings	(4,303		)	32,923
Financing obligations (note 11)	(2,675		)	(7,558		)
Deferred lease inducements (note 11)	(332		)	(366		)
Deferred capital obligations (note 11)	(3,795		)	(14,693		)
Change in non-cash working capital (note 21)	(6,371		)	16,353
	18,880			25,417
CASH FLOW FROM (USED IN) INVESTING ACTIVITIES
Expenditure on exploration and evaluation assets (note 8)	(577		)	(1,664		)
Additions to property, plant and equipment (note 9)	(69,515		)	(121,586		)
Proceeds on sale of property, plant and equipment	1,106			48,370
Proceeds on sale of marketable securities	—			3,861
Change in non-cash working capital (note 21)	(12,369		)	(9,608		)
	(81,355		)	(80,627		)
Change in cash	—			—
Cash, beginning of year	—			—
Cash, end of year	$	—		$	—
Cash paid:
Interest	$	35,018		$	33,930
Taxes	$	—		$	—

See accompanying notes to the financial statements.

Bellatrix Exploration Ltd. 7

NOTES TO THE FINANCIAL STATEMENTS

(expressed in Canadian dollars)

1. CORPORATE INFORMATION

Bellatrix Exploration Ltd. (the “Company” or “Bellatrix”) 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.

Common shares of Bellatrix trade on the Toronto Stock Exchange (“TSX”) under the symbol “BXE”.

Bellatrix was incorporated in Alberta, Canada and the Company’s registered office and principal place of business is located at 1920, 800 – 5th Avenue SW, Calgary, Alberta, Canada, T2P 3T6.

2. BASIS OF PREPARATION 

a. Statement of compliance

These financial statements (“financial statements”) were authorized by the Board of Directors on March 14, 2019. The Company prepared these financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). 

b. Basis of measurement

The financial statements are presented in Canadian dollars, the Company’s functional currency, and have been prepared on the historical cost basis except for derivative financial instruments and liabilities for cash-settled share-based payment arrangements measured at fair value. The financial statements have, in management’s opinion, been properly prepared using careful judgment and reasonable limits of materiality, and within the framework of the significant policies summarized in note 3. Significant estimates and judgments used in the preparation of the financial statements are detailed in note 4.

c. Basis of presentation

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business.

As previously announced, the revolving period under the Company’s Credit Facilities expires on May 30, 2019, but is extendible annually thereafter at the option of the Company, subject to lender approval. If the revolving period is not extended in May 2019, the Credit Facilities would enter a six-month term-out period to November 30, 2019. The Company has been advancing efforts and evaluating potential alternatives to optimize its capital structure, improve liquidity and enhance long term stakeholder value.  Such efforts include, among other things, Bellatrix’s ongoing discussions with parties across the Company’s capital structure in connection with potential transaction alternatives, including refinancing its outstanding US$145.8 million of 8.50% senior unsecured notes ("Senior Notes") due May 15, 2020 and extending the maturity of the Credit Facilities beyond November 30, 2019. The Company cautions that it can make no assurances as to whether any agreement with respect to a potential transaction may be reached, or the terms or timing of any such potential transaction.

As a result, there is currently significant uncertainty related to these future events and conditions that raise substantial doubt about whether the Company will continue as a going concern, and therefore, whether it will realize its assets and settle its liabilities in the normal course of business and at the amounts stated in the Financial Statements. Readers are cautioned to review note 7 for additional information in this regard. However, management believes that the Company will be successful in obtaining alternative debt financing and extending near term debt maturities as outlined in note 6(d) and note 7 in a timely manner and, accordingly, has prepared these financial statements on a going concern basis. Accordingly, no adjustments have been made to the financial statements relating to the recoverability and classification of the asset carrying amounts or the amount and classification of liabilities that may be necessary should the Company not continue as a going concern. These adjustments could be material.

Bellatrix continues to generate sufficient cash flow to meet its obligations in the ordinary course, including interest payments, capital spending and abandonment and remediation expenses, subject to achieving an extension of debt maturities.

Bellatrix Exploration Ltd. 8

3. SIGNIFICANT ACCOUNTING POLICIES

a. Revenue Recognition

Revenue from the sale of crude oil, natural gas, condensate and natural gas liquids (“NGLs”) is measured based on the consideration specified in contracts with customers and excludes amounts collected on behalf of third parties. Bellatrix recognizes revenue when it transfers control of the product to the buyer. This is generally at the time the customer obtains legal title to the product and when it is physically transferred to the delivery mechanism agreed with the customer, often pipelines or other transportation methods. The amount of revenue recognized is based on the agreed upon transaction price, whereby any variability in revenue is related specifically to the Company's efforts to deliver production. Therefore, the resulting revenue is allocated to the production delivered in the period during which the variability occurs. As a result, none of Bellatrix's variable revenue is considered to be constrained.

Bellatrix evaluates its arrangements with third parties and partners to determine if the Company acts as the principal or as an agent. In making this evaluation, management considers if Bellatrix obtains control of the product delivered, which is indicated by Bellatrix having the primary responsibility for the delivery of the product, having the ability to establish prices or having inventory risk. If Bellatrix acts in the capacity of an agent rather than as a principal in a transaction, then the revenue is recognized on a net basis, only reflecting the fee, if any, realized by the Company from the transaction.

Processing fees charged to other entities for use of pipelines and facilities owned by the Company are evaluated by management to determine if these originate from contracts with customers or from incidental or collaborative arrangements. Processing fees charged to other entities under contracts with customers are recognized in revenue when the related services are provided.

Bellatrix’s revenue transactions do not contain significant financing components and payments are typically due on the 25th day of the month following delivery. The Company does not adjust transaction prices for the effects of a significant financing component when the period between the transfer of the promised goods or services to the customer and payment by the customer is less than one year. The Company does not disclose or quantify information about remaining performance obligations that have an original expected duration of one year or less.

b. Transportation

Costs paid by Bellatrix for the transportation of crude oil, natural gas, condensate and NGLs to the point of control transfer are recognized when the transportation is provided.

c. Joint Interests

A portion of the Company’s exploration and development activities are conducted jointly with others. The joint interests are accounted for on a proportionate consolidation basis and as a result, the financial statements reflect only the Company’s proportionate share of the assets, liabilities, revenues, expenses and cash flows from these activities.

d. Property, Plant and Equipment and Exploration and Evaluation Assets

I. Pre-exploration expenditures

Expenditures made by the Company before acquiring the legal right to explore in a specific area do not meet the definition of an asset and therefore are expensed by the Company as incurred.

II. Exploration and evaluation expenditures

Once the legal right to explore has been acquired, costs incurred are capitalized as intangible exploration and evaluation assets (“E&E"). These costs include, but are not limited to, exploration license expenditures, leasehold property acquisition costs, evaluation costs, including drilling costs directly attributable to an identifiable well and directly attributable general and administrative costs. These costs are accumulated in cost centres by property and are not subject to depletion, until technical feasibility and commercial viability have been determined. 

E&E assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability, or if facts and circumstances suggest that the carrying amount is unlikely to be recovered. 

III. Developing and production costs

Items of property, plant and equipment (“PP&E”), which include oil and gas development and production assets, are measured at cost less accumulated depletion, depreciation and accumulated impairment losses net of recoveries.

Bellatrix Exploration Ltd. 9

IV. Subsequent costs

Costs incurred subsequent to the determination of technical feasibility and commercial viability and the costs of replacing parts of PP&E are recognized as oil and natural gas interests only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred. Such capitalized oil and natural gas interests generally represent costs incurred in developing proved and/or probable reserves and bringing in or enhancing production from such reserves, and are accumulated on a well, field or geotechnical area basis. The carrying amount of any replaced or sold component is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.

V. Depletion and depreciation

Depletion of petroleum and natural gas properties is provided using the unit-of-production method based on production volumes in relation to total estimated proven and probable reserves as determined annually by independent engineers in accordance with National Instrument 51-101, Standards of Disclosure of Oil and Gas Activities. Natural gas reserves and production are converted at the energy equivalent of six thousand cubic feet to one barrel of oil.

Calculations for depletion are based on total capitalized costs plus estimated future development costs of proven and probable undeveloped reserves less the estimated net realizable value of production equipment and facilities after the proved and probable reserves are fully produced.

Depreciation is recognized on significant facilities to expense the cost of significant components of assets less their residual values over their useful lives. Phase 1 of the Alder Flats Plant and associated equipment are depreciated using the straight-line method over estimated useful lives as follows:

• General plant and processing equipment - 40 years

• Other properties and equipment - 10 years

• Turnarounds - 5 years

Depreciation of office furniture and equipment is provided for on a 20% declining balance basis.

Depreciation methods, useful lives and residual values are reviewed at each reporting date and, if necessary, any changes would be accounted for prospectively.

VI. Dispositions

Gains on disposal of an item of PP&E or E&E are determined by comparing the proceeds from disposal with the carrying amount of PP&E or E&E and are recognized separately in the Statements of Profit (Loss) and Comprehensive Income (Loss). Exchanges of properties are measured at fair value, unless the transaction lacks commercial substance or fair value cannot be reasonably measured. Where the exchange is measured at fair value, a gain or loss is recognized in the Statements of Profit (Loss) and Comprehensive Income (Loss).

e. Impairment

I. Financial assets

Impairment of financial assets is determined by measuring the assets' expected credit loss ("ECL"). Accounts receivable are due within one year or less; therefore, these financial assets are not considered to have a significant financing component and a lifetime ECL is measured at the date of initial recognition of the accounts receivable.

The ECL pertaining to accounts receivable is assessed at initial recognition and this provision is re-assessed at each reporting date. ECLs are a probability-weighted estimate of all possible default events related to the financial asset and are measured as the difference between the present value of the cash flows due to Bellatrix and the cash flows the Company expects to receive, including cash flows expected from collateral and other credit enhancements that are a part of contractual terms. In making an assessment as to whether financial assets are credit-impaired, the Company considers historically realized bad debts, counterparty's identity, customers pay practices and the terms of the contract under which the obligation arose. The carrying amounts of financial assets are reduced by the amount of the ECL through an allowance account and losses are recognized within general and administrative ("G&A") expense in the Statements of Profit (Loss) and Comprehensive Income.

Based on industry experience, the Company considers its accounts receivable to be in default when the receivable is more than 90 days past due. Once the Company has pursued collection activities and it has been determined that the incremental cost of pursuing collection outweighs the benefits, Bellatrix derecognizes the gross carrying amount of the financial asset and the associated allowance from the balance sheets.

Bellatrix Exploration Ltd. 10

II. Non-financial assets

Developing and producing assets are assessed for impairment if facts and circumstances suggest that the carrying amount exceeds the recoverable amount. The impairment test is performed at the asset or CGU level.

The recoverable amount of an asset or a cash-generating unit ("CGU") is the greater of its value in use (“VIU”) and its fair value less costs to sell (“FVLCS”). FVLCS is determined to be the amount for which the asset could be sold in an arm’s length transaction. FVLCS can be determined by using an observable market metric or by using discounted future net cash flows of proved and probable reserves using forecasted prices and costs. VIU is determined by estimating the present value of the future net cash flows expected to be derived from the continued use of the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in the Company’s Statement of Profit (Loss) and Comprehensive Income (Loss) in the period in which it occurs.

Impairment losses recognized in prior years are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depletion and depreciation, if no impairment loss had been recognized.

E&E assets are assessed for impairment, both at the time of any triggering facts and circumstances as well as upon their eventual reclassification to producing assets (oil and natural gas interests in PP&E). E&E assets are grouped together with the Company’s CGU’s when they are assessed for impairment.

f. Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are determined by discounting the expected cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability, if the risks have not been incorporated into the estimate of cash flows. The increase in the provision due to the passage of time is recognized within finance expense.

Onerous contract provisions are recognized when the unavoidable costs of meeting the obligation exceed the economic benefit derived from the contract. The provision for onerous contracts is measured at the present value of estimated future cash flows underlying the obligations less any estimated recoveries, discounted at the risk-free rate.

I. Decommissioning liabilities

The Company’s activities give rise to dismantling, decommissioning and site disturbance remediation activities. A provision is made for the estimated cost of site restoration and capitalized in the relevant asset category.

Decommissioning obligations are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance sheet date. Changes in the present value of the estimated expenditure are reflected as an adjustment to the liability and the relevant asset. The accretion or unwinding of the discount on the decommissioning provision is recognized as a finance expense. Actual costs incurred upon settlement of the decommissioning liabilities are charged against the provision to the extent the provision was recognized.

II. Environmental liabilities

The Company records liabilities on an undiscounted basis for environmental remediation efforts that are likely to occur and where the cost can be reasonably estimated. The estimates, including associated legal costs, are based on available information using existing technology and enacted laws and regulations. The estimates are subject to revision in future periods based on actual costs incurred or new circumstances. Any amounts expected to be recovered from other parties, including insurers, are recorded as an asset separate from the associated liability.

Bellatrix Exploration Ltd. 11

g. Share-based Payments 

I. Equity-settled transactions

Bellatrix accounts for options issued under the Company’s share option plan by reference to the fair value of the equity instruments granted. The fair value of each share option is estimated on the date of the grant using the Black-Scholes options pricing model and charged to earnings over the vesting period with a corresponding increase to contributed surplus. The Company estimates a forfeiture rate on the grant date and the rate is adjusted to reflect the actual number of options that actually vest. The expected life of the options granted is adjusted, based on the Company’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

II. Cash-settled transactions

The Company’s Deferred Share Unit Plan (the “DSU Plan”) is accounted for as a cash settled share based payment plan in which the fair value of the amount payable under the DSU Plan is recognized as an expense with a corresponding increase in liabilities. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized in profit or loss.

Awards under the Award Incentive Plan ("Award Plan") may be settled in cash, in common shares of the Company, or a combination thereof. The Company’s Restricted and Performance Award Plan is accounted for as a cash settled share based payment plan in which the fair value of the amounts payable under the Award Plan are recognized incrementally as an expense over the vesting period, with a corresponding change in liabilities. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized in profit or loss.

h. Income Taxes

Income tax expense is comprised of current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. 

I. Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from, or paid, to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted, or substantively enacted, by the date of the statement of financial position.

II. Deferred tax 

Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is not a business combination. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted, or substantively enacted, by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

i. Financial Instruments

All financial assets are initially measured at fair value. Financial assets are subsequently measured at either amortized cost, fair value through other comprehensive income ("FVOCI") or fair value through profit or loss ("FVTPL"), depending on the Company's business model for managing the financial assets, and the contractual cash flow characteristics of the financial assets. Financial assets are not reclassified subsequent to their initial recognition, except if the Company changes its business model for managing financial assets.

A financial asset is subsequently measured at amortized cost if it meets both of the following conditions:

(i). The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and

(ii). The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Bellatrix Exploration Ltd. 12

Financial assets that meet condition (ii) above that are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets is subsequently measured at FVOCI.

All other financial assets are subsequently measured at FVTPL, with changes in fair value recognized in profit or loss. Accounts receivable are classified and measured at amortized cost.

Financial liabilities are classified and measured at amortized cost using the effective interest rate method, except for derivatives that are liabilities, deferred share units, restricted awards and performance awards, which are all classified and measured at FVTPL. Accounts payable and accrued liabilities, Credit Facilities, Second Lien Notes, Senior Notes, Convertible Debentures and finance lease obligations are classified and measured at amortized cost.

Financial instruments measured at fair value on the balance sheet require classification into one of the following levels of the fair value hierarchy:

Level 1 – Valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – Valuation based on inputs other than quoted prices included in level 1, that are observable directly or indirectly.

Level 3 – Valuation based on inputs that are not based on observable market data.

The fair value hierarchy level at which a fair value measurement is categorized is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. The Company has categorized its financial instruments that are fair valued on the balance sheet according to the fair value hierarchy.

Transaction costs attributable to financial instruments classified as other than held-for-trading are included in the recognized amount of the related financial instrument and recognized over the life of the resulting financial instrument using the effective interest rate method.

The Company utilizes financial derivatives and commodity sales contracts requiring physical delivery to manage the price risk attributable to anticipated sale of petroleum and natural gas production and foreign exchange exposures. The Company does not enter into derivative financial instruments for trading or speculative purposes. The Company has not designated its financial derivative contracts as effective accounting hedges, and thus has not applied hedge accounting, even though the Company considers all commodity contracts to be economic hedges. As a result, financial derivatives are classified as FVTPL and are recorded on the balance sheet at fair value, with fair value changes recorded in profit or loss.

The derivative financial instruments are initiated within the guidelines of the Company’s corporate hedging policy. This includes linking all derivatives to specific assets and liabilities on the balance sheet, to specific firm commitments, or forecasted transactions.

The Company accounts for its commodity sales and purchase contracts, which were entered into and continue to be held for the purpose of receipt or delivery of non-financial items, in accordance with its expected purchase, sale or usage requirements as executory contracts. As such, physical sales and purchase contracts are not recorded at fair value on the balance sheet. Settlements on these physical sales and purchase contracts are recognized in petroleum and natural gas sales.

j. Compound Financial Instruments

The Company's compound financial instruments are comprised of its Warrants issued with the Second Lien Notes and the Convertible Debentures that can be converted to common shares at the option of the holder. The number of shares to be issued does not vary with changes in fair value. 

The Second Lien Notes and Convertible Debentures liability component are recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially as the difference between the fair value of the Second Lien Notes and Convertible Debenture and the fair value of the liability components. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of the Second Lien Notes and Convertible Debentures is measured at amortized cost using the effective interest method. The Warrants and equity component of the Convertible Debentures are not re-measured subsequent to initial recognition.

k. Lease Obligations

Leases which effectively transfer substantially all of the risks and rewards of ownership to the Company are classified as finance leases and are accounted for as an acquisition of an asset and an assumption of an obligation at the inception of the lease, measured as the present value of minimum lease payments to a maximum of the asset’s fair value. The asset is amortized in accordance with the Company’s depletion and depreciation policy. The obligations recorded under finance lease payments are reduced by the lease payments made.

Bellatrix Exploration Ltd. 13

Assets held under other leases are classified as operating leases and are not recognized in the balance sheet. Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received from landlords are deferred and recognized as an integral part of the total lease expense, over the term of the lease.

l. Basic and Diluted per Share Calculations

Basic per share amounts are calculated using the weighted average number of shares outstanding during the period. The Company uses the treasury share method to determine the dilutive effect of share options. Under the treasury share method, only “in the money” dilutive instruments impact the diluted calculations in computing diluted per share amounts.

Bellatrix Exploration Ltd. 14

m. Finance Income and Expenses

Finance income is recognized as it accrues in profit or loss, using the effective interest method. Finance expense comprises interest expense on borrowings, amortization of financing costs and discounts, and accretion of the discount on provisions.

n. Borrowing Costs

Borrowing costs incurred for the construction of qualifying assets are capitalized during the period of time that is required to complete and prepare the assets for their intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use. All other borrowing costs are recognized in profit or loss using the effective interest method. The capitalization rate used to determine the amount of borrowing costs to be capitalized is the weighted average interest rate applicable to the Company’s outstanding borrowings during the period.

o. Cash and Cash Equivalents

Cash and cash equivalents include cash and short-term investments with original maturities of three months or less.

p. Business Combinations

Business combinations are accounted for using the acquisition method. The identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date. The cost of an acquisition is measured as the aggregate consideration transferred, measured at the acquisition date fair value. If the cost of the acquisition is less than the fair value of the net assets acquired, the difference is recognized immediately in profit or loss. If the cost of the acquisition is more than the fair value of the net assets acquired, the difference is recognized on the balance sheet as goodwill. Acquisition costs incurred are expensed.

q. Foreign Currency Translation

Monetary assets and liabilities denominated in a foreign currency are translated at the rate of exchange in effect at the balance sheet date. Revenues and expenses are translated at the period average rates of exchange. Translation gains and losses are included in earnings in the period in which they arise.

Bellatrix’s functional and presentation currency is Canadian dollars.

4. CRITICAL JUDGMENTS AND ACCOUNTING ESTIMATES

The financial statements of the Company have been prepared by management in accordance with IFRS. The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, and contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period and accompanying notes. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be material. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

a. Critical Accounting Judgments

I. Oil and Gas Reserves

Reserves and resources are used in the units of production calculation for depletion, depreciation and amortization, and the impairment analysis which affect net profit or loss. There are numerous uncertainties inherent in estimating oil and gas reserves. Estimating reserves is very complex, requiring many judgments based on geological, geophysical, engineering and economic data. Changes in these judgments could have a material impact on the estimated reserves. These estimates may change, having either a negative or positive effect on net profit as further information becomes available and as the economic environment changes.

II. Identification of CGUs

Bellatrix’s assets are aggregated into CGUs, for the purpose of calculating impairment, based on their ability to generate largely independent cash flows, geography, geology, production profile and infrastructure of their assets.

III. Impairment Indicators and Impairment Reversal 

Judgment is required to assess when impairment indicators exist and impairment testing is required with respect to exploration and evaluation assets and property, plant and equipment.

Bellatrix Exploration Ltd. 15

IV. Joint Arrangements

Judgment is required to determine when the Company has joint control over an arrangement. In establishing joint control, the Company considers whether unanimous consent is required to direct the activities that significantly affect the returns of the arrangement, such as the capital and operating activities of the arrangement. Additionally, the Company assesses the rights and obligations arising from the arrangement by considering its governance structure, legal form, and terms agreed upon by the parties sharing control, including the contractual rights of each partner, dispute resolution procedures, termination provisions, and procedures for subsequent transactions in its determination of joint control.

Once joint control has been established, judgment is also required to classify the joint arrangement. The type of joint arrangement is determined through analysis of the rights and obligations arising from the arrangement by considering its legal structure, legal form and terms agreed upon by the parties sharing control. An arrangement that is not structured through a separate vehicle in which the controlling parties have rights to the assets, revenues and substantially all of the economic benefits generated through the arrangement, in addition to obligations for the liabilities and expenses, is classified as a joint operation. An arrangement in which these criteria are not met is classified as a joint venture.

V. Non-monetary Transactions

Judgment is required to determine whether non-monetary transactions have commercial substance.

b. Critical Estimates and Assumptions

I. Recoverability of asset carrying values

The Company assesses its oil and gas properties, including exploration and evaluation assets, for possible impairment if there are events or changes in circumstances that indicate that carrying values of the assets may not be recoverable, or at least at every reporting date. 

The assessment of any impairment of property, plant and equipment is dependent upon estimates of recoverable amount that take into account factors such as reserves, future estimated commodity prices, royalties and costs, economic and market conditions, timing of cash flows, discount rates, the useful lives of assets and their related salvage values. By their nature, these estimates and assumptions are subject to measurement uncertainty and may impact the carrying value of the Company’s assets in future periods.

II. Decommissioning obligations

Provisions for decommissioning obligations associated with the Company’s drilling operations are based on current legal and constructive requirements, technology, price levels and expected plans for remediation. Actual costs and cash outflows can differ from estimates because of changes in laws and regulations, public expectations, prices, discovery and analysis of site conditions and changes in clean up technology. 

III. Income taxes 

Deferred tax assets and liabilities are recognized for the estimated tax consequences between amounts included in the financial statements and their tax base using substantively enacted future income tax rates. Timing of future revenue streams and future capital spending changes can affect the timing of any temporary differences, and accordingly affect the amount of the deferred tax asset or liability calculated at a point in time. Deferred tax assets are recognized when it is considered probable that deductible temporary differences will be recovered in future periods, which requires Management judgment. These differences could materially impact earnings.

Bellatrix Exploration Ltd. 16

5. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES

NEWLY ADOPTED ACCOUNTING POLICIES

IFRS 9 Financial Instruments ("IFRS 9")

The Company adopted IFRS 9 effective January 1, 2018. IFRS 9 replaces IAS 39 - Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 introduces new requirements for the classification and measurement of financial assets, amends the requirements related to hedge accounting, and introduces a forward-looking expected loss impairment model.

The adoption of this standard had no impact on the Company’s financial statements on the date of adoption, or for comparative periods. There was no change in the carrying amounts recognized under IAS 39, despite the new measurement categories stipulated under IFRS 9. The adoption of the expected credit loss impairment model for financial assets measured at amortized cost did not result in any additional provision for impairment. The Company has applied IFRS 9 retrospectively, without restatement.

There was no change to the measurement categories for financial liabilities. Financial liability classifications are all unchanged from their classifications under IAS 39. Deferred share units, restricted awards and performance awards continue to be classified as FVTPL. Accounts payable and accrued liabilities, Credit Facilities, Second Lien Notes, Senior Notes, Convertible Debentures (each as defined in Note 7) and finance lease obligations are classified as amortized cost.

A comparison of financial instrument subsequent measurement categories, pre and post adoption of IFRS 9, is as follows:

Financial Assets and Liabilities	IAS 39	IFRS 9
Accounts receivable	Amortized cost	Amortized cost
Commodity risk management contracts	FVTPL	FVTPL
Foreign exchange risk management contracts	FVTPL	FVTPL
Accounts payable and accrued liabilities	Amortized cost	Amortized cost
Deferred share units	FVTPL	FVTPL
Restricted awards	FVTPL	FVTPL
Performance awards	FVTPL	FVTPL
Credit Facilities	Amortized cost	Amortized cost
Second Lien Notes	N/A	Amortized cost
Senior Notes	Amortized cost	Amortized cost
Convertible Debentures	Amortized cost	Amortized cost
Finance lease obligation	Amortized cost	Amortized cost

IFRS 15 Revenue from Contracts with Customers ("IFRS 15")

The Company adopted IFRS 15 with a date of initial application of January 1, 2018. Bellatrix used the cumulative effect method to adopt the new standard. Bellatrix has reviewed its revenue streams and major contracts with customers using the IFRS 15 five-step model and there are no material changes to the timing or amounts of revenue recognized. However, IFRS 15 contains new disclosure requirements. See note 13.

IFRS 3 Business Combinations ("IFRS 3")

The Company early adopted the amended IFRS 3 with a date of initial application of November 1, 2018. The amendment provides clarification on determining whether an acquisition made is of a business or a group of assets and introduces an optional concentration test that permits a simplified assessment. The amendments are applied prospectively to all business combinations and asset acquisitions. These impact the asset acquisitions from two joint venture partners in the fourth quarter of 2018 which management has assessed do not meet the definition of a business combination.

Bellatrix Exploration Ltd. 17

FUTURE ACCOUNTING POLICIES

IFRS 16 Leases ("IFRS 16")

IFRS 16 replaces IAS 17 - "Leases" and the standard will come into effect for annual periods beginning on or after January 1, 2019. For lessees applying IFRS 16, a single recognition and measurement model for leases would apply, with required recognition of right-of-use (“ROU”) assets and lease liabilities for most leases. All contracts that meet the definition of a lease under IFRS 16, including those presently accounted for as operating leases, will be recorded on the balance sheet. The standard may be applied retrospectively or using a modified retrospective approach. The Company has selected to use the modified retrospective approach which does not require restatement of prior period financial information as the cumulative effect of applying the standard to prior periods is recorded as an adjustment to opening retained earnings. On initial adoption, Bellatrix has elected to use the following practical expedients permitted under the standard:

• Certain short-term leases and leases of low value assets that have been identified at January 1, 2019 will not be recognized on the balance sheet.

• At January 1, 2019, Bellatrix will not recognize leases with terms ending within 12 months as short-term leases.

• Leases having similar characteristics will be measured as a portfolio by applying a single discount rate.

• For certain leases having associated initial direct costs, Bellatrix will, at initial measurement on transition, exclude these direct costs from the measurement of the ROU asset.

• At January 1, 2019, any provision for onerous contracts previously recognized will be applied to the associated ROU asset recognized upon transition to IFRS 16, In these cases, there will be no impairment assessment made under IAS 36 - “Impairment of Assets”.

On adoption of IFRS 16, the Company will recognize lease liabilities in relation to leases under the principles of the new standard measured at the present value of the remaining lease payments, discounted using the Company’s incremental borrowing rate as at January 1, 2019. The associated ROU assets will be measured at the amount equal to the lease liability on January 1, 2019 less any amount previously recognized under IAS 37 for onerous contracts with no impact on retained earnings.

Adoption of the new standard will result in the recognition of additional lease liabilities and ROU assets in excess of approximately $80 million. The Company’s leases that will be recognized on its balance sheet at January 1, 2019 include leases of office leases, compressor leases and equipment leases. The impact on the statement of profit (loss) and comprehensive income (loss) will be as follows:

• Lower general and administrative expenses, operating costs and higher other income

• Higher finance expenses due to the interest recognized on the lease obligations; and

• Higher depreciation expense related to the ROU assets.

6. FINANCIAL RISK MANAGEMENT

a. Overview

The Company has exposure to the following risks from its use of financial instruments:

•Credit risk

•Liquidity risk

•Market risk

▪Foreign exchange risk

▪Commodity price risk

▪Interest rate risk

This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. Further quantitative disclosures are included throughout these financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board has implemented and monitors compliance with risk management policies.

The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company’s activities.

b. Capital Management

The Company's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the future development of the business. The Company manages its capital structure and makes adjustments to it based on changes

Bellatrix Exploration Ltd. 18

in economic conditions and the risk characteristics of the underlying petroleum and natural gas assets. The Company considers its capital structure to include shareholders’ equity, Credit Facilities, Second Lien Notes, Senior Notes, Convertible Debentures, and working capital. In order to maintain or adjust the capital structure, the Company may from time to time issue common shares, senior notes, convertible debentures or other debt instruments, adjust its capital spending, and/or dispose of certain assets to manage current and forecasted debt levels. Bellatrix does not pay dividends. 

Bellatrix remains highly focused on key business objectives of maintaining financial strength and liquidity, and optimizing capital investments in the current commodity price environment. In order to preserve liquidity and capital resources, in January 2019, Bellatrix’s Board of Directors approved a 2019 net capital budget of between $40 million and $50 million. Bellatrix expects to be able to fund its 2019 capital program by reinvesting cash flow, supplemented by borrowing under its Credit Facilities. Bellatrix continually monitors its capital spending program in light of prevailing commodity prices and the United States/Canadian dollar exchange rate with the aim of ensuring the Company will be able to meet future anticipated obligations incurred from normal ongoing operations with adjusted funds flow and borrowings under its Credit Facilities, as necessary. Please refer to note 7 and ‘Liquidity Risk’ below for further discussion.

The Company monitors its capital structure based on the ratio of total net debt to annualized adjusted funds flow (defined below). This ratio is calculated as total net debt, defined as outstanding Credit Facilities, Second Lien Notes, Senior Notes, Convertible Debentures (liability component), and plus or minus adjusted working capital (defined below), divided by adjusted funds flow (defined below) for the most recent calendar quarter, annualized (multiplied by four). The total net debt to annualized adjusted funds flow ratio may increase at certain times as a result of acquisitions, fluctuations in commodity prices, timing of capital expenditures and other factors. In order to facilitate the management of this ratio, the Company prepares capital expenditure budgets which are reviewed and updated as necessary depending on varying factors including current and forecast prices, successful capital deployment and general industry conditions. The budgets are approved by the Board of Directors.

The Company’s capital structure and its calculation of total net debt and the total net debt to adjusted funds flow ratio as defined by the Company is as follows:

Debt to Adjusted Funds Flow Ratio
	Year ended December 31,
($000s, except where noted)	2018		2017
Shareholders’ equity	672,725		774,022
Credit Facilities	47,763		52,066
Adjusted working capital deficiency (1)	20,740		23,926
Subtotal	68,503		75,992
Second Lien Notes (mature on September 11, 2023)(2)	137,097		—
Senior Notes (mature May 15, 2020) (2)	196,000		305,409
Net debt (1)	401,600		381,401
Convertible Debentures (liability component)	41,732		39,426
Total net debt (1) at year end	443,332		420,827
Debt to adjusted funds flow ratio (annualized)(3) (4)
Adjusted funds flow (4) (annualized)	62,032		62,800
Net debt (1) to periods adjusted funds flow ratio (annualized) (3)	6.5	x	6.1	x
Total net debt to periods adjusted funds flow ratio (annualized) (3)	7.1	x	6.7	x
Debt to adjusted funds flow ratio (4)
Adjusted funds flow for the year (4)	48,025		58,240
Net debt (1) to adjusted funds flow ratio (4) for the year	8.4	x	6.5	x
Total net debt (1) to adjusted funds flow ratio (4) for the year	9.2	x	7.2	x

(1)Net debt and total net debt as presented do not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. The Company’s calculation of total net debt excludes other deferred liabilities, long-term risk management contract liabilities and decommissioning liabilities. Total net debt includes the adjusted working capital deficiency, amounts outstanding under Credit Facilities, Second Lien Notes, Senior Notes and Convertible Debentures (liability component). The adjusted working capital deficiency as presented does not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. The Company calculated adjusted working capital deficiency as net working capital deficiency excluding current risk management contract assets and liabilities, current portion of other deferred liabilities, current portion of Credit Facilities and current portion of decommissioning liability. Net debt excludes the liability component of Convertible Debentures that is included in total net debt.

Bellatrix Exploration Ltd. 19

(2)For the year ended December 31, 2018, Second Lien Notes and Senior Notes includes an unrealized foreign exchange loss of $18.6 million (2017: $22.2 million gain) and does not include an unrealized gain of $3.4 million (2017: $3.9 millionloss) on foreign exchange contracts.

(3)For the years ended December 31, 2018 and 2017, net debt and total net debt to period’s adjusted funds flow ratio (annualized) is calculated based upon fourth quarter adjusted funds flow annualized.

(4)Adjusted funds flow as presented do not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. Adjusted funds flow is calculated as cash flow from operating activities, excluding decommissioning costs incurred, changes in non-cash working capital incurred, and transaction costs.

c. Credit Risk

Credit risk is the risk of financial loss to Bellatrix if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from Bellatrix’s trade receivables from joint venture partners, petroleum and natural gas marketers, and financial derivative counterparties. Credit risk is considered very low for the Company's risk management contracts due to the external credit ratings of its counterparties and Bellatrix's process for selecting and monitoring credit-worthy counterparties.

A substantial portion of Bellatrix’s accounts receivable are with customers and joint interest partners in the petroleum and natural gas industry and are subject to normal industry credit risks. Receivables from petroleum and natural gas marketers are normally collected on the 25th day of the month following production. Bellatrix currently sells substantially all of its production to ten primary purchasers under standard industry sale and payment terms. The most significant 60 day exposure to a single counterparty is approximately $13.9 million. Purchasers of Bellatrix’s natural gas, crude oil and natural gas liquids are subject to a periodic internal credit review to minimize the risk of non-payment. Bellatrix has continued to closely monitor and reassess the creditworthiness of its counterparties, including financial institutions. This has resulted in Bellatrix mitigating its exposures to certain counterparties by obtaining financial assurances or reducing credit where it is deemed warranted and permitted under contractual terms.

Bellatrix may be exposed to third party credit risk through its contractual arrangements with its current or future partners and joint venture partners, marketers of its petroleum and natural gas production, derivative counterparties and other parties.

As at December 31, 2018, accounts receivable was comprised of the following:

Aging ($000s)	Not past due (less than 90 days)		Past due (90 days or more)			Total
Joint venture and other trade accounts receivable	$	6,672	$	8,316		$	14,988
Revenue and other accruals	23,252		297			23,549
Less: Allowance for expected credit loss
Balance, beginning of year	—		(889		)	(889		)
Provision	—		(693		)	(693		)
Balance, end of year	—		(1,582		)	(1,582		)
Total accounts receivable	$	29,924	$	7,031		$	36,955

The carrying amount of accounts receivable and risk management assets represent the maximum credit exposure.

d. Liquidity Risk

Liquidity risk is the risk that Bellatrix will not be able to meet its financial obligations as they become due. Bellatrix actively manages its liquidity through daily and longer-term cash, debt and equity management strategies. Such strategies encompass, among other factors: having adequate sources of financing available through its Credit Facilities, estimating future cash generated from operations based on reasonable production and pricing assumptions, analysis of economic risk management opportunities, and maintaining sufficient cash flows for compliance with the Senior Debt Covenants described in note 7. The Company also mitigates liquidity risk by maintaining an insurance program to minimize exposure to insurable losses.

The Company prepares annual capital expenditure budgets which are regularly monitored and updated as necessary. Further, the Company utilizes authorizations for expenditures on both operated and non-operated projects to further manage capital expenditures. To facilitate the capital expenditure program, the Company has revolving reserve based Credit Facilities, as outlined in note 7, which are reviewed semi-annually by the lenders thereunder. The borrowing base under the Company’s Credit Facilities is $100 million and total commitments were $95 million at December 31, 2018. Amounts outstanding under the Credit Facilities were $47.8 million and total outstanding letters of credit were $13.9 million at December 31, 2018. The term of the Company’s Credit Facilities is to May 30, 2019, and the Credit Facilities are extendible annually thereafter at the option of the Company, subject to lender approval. If not renewed in May 2019, the Credit Facilities would enter a six-month term-out period to November 30, 2019.

Bellatrix Exploration Ltd. 20

The Credit Facilities outline limitations based on percentages of the prior quarter’s sale volumes, which may be hedged through financial commodity price risk management contracts.

Bellatrix also has Second Lien Notes, Senior Notes and Convertible Debentures outstanding with fixed interest rates, as outlined in note 7, which mature on September 11, 2023, May 15, 2020 and September 30, 2021, respectively. The maturity date of Second Lien Notes will be accelerated to March 14, 2020 if more than US$25 million principal amount of Senior Notes remains outstanding as at March 14, 2020.

There remains uncertainty and liquidity risk until such time as the Company implements a financing arrangement that addresses the pending maturities under the May 2020 Senior Notes and the Credit Facilities. During 2018, US$104.2 million of Senior Notes were exchanged for Second Lien Notes and common shares. Bellatrix is engaged in ongoing confidential discussions with parties across the Company’s capital structure in connection with potential transaction alternatives, including refinancing the remaining Senior Notes which mature in May 2020 in order to extend the maturity of the Credit Facilities beyond November 30, 2019. There are no assurances that a transaction will be completed and that an extension of the Credit Facilities will be obtained by the Company or on what terms.

Bellatrix is aware that the Company's outstanding Senior Notes have recently been trading at a discount to par value. In order to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, Bellatrix may, from time to time, seek to purchase such debt for cash, in exchange for other debt or equity securities, or for a combination of cash and securities, in each case in open market purchases and/or privately negotiated transactions. Bellatrix will evaluate any such transactions in light of then existing market conditions, taking into account the Company's current liquidity and prospects for future access to capital. In addition, Bellatrix remains in active discussions with existing and potential new lenders with a view to providing additional liquidity to Bellatrix. The amounts involved in any such transactions, individually or in the aggregate, may be material.

As at December 31, 2018 the Company has eliminated net debt associated with its Senior Notes by US$32.1 million (approximately $41.8 million CAD). This included a US$24.1 million reduction through note exchanges for common shares of Bellatrix, as well as a US$8.0 million reduction (approximately $10.5 million CAD) through the Second Lien Refinancing exchange.  In addition, the Second Lien Refinancing exchange benefited the Company’s long term debt maturity profile as it extended the maturity on US$72.1 million of Senior Notes by three years, from 2020 to 2023.

At December 31, 2018 Exchanging Noteholders had subscribed for US$30 million additional Second Lien Notes (see note 7), of which US$9.0 million had been spent and US$21.0 million was committed for use on capital expenditures, development capital, and Senior Notes purchases.

On January 22, 2019, the Company announced that its board of directors had determined to commence procedures for the voluntary delisting of the Company's common shares from the New York Stock Exchange ("NYSE"). Bellatrix has filed a Form 25 with the Securities and Exchange Commission ("SEC") to affect the voluntary delisting of Bellatrix's common shares from the NYSE and the last day of trading was February 11, 2019.

Future liquidity depends primarily on cash flow generated from operations, availability under the Credit Facilities (as noted above) and the ability to access debt and equity markets and the ability to refinance the May 2020 Senior Notes. From time to time, the Company accesses capital markets to meet its additional financing needs and to maintain flexibility in funding its capital programs. As at December 31, 2018, the Company has the ability to issue up to an additional $476.0 million in equity securities under its $500 million Shelf Prospectus, which expires on July 29, 2020.

There can be no assurance that future debt or equity financing, additional credit under the Credit Facilities, or cash generated by operations will be available or sufficient to meet these requirements or for other corporate purposes or, if debt or equity financing is available, that it will be on terms acceptable to Bellatrix.

Bellatrix Exploration Ltd. 21

The following are the contractual maturities of financial liabilities as at December 31, 2018:

Liabilities ($000s)	Total		< 1 Year		1-3 Years		3-5 Years		More than 5 years
Accounts payable and accrued liabilities	$	61,211	$	61,211	$	—	$	—	$	—
Risk management liability	2,569		917		1,652		—		—
Credit Facilities	47,763		47,763		—		—		—
Second Lien Notes (1)(2)	139,331		—		—		139,331		—
Senior Notes (1)	198,904		—		198,904		—		—
Convertible Debentures (1)	50,000		—		50,000		—		—
Finance lease obligation	5,721		475		938		915		3,393
Total	$	505,499	$	110,366	$	251,494	$	140,246	$	3,393

(1) Principal amount of the instruments

(2) Maturity date of Second Lien Notes will be accelerated to March 14, 2020 if more than US$25 million principal amount of Senior Notes remaining outstanding as at March 14, 2020.

e. Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, commodity prices, and interest rates will affect the Company’s net profit or the value of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing returns.

f. Foreign Exchange Risk

Foreign exchange risk is the risk that fluctuations in the Canadian/United States dollar foreign exchange rate may impact the Company’s cash flows and net profit (loss). The Company’s realized commodity prices for crude oil and natural gas are based upon United States dollar denominated commodity prices. Fluctuations in the Canadian/United States dollar foreign exchange rate may thus impact commodity prices received by the Company. In addition, the Company has United States dollar denominated Second Lien Notes, Senior Notes and related interest obligations of which future cash payments are directly impacted by the exchange rate in effect on the payment date.

The Company may utilize foreign exchange derivative contracts to manage foreign exchange risks in order to maintain cash flow stability. Foreign exchange derivative transactions are in accordance with the risk management policy that has been approved by the Board of Directors. The aggregate amount hedged under all foreign exchange derivative contracts is limited to the outstanding principal amount of the Second Lien Notes, Senior Notes or 60% of the Company’s United States dollar revenues over the previous three months. Additionally, the term of foreign exchange contracts is limited to the remaining term of the related Second Lien Notes or Senior Notes or a maximum of three years. See note 17 for the foreign exchange risk management contacts that the Company has entered at December 31, 2018.

For the year ended December 31, 2018, a $0.01 increase or decrease in the CDN$/US$ foreign exchange rate, with all other variables held constant, would impact the profit (loss) before income taxes by approximately $0.6 million.

g. Commodity Price Risk

Commodity price risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in commodity prices. Commodity prices for petroleum and natural gas are impacted by not only the relationship between the Canadian and United States dollar, as outlined above, but also global economic events that dictate the levels of supply and demand.

The Company utilizes both financial derivatives and physical delivery sales contracts to manage commodity price risks. All such transactions are conducted in accordance with the commodity price risk management policy that has been approved by the Board of Directors.

The Company’s formal commodity price risk management policy permits management to use specified price risk management strategies including fixed price contracts, costless collars and the purchase of floor price options, other derivative financial instruments, and physical delivery sales contracts to reduce the impact of price volatility and ensure minimum prices for a maximum of thirty months beyond the current date. The program is designed to provide price protection on a portion of the Company’s future production in the event of adverse commodity price movement, while retaining significant exposure to upside price movements. By doing this, the Company seeks to provide a measure of stability to cash flows from operating activities, as well as, to ensure Bellatrix realizes positive economic returns from its capital developments and acquisition activities.

Bellatrix Exploration Ltd. 22

For the year ended December 31, 2018, if the prices for AECO natural gas had increased or decreased by $0.10/mcf, with all other variables held constant, net loss before tax would have be impacted by $5.5 million. For the year ended December 31, 2018, if prices for WTI crude oil had increased or decreased by $1.00/bbl, with all other variables held constant, net profit would be impacted by $3.7 million.

As at December 31, 2018, the Company has entered into commodity price risk management arrangements as follows:

Natural gas fixed price arrangements

Type		Period	Volume	Price			Index
Natural gas fixed	Financial	January 2019	10,000 GJ/d	$	2.54	CDN	AECO
Natural gas fixed	Financial	February 2019	10,000 GJ/d	$	2.43	CDN	AECO
Natural gas fixed	Financial	April 1, 2019 to October 31, 2019	20,000 GJ/d	$	1.79	CDN	AECO

Natural gas basis differential arrangements

Type		Period	Volume	Price			Index
Natural gas	Financial	April 1, 2019 to October 31, 2020	10,551 GJ/d	$	(1.17	)US	AECO 7A/NYMEX
Natural gas	Financial	January 1, 2019 to October 31, 2020	10,551 GJ/d	$	(1.19	)US	AECO 7A/NGI Chicago
Natural gas	Financial	January 1, 2019 to October 31, 2020	5,275 GJ/d	$	(1.23	)US	AECO/Dawn Gas Daily

Crude oil call option arrangements

Type		Period	Volume	Price			Index
Oil	Financial	January 1, 2019 to December 31, 2019	1,000 bbl/d	$	87.50	CDN	WTI - NYMEX
Oil	Financial	January 1, 2020 to December 31, 2020	1,000 bbl/d	$	77.90	CDN	WTI - NYMEX

The following is a summary of the net risk management asset (liability) as at December 31, 2018 and December 31, 2017:

($000s)	2018			2017
Current portion commodity contract asset	$	9,852		$	31,910
Commodity contract asset (long term)	3,291			1,213
Current portion commodity contract liability	(917		)	(4,468		)
Commodity contract liability (long term)	(1,652		)	—
Foreign exchange contract liability (long term)	—			(3,422		)
Net risk management asset (liability)	$	10,574		$	25,233

Subsequent to December 31, 2018, the Company monetized certain natural gas basis differential arrangements from April 1, 2019 to October 31, 2019 of 26,377 GJ/d for proceeds of $2.4 million. In addition, the Company entered into commodity price risk management arrangements as follows:

Natural gas fixed price arrangements

Type		Period	Volume	Price			Index
Natural gas fixed	Financial	March 2019	40,000 GJ/d	$	2.38	CDN	AECO

h. Interest Rate Risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in the market interest rates. The Company is exposed to interest rate fluctuations on its Credit Facilities which bear a floating rate of interest. As at December 31, 2018, if interest rates had been 1% lower with all other variables held constant, net loss before income tax for the year ended December 31, 2018 would have been approximately $0.5 million lower, due to lower interest expense. An equal and opposite impact would have occurred to net earnings had interest rates been 1% higher.

Bellatrix Exploration Ltd. 23

i. Fair Value

The Company’s financial instruments as at December 31, 2018 include accounts receivable, deposits, risk management assets and liabilities, accounts payable and accrued liabilities, finance lease obligations, Credit Facilities, Second Lien Notes, Senior Notes and Convertible Debentures.

The fair value of accounts receivable, deposits, accounts payable and accrued liabilities approximate their carrying amounts due to their short-terms to maturity.

The Company enters into risk management contracts under master netting arrangements. Under these arrangements, the amounts owed by each counterparty for commodity contracts outstanding in the same commodity are aggregated into a single net amount receivable or payable. If a default occurs, the net amount subject to a master netting arrangement is receivable or payable for settlement purposes. The carrying amounts of commodity and foreign exchange contracts held under master netting arrangements are recorded on a net basis. At December 31, 2018 and 2017, the impact of netting gross amounts is negligible.

The risk management assets and liabilities at December 31, 2018 include commodity contracts. The fair value of commodity contracts is determined by discounting the difference between the contracted price and published forward price curves as at the balance sheet date, using the remaining contracted petroleum and natural gas volumes. The fair value of foreign exchange contracts is determined based on the difference between the contracted forward rate and current forward rates, using the remaining settlement amount.

Credit Facilities bear interest at a floating market rate and the credit and market premiums therein are indicative of current rates; accordingly the fair market value approximates the carrying value.

The fair value of financial assets and liabilities, excluding working capital and Credit Facilities discussed above, is attributable to the following fair value hierarchy levels at December 31, 2018 and December 31, 2017:

($000s)		Fair Value
2018	Carrying Value	Level 1	Level 2	Level 3
Financial assets
Risk management asset	13,143	—	13,143	—
Financial liabilities
Risk management liability	2,569	—	2,569	—
Finance lease obligation	5,721	—	7,494	—
Second Lien Notes (3)	137,097	—	139,337	—
Senior Notes (2)	196,000	—	119,342	—
Convertible Debentures (1)	41,732	—	22,500	—

(1) The fair value of the Convertible Debentures is based on the closing market price on the TSX of $45.00 per Debenture as at December 31, 2018, and represents the market value of the entire instrument.

(2) The fair value of the Senior Notes is based on the closing market price of $60.00 per Senior Note as at December 31, 2018.

(3) The fair value of Second Lien Notes approximates the carrying value given the September 11, 2018 date of issuance and additional notes issued on December 11, 2018 at the same terms.

($000s)		Fair Value
2017	Carrying Value	Level 1	Level 2	Level 3
Financial assets
Risk management asset	33,123	—	33,123	—
Financial liabilities
Risk management liability	7,890	—	7,890	—
Finance lease obligation	6,891	—	8,932	—
Convertible Debentures (1)	39,426	—	46,000	—
Senior Notes (2)	305,409	—	299,258	—

(1) The fair value of the Convertible Debentures is based on the closing market price on the TSX of $92.00per Debenture as at December 31, 2017, and represents the market value of the entire instrument.

(2) The fair value of the Senior Notes is based on the closing market price of $95.63 per Senior Note as at December 31, 2017.

Bellatrix Exploration Ltd. 24

7. DEBT

($000s)	2018		2017
Credit Facilities - current	$	47,763	$	—
Credit Facilities - non-current	—		52,066
Second Lien Notes (mature on September 11, 2023 to December 12, 2023)	137,097		—
Senior Notes (mature on May 15, 2020)	196,000		305,409
Convertible Debentures (liability component)	41,732		39,426
Debt	$	422,592	$	396,901

Credit Facilities

At December 31, 2018, the Company had $47.8 million outstanding under its syndicated revolving credit facilities (the “Credit Facilities”) provided by four financial institutions. In connection with the completion of the Second Lien Refinancing (defined below), the agreement governing the Credit Facilities was amended and restated, with the borrowing base reconfirmed at $100 million with total commitments of $95 million. The terms of the Credit Facilities were amended and restated to, among other things, allow for the completion of the transactions comprising the Second Lien Refinancing, amend the interest and fees payable under the Credit Facilities and provide for an additional financial covenant (refer to Covenants below). The term of the Credit Facilities is to May 30, 2019, and the Credit Facilities are extendible annually thereafter at the option of the Company, subject to lender approval. If not renewed in May 2019, the Credit Facilities would enter a six-month term-out period to November 30, 2019. The next semi-annual redetermination is scheduled for May 2019.

The Credit Facilities bear interest at a floating rate. For the year ended December 31, 2018 the weighted average interest rate for amounts borrowed under the Credit Facilities was 4.42%. The Credit Facilities are secured by a $1.0 billion debenture containing a first ranking charge and security interest. The Company has provided a negative pledge and undertaking to provide fixed charges over its properties in certain circumstances.

As at December 31, 2018, total outstanding letters of credit were $13.9 million which reduced the amount otherwise available to be drawn under the Credit Facilities.

Second Lien Notes

During 2018, Bellatrix completed a debt refinancing transaction (the "Second Lien Refinancing") pursuant to a note purchase agreement ("Note Purchase Agreement") with certain holders of the Senior Notes (the “Exchanging Noteholders”) to exchange US$80.1 million of the Company’s Senior Notes for US$72.1 million of second lien notes due 2023 (the “Second Lien Notes”). The Second Lien Notes bear interest at 8.5% per annum, payable quarterly, and are secured by a $250 million demand debenture over all of the Company’s assets, which is subordinated to the security provided under the Credit Facilities. The Note Purchase Agreement provides that the maturity date of Second Lien Notes will be accelerated to March 14, 2020 if more than US$25 million principal amount of Senior Notes remains outstanding as at March 14, 2020.

In addition, the Exchanging Noteholders have agreed to subscribe for between US$30 million and US$40 million of additional Second Lien Notes, with the proceeds to be used for capital expenditures, development capital and Senior Notes purchases. During 2018 Bellatrix issued US$30 million of additional Second Lien Notes to the Exchanging Noteholders.

The Exchanging Noteholders also agreed to allow for up to US$50 million in additional Second Lien Note issuances to be used exclusively for future Senior Note exchanges on or before February 28, 2019. Such availability period has as of March 14, 2019 not been further extended by the parties to the Second Lien Notes Agreement. However, the Company remains in ongoing confidential discussions with parties across its capital structure in connection with potential transaction alternatives. If any of the incremental US$50 million of Second Lien Note capacity is utilized, then the Exchanging Noteholders' commitment to subscribe for additional Second Lien Notes will be limited to US$30 million. The Note Purchase Agreement also provides for the ability to issue additional subordinate secured and unsecured debt in subsequent refinancing and capital raising transactions.

Pursuant to the Note Purchase Agreement, Bellatrix issued warrants to purchase an aggregate of 3,088,205 common shares of Bellatrix to the Exchanging Noteholders at an exercise price of $1.30 per Common Share expiring five years from the issuance date of the warrants. The Warrants will only vest if and when the Company accesses any of the incremental US$50 million of Second Lien Note capacity.

Bellatrix Exploration Ltd. 25

Second Lien Notes
($000s)	Liability Component		Warrants
Balance, December 31, 2017	$	—	$	—
Issuance of Second Lien Notes in exchange for Senior Notes(2)	92,451		1,652
Issuance of additional Second Lien Notes for cash proceeds	39,815		—
Unrealized foreign exchange gain (1)	4,719		—
Amortization of discount	112		—
Balance, December 31, 2018	$	137,097	$	1,652

(1) Exchange rate (CDN$/US$1.00) at December 31, 2018 was 1.3646.

(2) Warrants component of Second Lien Notes is presented net of tax.

Convertible Debentures

At December 31, 2018 Bellatrix had outstanding $50 million of 6.75% convertible unsecured subordinated debentures (the “Convertible Debentures”). The Convertible Debentures bear interest at a rate of 6.75% per annum, payable semiannually in arrears on September 30 and March 31 of each year. The maturity date of the Convertible Debentures is September 30, 2021. As at December 31, 2018, each $1,000 principal amount of Convertible Debenture is convertible at the option of the holder into approximately 123.4568 common shares of Bellatrix (representing a conversion price of $8.10). The Convertible Debentures are not redeemable prior to September 30, 2019, except in limited circumstances following a Change of Control (as defined by the terms of the indenture governing the Convertible Debentures). On and after September 30, 2019 and prior to September 30, 2020, the Convertible Debentures are redeemable at Bellatrix’s option, in whole or in part from time to time, at a redemption price equal to their principal amount plus accrued and unpaid interest thereon, if any, if the weighted average trading price of Bellatrix's common shares specified period is not less than 125% of the conversion price. On or after September 30, 2020, the Convertible Debentures are redeemable at Bellatrix's option, in whole or in part from time to time, at a redemption price equal to the principal amount thereof plus accrued and unpaid interest thereon, if any, up to but excluding the date set for redemption. The Convertible Debentures are direct, subordinated unsecured obligations of the Company, subordinated to the Credit Facilities, the Second Lien Notes, the Senior Notes and any other senior indebtedness.

($000s)	Liability Component		Equity Component
Balance, December 31, 2016	$	37,420	$	7,818
Effective interest on Convertible Debentures	$	2,006	$	—
Balance, December 31, 2017	$	39,426	$	7,818
Effective interest on Convertible Debentures	2,306		—
Balance, December 31, 2018	$	41,732	$	7,818

Senior Notes

At December 31, 2018, the Company had outstanding US$145.8 million (2017: US$250 million) of 8.50% senior unsecured notes due May 15, 2020 (the “Senior Notes”). During the year ended December 31, 2018 Bellatrix reduced the Senior Notes outstanding by $134.1 million (US$104.2 million) through the Second Lien Refinancing, as well as the transactions described below.

Interest is payable on the Senior Notes semi-annually and the Senior Notes are redeemable at the Company's option, in whole or in part at specified redemption prices. The Senior Notes are carried at amortized cost, net of debt issuance costs of $1.3 million, which accrete up to the principal balance at maturity using an effective interest rate of 9.6%. The Senior Notes were initially recognized at fair value, net of debt issue costs, and have subsequently been carried at amortized cost.

Bellatrix Exploration Ltd. 26

($000s)	Amount
Balance, December 31, 2016	$	324,691
Unrealized foreign exchange gain(1) (2)	(22,079		)
Amortization of discount and debt issue costs	2,797
Balance, December 31, 2017	$	305,409
Unrealized foreign exchange gain (3) (4)	22,032
Amortization of discount and debt issue costs	2,617
Settlement of Senior Notes for equity	(30,673		)
Settlement of Senior Notes for Second Lien Notes	(103,385		)
Balance, December 31, 2018	$	196,000

(1) Exchange rate (CDN$/US$1.00) at December 31, 2017 was 1.2518.

(2) Amount does not include unrealized loss on foreign exchange contracts of $3.9 million.

(3) Exchange rate (CDN$/US$1.00) at December 31, 2018 was 1.3646.

(4) Amount does not include unrealized gain on foreign exchange contracts of $3.4 million.

During the year ended December 31, 2018, Bellatrix entered into agreements (the "Exchange Agreements") with third parties to exchange US$24.1 million aggregate principal amount of Senior Notes (the "Surrendered Senior Notes") for an aggregate of 19,900,032 Common Shares (the "Note Exchanges"). The Surrendered Senior Notes were exchanged at a value of US$900 for each US$1,000 principal amount of Senior Notes (the "Repurchase Value"). Pursuant to the terms of the Exchange Agreements, the Repurchase Value was applied towards the purchase of the Common Shares at a deemed price per Common Share, which was based on a 5% discount to the volume average trading price on the TSX for a period not less than five trading days preceding the effective date of the applicable Exchange Agreement. Bellatrix recorded a gain of $6.1 million on settlement.

Covenants

The agreement governing the Credit Facilities includes two financial covenants that must be met quarterly. The covenants require that the Company maintain a ratio of outstanding Senior Debt (defined below) to consolidated earnings before interest, taxes, depletion, depreciation and amortization (“EBITDA”), as defined by the terms of the agreement governing the Credit Facilities and adjusted for non-cash charges, for a trailing twelve month period of not more than 5.0 times until December 31, 2020, 4.5 times during the fiscal year ended December 31, 2021 and 4.0 times thereafter (the “Senior Debt Covenant”) and a First Lien Debt (defined below) to EBITDA ratio of not more than 3.0 times (the "First Lien Covenant").

As at December 31, 2018, the Company was in compliance with the Senior Debt Covenant and First Lien Covenant with a Senior Debt to EBITDA ratio of 2.88 times and a First Lien Debt to EBITDA ratio of 1.15 times.

The agreement governing the Second Lien Notes contains one financial covenant which requires the Company to maintain a ratio of outstanding Senior Debt to EBITDA for a trailing twelve month period of not more than 5.0 times until December 31, 2020, 4.5 times during the fiscal year ended December 31, 2021 and 4.0 times thereafter (the “Second Lien Covenant”). The calculations for the financial covenants are based on specific definitions that are not in accordance with IFRS and the calculations cannot be readily replicated by referring to the financial statements.

The following table lists the covenant under the Credit Facilities and Second Lien Notes and the Company’s compliance therewith as at December 31, 2018.

	Covenant as at		Position at
	December 31, 2018		December 31, 2018
Credit Facilities – Covenants	Maximum Ratio
Senior Debt (1) to EBITDA (2) for the last four fiscal quarters	5.00	x	2.88	x
First Lien Debt (3) to EBITDA (2) for the last four fiscal quarters	3.00	x	1.15	x
Second Lien Notes - Covenant
Senior Debt (1) to EBITDA (2) for the last four fiscal quarters	5.00	x	2.88	x

(1)“Senior Debt” is defined as Consolidated Total Debt, excluding any unsecured or subordinated debt (Senior Notes and Convertible Debentures (liability component)). “Consolidated Total Debt” is defined as determined on a consolidated basis in accordance with GAAP and without duplication, all Debt of the Borrower. The Company’s calculation of Consolidated Total Debt excludes decommissioning liabilities, onerous contracts and deferred tax liability. The calculation includes outstanding letters of credit, Credit Facilities, finance lease obligations, deferred lease inducements, deferred capital obligations, deferred financing obligations and net working capital deficiency (excess), calculated as working capital deficiency excluding current risk management contract assets and liabilities, current decommissioning liabilities and current onerous contracts. Senior Debt at December 31, 2018 was $224.4 million.

Bellatrix Exploration Ltd. 27

(2)EBITDA is calculated based on terms and definitions set out in the agreements governing the Credit Facilities and Second Lien Notes which adjusts net income for financing costs, income taxes, depletion and depreciation, certain specific unrealized and non-cash transactions, and acquisition and disposition activity and is calculated based on a trailing twelve month basis. EBITDA for the trailing twelve months ended December 31, 2018 was $77.9 million.

(3) "First Lien Debt" is defined as Consolidated Total Debt, excluding any unsecured, second lien or subordinated debt (Second Lien Notes, Senior Notes and Convertible Debentures (liability component)). First Lien Debt at December 31, 2018 was $89.8 million.

The Senior Notes do not contain any maintenance financial covenants, but do contain covenants limiting the Company’s ability to incur additional indebtedness, including borrowings under the Credit Facilities, unless one of two alternative tests are satisfied. The first test applies to all future indebtedness and requires that, after giving effect to the incurrence of additional indebtedness, the Company’s fixed charge coverage ratio (which is the ratio of cash flow to fixed charges (both as defined in the Note Indenture) over the trailing four fiscal quarters) will be at least 2.25 to 1.0.

The second test allows the Company to incur additional indebtedness, irrespective of the fixed charge coverage ratio test, as long as the additional indebtedness, is not more than, subject to certain exceptions, the lesser of (i) the greater of (1) $675 million, and (2) 35% of adjusted consolidated net tangible assets ("ACNTA"), plus $150 million and (ii) 50% of the discounted future net revenues from proved oil and natural gas reserves included in the calculation of ACNTA. ACNTA is defined in the Note Indenture and is determined primarily by the value of discounted future net revenues from proved oil and natural gas reserves plus the capitalized cost attributable to the Company’s unevaluated properties. As a result, the Company can currently incur up to $525 million under bank facilities (which include the Credit Facilities) subject to the maximum borrowing base of the Credit Facilities, without reference to limitations that would otherwise apply due to the fixed charge coverage ratio test.

The following table lists the covenant under Second Lien Notes and Senior Notes and the Company’s position therewith as at December 31, 2018:

	Covenant as at		Position at
	December 31, 2018		December 31, 2018
Second Lien Notes and Senior Notes – Incurrence Test	Minimum Ratio
Fixed charge coverage (1)	2.25	x	2.00	x

(1)Fixed charge coverage is computed as the ratio of fixed charges (as defined in the Note Indenture, fixed charges generally includes interest expense plus paid or accrued dividends, if any) to trailing twelve month cash flow (as defined in the Note Indenture, cash flow includes the net profit (loss) and adds back provision for taxes, fixed charges, depletion, and various other non-recurring expenses and charges). For the trailing twelve months ended December 31, 2018, fixed charges were $39.8 million and cash flow was $79.7 million.

8. EXPLORATION AND EVALUATION ASSETS

($000s)
Cost
Balance, December 31, 2016	$	29,246
Additions	1,664
Dispositions	(7,843		)
Transfer to oil and natural gas properties	(336		)
Balance, December 31, 2017	22,731
Additions	577
Transfer to oil and natural gas properties	(5,601		)
Balance, December 31, 2018	$	17,707

Exploration and evaluation ("E&E") assets consist of Bellatrix's exploration projects which are pending the determination of proved or probable reserves and production.

Bellatrix performed an assessment of possible indicators of impairment or impairment reversal on E&E assets. At December 31, 2018, impairment indicators were identified for E&E assets, primarily as a result of sustained low natural gas prices. No impairment was recognized on E&E assets as the estimated recoverable amount of the assets exceeded their carrying value. The estimated recoverable amount was based on a fair value less costs of disposal calculation determined principally on recent and relevant land sales.

Bellatrix Exploration Ltd. 28

9. PROPERTY, PLANT AND EQUIPMENT

($000s)	Oil and Natural  Gas Properties			Operated Facilities		Office Furniture and Equipment		Total
Cost
Balance, December 31, 2016	$	2,034,954		$	56,060	$	26,420	$	2,117,434
Additions	111,485			12,058		1,888		125,431
Transfer from exploration and evaluation assets	336			—		—		336
Disposals	(298,102		)	—		—		(298,102		)
Balance, December 31, 2017	1,848,673			68,118		28,308		1,945,099
Additions	77,837			3,102		1,311		82,250
Transfer from exploration and evaluation assets	5,601			—		—		5,601
Disposals	(7,736		)	—		—		(7,736		)
Balance, December 31, 2018	$	1,924,375		$	71,220	$	29,619	$	2,025,214
Accumulated depletion, depreciation and impairment losses
Balance, December 31, 2016	$	806,656		$	1,987	$	12,219	$	820,862
Charge for the year	116,693			1,122		2,837		120,652
Disposals	(196,955		)	—		—		(196,955		)
Impairment (reversal)	13,150			—		—		13,150
Balance, December 31, 2017	739,544			3,109		15,056		757,709
Charge for the year	100,840			1,854		2,592		105,286
Disposals	(4,343		)	—		—		(4,343		)
Impairment	$	2,140		$	—	$	—	$	2,140
Balance, December 31, 2018	$	838,181		$	4,963	$	17,648	$	860,792
Carrying amounts
Balance, December 31, 2017	$	1,109,129		$	65,009	$	13,252	$	1,187,390
Balance, December 31, 2018	$	1,086,194		$	66,257	$	11,971	$	1,164,422

Bellatrix has included $863 million (2017: $832 million) for future development costs and excluded $41.4 million (2017: $46.6 million) for estimated salvage from the depletion and depreciation calculation for the three months ended December 31, 2018.

For the year ended December 31, 2018, the Company capitalized $7.0 million (2017: $7.6 million) of general and administrative expenses and $0.1 million (2017: $0.8 million) of share-based compensation costs directly related to exploration and development activities.

Acquisitions

Bellatrix completed an acquisition of assets within its core Ferrier area of west central Alberta that includes approximately 2,200 boe/d (79% natural gas, 21% liquids) of low decline production. The acquisition was funded through a combination of the issuance of 4.00 million common shares of Bellatrix, $7.66 million in cash and $9.1 million in purchase price adjustments.

Bellatrix completed an acquisition of assets within its core Ferrier area of west central Alberta that includes approximately 1,250 boe/d (65% of natural gas, 35% liquids) of low decline (<15%) production. The acquisition was funded through a combination of the issuance of 6.75 million common shares of Bellatrix and $1.75 million in cash.

Dispositions

Bellatrix recognized a deferred financing obligation and a deferred gain pursuant to the sale of a 35% working interest in the Alder Flats Plant in 2016. The Phase 2 expansion project of the Alder Flats Plant was fully commissioned and began selling volumes mid-March 2018. During the year ended December 31, 2018 Bellatrix recognized a gain of $14.0 million related to the realized deferred gain and unspent portion of the deferred financing obligation.

Bellatrix Exploration Ltd. 29

During the fourth quarter of 2018, Bellatrix completed the renegotiation of processing agreements for facilities in Bellatrix's core area of west central Alberta, which resulted in a reduction of take-or-pay fees effective July 1, 2018. As part of the transaction, Bellatrix divested a non-controlling working interest ownership in an inactive raw gas gathering pipeline. The disposition of the pipeline resulted in a loss on disposition of $3.4 million.

During the third quarter of 2017, Bellatrix completed the sale of certain non-core oil and gas properties in the West Pembina area of Alberta for gross proceeds of $16.0 million, effective July 1, 2017. Bellatrix recorded a loss of $18.6 million on the sale.

During the second quarter of 2017, Bellatrix completed the sale of certain non-core oil and gas properties in the Strachan area of Alberta for gross proceeds of $34.5 million, effective April 1, 2017. Bellatrix recorded a loss of $37.0 million on the sale. Additionally, in the second quarter, Bellatrix transferred certain production facilities and infrastructure to a third party midstream company in exchange for proceeds of $20 million. Under the terms of the agreement, Bellatrix will have exclusive access to, and operatorship of, the infrastructure.

Impairment Loss

Bellatrix performed an assessment of possible indicators of impairment or impairment reversal on all of the Company’s CGUs. At December 31, 2018, impairment indicators were identified for the Company’s core Central Alberta CGU, non-core North Alberta CGU and non-core South Alberta CGU, primarily as a result of sustained low natural gas prices.

The recoverable amount of the Central Alberta, North Alberta and South Alberta CGUs as at December 31, 2018 was determined using a VIU approach, as Bellatrix determined that VIU was greater than FVLCS. VIU was calculated as the net present value of the before-tax cash flows from proved plus probable oil and gas reserves of each CGU based on reserves estimated by Bellatrix’s independent reserve evaluator at December 31, 2018, adjusted for the net present value of the before-tax abandonment and reclamation costs on proved plus probable undeveloped oil and gas reserves.

No impairment was recognized in the Company's core Central Alberta CGU as the estimated recoverable amount of the CGU exceeded its carrying value for the year ended December 31, 2018. The VIU of the Central Alberta CGU was based on before-tax discount rates ranging from 12-15%.

For the year ended December 31, 2018, a non-cash impairment loss of $0.8 million was recognized in the Company’s non-core North Alberta CGU. The estimated recoverable amount after decommissioning liabilities of the North Alberta CGU as at December 31, 2018 was negative $5.2 million. A non-cash impairment loss of $1.3 million was recognized in the Company’s non-core South Alberta CGU. The estimated recoverable amount after decommissioning liabilities of the South Alberta CGU was negative $18.9 million. The VIU of the North Alberta and South Alberta CGU was based on before-tax discount rates ranging from 15-20%.

The VIU of each CGU was based on the following forward commodity price estimates:

Year	EdmontonCrude Ref Oil ($/bbl) (1)	AECO NaturalGas ($/MMBtu) (1)	Butane ($/bbl) (1)	Propane  ($/bbl) (1)	Condensate($/bbl) (1)	CDN$/US$ Exchange Rates(1)
2019	63.50	1.90	20.96	28.58	67.95	1.32
2020	75.55	2.29	37.02	33.24	78.95	1.28
2021	80.50	2.71	45.89	37.03	83.72	1.25
2022	83.25	3.03	54.95	38.30	86.58	1.25
2023	85.60	3.21	58.21	41.52	88.60	1.25
2024	87.62	3.33	61.33	42.93	90.68	1.25
2025	90.01	3.44	62.10	44.10	93.16	1.25
2026	92.68	3.50	63.95	45.41	95.92	1.25
2027	94.53	3.57	65.22	46.32	97.84	1.25
2028	96.42	3.65	66.53	47.25	99.79	1.25
Thereafter	+2% per year	+2% per year	+2% per year	+2% per year	+2% per year	—

(1)The InSite price forecasts, effective January 1, 2019.

A 1% increase to the discount rates applied in the impairment calculation for the North Alberta CGU and South Alberta CGU would result in an increase in impairment loss of approximately $0.2 million and nil, respectively for the year ended December 31, 2018, whereas a 1% decrease to the discount rates applied would result in a corresponding decrease to the impairment loss recognized.

Bellatrix Exploration Ltd. 30

Bellatrix performed an assessment of possible indicators of impairment or impairment reversal on all of the Company’s CGUs at December 31, 2017. At December 31, 2017, impairment indicators were identified for the Company’s non-core North Alberta CGU and non-core South Alberta CGU, primarily as a result of a lack of active development plans in the CGUs. No impairment indicators were identified in the Company’s core Central Alberta CGU in 2017.

For the year ended December 31, 2017, a non-cash impairment loss of $12.2 million was recognized in the Company’s non-core North Alberta CGU. The estimated recoverable amount after decommissioning liabilities of the North Alberta CGU as at December 31, 2017 was negative $4.7 million. A non-cash impairment loss of $1.0 million was recognized in the Company's non-core South Alberta CGU. The estimated recoverable amount after decommissioning liabilities of the South Alberta CGU was negative $18.3 million. The VIU determination of estimated recoverable amounts of each CGU was based on before-tax discount rates ranging from 15-20% and the following forward commodity price estimates:

Year	EdmontonCrude Ref Oil ($/bbl) (1)	AECO Gas ($/MMBtu)(1)	Butane ($/bbl)(1)	Propane($/bbl)(1)	Condensate($/bbl) (1)	CDN$/US$ Exchange Rates(1)
2018	71.36	2.52	51.38	35.68	74.93	1.27
2019	73.44	2.93	52.88	36.72	77.12	1.25
2020	75.47	3.22	54.34	35.85	79.25	1.23
2021	80.49	3.51	57.96	36.22	84.52	1.22
2022	82.38	3.75	59.31	37.07	86.50	1.20
2023	84.22	3.85	60.64	37.90	88.43	1.19
2024	86.01	3.95	61.93	38.70	90.31	1.18
2025	88.85	4.11	63.97	39.98	93.29	1.18
2026	90.62	4.27	65.25	40.78	95.15	1.18
2027	92.43	4.35	66.55	41.60	97.06	1.18
Thereafter	+2% per year	+2% per year	+2% per year	+2% per year	+2% per year	1.18

(1)The InSite price forecasts, effective January 1, 2018.

10. DECOMMISSIONING LIABILITIES

The Company’s decommissioning liabilities result from net ownership interests in petroleum and natural gas assets including well sites, gathering systems and processing facilities. At December 31, 2018, the Company estimated the total undiscounted amount of cash flows required to settle its decommissioning liabilities to be approximately $98.5 million (2017: $94.6 million) which will be incurred between 2018 and 2066. A risk-free rate between 1.91% and 2.15% (2017: 1.66% and 2.20%) and an inflation rate of 2.0% (2017: 2.0%) were used to calculate the fair value of the decommissioning liabilities as at December 31, 2018.

($000s)	2018			2017
Balance, beginning of year	$	60,611		$	62,844
Incurred on development activities	678			1,501
Acquired through asset acquisitions	3,462			—
Revisions on estimates	37			3,210
Decommissioning costs incurred	(2,242		)	(2,758		)
Reversed on dispositions	—			(5,473		)
Accretion expense	1,328			1,287
Balance, end of year	$	63,874		$	60,611

Bellatrix Exploration Ltd. 31

11. OTHER DEFERRED LIABILITIES

($000s)	Finance lease obligation			Deferred lease inducements			Onerous Contracts		Deferred financing obligations(1)			Deferred gain(1)			Deferred Capital Obligation(1)			Total
Balance, December 31, 2017	$	6,891		$	2,021		$	—	$	1,505		$	13,020		$	4,755		$	28,192
Deferred lease inducements	—			(332		)	—		—			—			—			(332		)
Payments on finance lease	(1,170		)	—			—		—			—			—			(1,170		)
Loss on onerous contracts	—			—			5,362		—			—			—			5,362
Drawdown deferred financing obligations	—			—			—		(1,505		)	—			—			(1,505		)
Drawdown deferred capital obligations	—			—			—		—			—			(4,755		)	(4,755		)
Realized deferred gain	$	—		$	—		$	—	$	—		$	(13,020	)	$	—		$	(13,020	)
Balance, December 31, 2018	$	5,721		$	1,689		$	5,362	$	—		$	—		$	—		$	12,772
Current portion of other deferred liabilities	$	476		$	340		$	1,093	$	—		$	—		$	—		$	1,909
Long term portion of other deferred liabilities	$	5,245		$	1,349		$	4,269	$	—		$	—		$	—		$	10,863

(1) Bellatrix recognized a deferred financing obligation and a deferred gain pursuant to the sale of a 35% working interest in the Alder Flats Plant in 2016. The Phase 2 expansion project of the Alder Flats Plant was fully commissioned and began selling volumes mid-March 2018.

Onerous contracts result from unfavourable leases in which the unavoidable costs of meeting the obligations under the contracts exceed the economic benefits expected to be received. As at December 31, 2018, the Company recorded a provision of $5.4 million related to unoccupied office lease premises representing the minimum future payments that the Company is required to make. The onerous contract provision is expected to be settled in periods up to and including the year 2024.

Finance Lease Obligations

Finance leases are for the use of certain constructed facilities. The agreements expire in years 2030 to 2032, or earlier if certain circumstances are met. At the end of the term of each agreement, the ownership of the facilities is transferred to the Company. Assets under these finance leases at December 31, 2018 totaled $15.3 million (2017: $15.3 million) with accumulated depreciation of $5.0 million (2017: $4.4 million).

The following is a schedule of future minimum lease payments under the finance lease obligations:

Year ending December 31,	($000s)
2019	$	1,317
2020	1,240
2021	1,164
2022	1,088
2023	1,011
Thereafter	5,514
Total lease payments	11,334
Amount representing implicit interest at 15.28%	(5,613		)
Total lease obligation at December 31, 2018	$	5,721

Bellatrix Exploration Ltd. 32

12. SHAREHOLDERS’ CAPITAL

During the year ended December 31, 2018, as described in note 7, Bellatrix acquired and canceled US$24.1 million of the Senior Notes, issuing 19,900,032 common shares of Bellatrix in exchange.

Effective July 1, 2017, the Company consolidated its common shares on the basis of 1 new common share for every 5 old common shares outstanding. All figures in the financial statements have been adjusted to reflect the 5:1 consolidation. The number of outstanding share options, Deferred Share Units, Restricted Awards and Performance Awards have also been adjusted proportionately. The corresponding exercise prices have increased by the same ratio. The conversion price and ratio on the Convertible Debentures have also been adjusted proportionately.

Bellatrix is authorized to issue an unlimited number of common shares and 95,978,621 preferred shares. At December 31, 2018, no preferred shares have been issued. All shares issued are fully paid and have no par value. The common shareholders are entitled to dividends as may be declared by the Board of Directors from time to time; no dividends were declared by the Board of Directors during the years ended December 31, 2018 or 2017.

	2018				2017
	Number	Amount ($000s)			Number	Amount ($000s)
Common shares, opening balance	49,378,026	$	1,068,377		49,317,166	$	1,068,084
Shares issued on settlement of Senior Notes (note 7)	19,900,032	31,306			—	—
Shares issued on settlement of share-based compensation	87,516	127			60,860	289
Shares issued on property acquisition, net of tax effect (note 9)	10,750,000	12,053			—	—
Flow through shares issued	793,651	1,143			—	—
Share issue costs on equity issue, net of tax effect	—	(387		)	—	4
Balance, end of year	80,909,225	$	1,112,619		49,378,026	$	1,068,377

13. REVENUE

Bellatrix sells its production pursuant to fixed and variable price contracts. The transaction price for variable priced contracts is based on the commodity price, adjusted for quality, location or other factors, whereby each component of the pricing formula can be either fixed or variable, depending on the contract terms. Under the contracts, the Company is required to deliver a fixed or variable volume of crude oil, natural gas, condensate and NGLs to the contract counterparty. Revenue is recognized when a unit of production is delivered to the contract counterparty. The amount of revenue recognized is based on the agreed transaction price.

The majority of crude oil and natural gas is sold under contracts of varying terms of up to one year. The majority of Bellatrix’s NGLs are sold pursuant to one multi-year contract. Revenues are typically collected on the 25th day of the month following production. Processing fees charged to third parties are generally earned under multi-year contracts at fixed fees that vary by volume.

The following table provides a summary of the Company’s revenue disaggregated by revenue source:

($000s)	2018		2017
Crude oil and condensate	$	51,761	$	51,448
NGLs (excluding condensate)	70,970		54,602
Crude oil, condensate and NGLs	122,731		106,050
Natural gas	100,405		137,775
Petroleum and natural gas sales	223,136		243,825
Other income (1)	5,576		5,574
Total revenue	$	228,712	$	249,399

(1)Other income primarily consists of processing and other third party income.

At December 31, 2018, receivables from contracts with customers, which are included in accounts receivable, were $20.9 million (December 31, 2017: $25.3 million).

Bellatrix Exploration Ltd. 33

At December 31, 2018, the Company had the following contracts with customers for the sale of future production:

Commodity	Period	Volume	Price
NGL product mix	January 1, 2019 - March 31, 2026	10,000 bbl/d	Varying indices for the relative components of the product mix
Natural gas	January 1, 2019 - October 31, 2020	20,000 MMBtu/d	Chicago
Natural gas	January 1, 2019 - October 31, 2020	25,000 MMBtu/d	Dawn
Natural gas	January 1, 2019 - October 31, 2020	15,000 MMBtu/d	Malin

14. SHARE-BASED COMPENSATION PLANS

The following tables provide a summary of the Company’s share-based compensation expense (recovery) for the years ended December 31, 2018 and December 31, 2017:

($000s)	2018			2017
Share options expense	$	334		$	1,074
Deferred share units expense (recovery)	(669		)	(583		)
Restricted awards expense (recovery)	(80		)	178
Performance awards expense (recovery)	(88		)	(137		)
Share-based compensation expense (recovery) included in general and administrative expense	$	(503	)	$	532
Share-based compensation expense included in operating expense	$	110		$	167
Total share-based compensation expense (recovery)	$	(393	)	$	699

The following tables provide a summary of the Company’s share options expense for the years ended December 31, 2018 and December 31, 2017:

($000s)	2018		2017
Share options expense	$	334	$	1,074
Share options expense capitalized	73		600
Gross share option expense	$	407	$	1,674

The following table provides a summary of the Company’s share-based compensation liability balances within accounts payable and accrued liabilities:

($000s)	Deferred Share Units		Restricted Awards		Performance Awards		Total
Liability balance, December 31, 2018	$	543	$	321	$	212	$	1,076
Liability balance, December 31, 2017	$	1,212	$	754	$	457	$	2,423

a. Share Option Plan

Bellatrix has a share option plan whereby the Company may grant share options to its officers, employees, consultants, and other service providers. Under this plan, the exercise price of each share option is not less than the volume weighted average trading price of the Company’s share price for the five trading days immediately preceding the date of grant. The maximum term of an option grant is five years. Option grants are non-transferable or assignable except in accordance with the share option plan and the holding of share options shall not entitle a holder to any rights as a shareholder of Bellatrix. Share options, entitling the holder to purchase common shares of the Company, have been granted to officers, employees, consultants, and other service providers of Bellatrix. One third of the initial grant of share options normally vests on each of the first, second, and third anniversary from the date of grant.

Bellatrix Exploration Ltd. 34

The fair values of all share options granted are estimated on the date of grant using the Black-Scholes option-pricing model. The weighted average fair market value of share options granted during the years ended December 31, 2018 and 2017, and the weighted average assumptions used in their determination are as noted below:

	2018		2017
Inputs:
Share price	$	1.48	$	4.27
Exercise price	$	1.48	$	4.55
Risk free interest rate (%)	2.0		0.9
Option life (years)	2.8		2.8
Option volatility (%)	65		71
Results:
Weighted average fair value of each share option granted	$	0.64	$	1.87

Bellatrix calculates volatility based on historical share price. Bellatrix incorporates an estimated forfeiture rate between 3% and 10% (2017: 3% to 10%) for stock options that will not vest, and adjusts for actual forfeitures as they occur.

The following tables summarize information regarding Bellatrix’s Share Option Plan:

Share Options Continuity
	Weighted Average Exercise Price		Number
Balance, December 31, 2016	$	23.22	2,573,024
Granted	$	4.55	185,000
Forfeited	$	35.10	(877,956	)
Expired	$	17.12	(257,936	)
Balance, December 31, 2017	$	15.62	1,622,132
Granted	$	1.48	95,000
Forfeited	$	21.99	(722,800	)
Expired	$	36.00	(41,800	)
Balance, December 31, 2018	$	8.49	952,532

As of December 31, 2018, a total of 6,472,738 common shares were reserved for issuance on exercise of share options, leaving an additional 5,520,206 available for future share option grants.

Share Options Outstanding, December 31, 2018

				Outstanding				Exercisable
Exercise Price				At December 31, 2018	Weighted  Average Exercise Price		Weighted Average Remaining Contractual Life	At December 31, 2018	Weighted Average Exercise Price
	$1.48	-	$2.67	95,000		$1.48	4.4	—	—
	$2.68	-	$4.47	119,000		$3.85	3.5	39,665		$3.85
	$4.48	-	$5.55	446,532		$5.10	2.6	332,688		$5.10
	$5.56	-	$10.68	60,000		$6.00	3.3	20,000		$6.00
	$10.69	-	$17.38	1,600		$15.68	1.2	1,600		$15.68
	$17.39	-	$19.52	204,000		$18.75	1.4	204,000		$18.75
	$19.53	-	$46.53	17,400		$33.10	0.7	17,400		$33.10
	$46.54	-	$46.90	9,000		$46.89	0.5	9,000		$46.89
	$1.48	-	$46.90	952,532		$8.49	2.6	624,353		$10.92

Bellatrix Exploration Ltd. 35

b. Deferred Share Unit Plan

Under Bellatrix’s Deferred Share Unit Plan, the Company may grant to non-employee directors, deferred share units (“DSUs”). Each DSU is a right to receive, on a deferred payment basis, a cash payment equivalent to the volume weighted average trading price of the Company’s common shares for the five trading days immediately preceding the redemption date of such DSU. Participants of the DSU Plan may also elect to receive their annual remuneration in the form of DSUs. Subject to TSX and shareholder approval, Bellatrix may elect to deliver common shares from treasury in satisfaction, in whole or in part, of any payment to be made upon the redemption of the DSUs. The DSUs vest immediately and must be redeemed by December 1st of the calendar year immediately following the year in which the participant ceases to hold all positions with Bellatrix or earlier if the participant elects to have the DSUs redeemed at an earlier date (provided that the DSUs may not be redeemed prior to the date that the participant ceases to hold all positions with Bellatrix).

DSU Continuity
	Number
Balance, December 31, 2016	377,667
Granted	260,381
Exercised	(120,150	)
Balance, December 31, 2017	517,898
Granted	304,056
Balance, December 31, 2018	821,954

c. Award Plan

Bellatrix has an Award Incentive Plan (“Award Plan”) where the Company may grant Restricted Awards (“RAs”) and Performance Awards (“PAs”) to officers, employees, and other service providers. During 2016, the shareholders and the TSX approved the issuance of common shares on settlement of RAs and PAs under the Award Plan. As a result, awards under the Award Plan may be settled in cash, in common shares of the Company, or a combination thereof. In the case of PAs, settlement is subject to a “payout multiplier” (the payout multiplier shall be based on such corporate performance measures as determined by the Board of Directors (or the Compensation Committee) of the Company) and may range between zero and two times.

RAs granted to employees vest in equal annual amounts over the course of three years. Each RA entitles its holder to receive a cash payment equal to the weighted average trading price of the Company’s shares trading on the TSX for the five trading days preceding its vesting date. Unvested RAs are forfeited at the time the holder’s employment with the Company ends, except on death in which case they vest immediately. Bellatrix incorporates an estimated forfeiture rate between 3% and 10% for RAs that will not vest, and adjusts for actual forfeitures as they occur. Outstanding RAs are revalued at each financial reporting date to their fair market value at that time, determined by the weighted average trading price of the Company’s shares on the TSX for the five trading days preceding period end.

RA Continuity
	Number of RAs
Balance, December 31, 2016	426,395
Granted	652,740
Exercised	(175,833	)
Forfeited	(79,815	)
Balance, December 31, 2017	823,487
Granted	880,200
Exercised	(317,840	)
Forfeited	(202,846	)
Balance, December 31, 2018	1,183,001

PAs vest on the third anniversary date of their issuance. Each PA entitles its holder to receive a cash payment equal to the weighted average trading price of the Company’s shares trading on the TSX for the five trading days preceding its vesting date, multiplied by a payout multiplier determined by the Company’s Board of Directors based on determined corporate performance measures. Unvested PAs are forfeited at the time the holder’s employment with the Company ends. Bellatrix incorporates an estimated forfeiture rate of 5% for PAs that will not vest, and adjusts for actual forfeitures as they occur. Outstanding PAs are revalued at each financial

Bellatrix Exploration Ltd. 36

reporting date to their fair market value at that time, determined by the weighted average trading price of the Company’s shares on the TSX for the 5 trading days preceding period end.

PA Continuity
	Number of PAs
Balance, December 31, 2016	303,335
Granted	370,000
Exercised	(61,920	)
Forfeited	(38,360	)
Balance, December 31, 2017	573,055
Granted	335,800
Exercised	(77,870	)
Forfeited	(67,910	)
Balance, December 31, 2018	763,075

15. INCOME TAXES

Bellatrix is a corporation as defined under the Income Tax Act (Canada) and is subject to Canadian federal and provincial taxes. Bellatrix is subject to provincial taxes in Alberta, British Columbia, and Saskatchewan as the Company operates in those jurisdictions.

The provision for income taxes differs from the expected amount calculated by applying the combined 2018 federal and provincial corporate income tax rate of 27.0% (2017: 27.0%) to net profit (loss) before taxes. This difference results from the following items:

($000s)	2018			2017
Expected income tax expense (recovery)	$	(26,471	)	$	(20,506	)
Change in unrecognized deferred tax asset	69,805			44,114
Non-taxable portion of unrealized foreign exchange (gain) loss	3,972			(4,947		)
Share based compensation expense	86			610
Flow through share issuance	309			108
Other	594			(3,964		)
Deferred tax expense (recovery)	$	48,295		$	15,415

The change in the unrecognized deferred tax asset in 2017 was a result of the completion of the non-core property disposition in the second quarter of 2017.

Bellatrix Exploration Ltd. 37

The components of the net deferred tax asset at December 31, 2018 are as follows:

($000s)	2018			2017
Deferred tax liabilities:
Risk management contract asset	(3,549		)	(8,943		)
Convertible Debentures	(2,122		)	(2,616		)
Deferred tax assets:
Property, plant and equipment and exploration and evaluation assets	$	5,280		$	(6,845	)
Senior Notes	—			756
Finance lease obligation	—			1,860
Onerous lease	—			—
Deferred financing obligation	—			406
Deferred gain on sale	—			3,515
Risk management contract liability	—			1,206
Decommissioning liabilities	—			16,365
Share issue costs	391			840
Non-capital losses	—			40,850
Other	—			904
Deferred tax asset (liability)	$	—		$	48,298

Deferred income tax expense (recovery) is a non-cash item relating to temporary differences between the accounting and tax basis of Bellatrix's assets and liabilities. As at December 31, 2018, Bellatrix was in a net unrecognized deferred tax asset position due to uncertainty of Bellatrix's ability to realize the tax assets in future years (refer to note 2 (c)). This resulted in a non-cash deferred tax expense of $70.2 million during the year ended December 31, 2018 related to the unrecognized benefit of deductible temporary differences in excess of taxable temporary differences of approximately $165 million and non-capital loss carry forwards of $133 million. As at December 31, 2018, Bellatrix had approximately $1.40 billion in tax pools available for deduction against future income. Included in this tax basis are estimated non-capital loss carry forwards of approximately $133 million that expire in years 2025 through 2036.

A continuity of the net deferred income tax asset (liability) for 2018 and 2017 is provided below:

($000s)	Balance, January 1, 2018			Recognized in profit (loss)			Recognized in equity			Balance, December 31, 2018
Property, plant and equipment and exploration and evaluation assets	$	(6,845	)	$	6,845		$	—		$	—
Decommissioning liabilities	16,365			(16,365		)	—			—
Risk management contract asset	(8,943		)	8,943			—			—
Risk management contract liability	1,206			(1,206		)	—			—
Share issue costs	840			(983		)	143			—
Non-capital losses	38,915			(38,915		)	—			—
Finance lease obligation	1,860			(1,860		)	—			—
Onerous lease	—			—			—			—
Deferred financing obligation	406			(406		)	—			—
Deferred gain on sale	3,515			(3,515		)	—			—
Alberta non-capital losses greater than Federal non-capital losses	1,935			(1,935		)	—			—
Senior Notes	756			(756		)	—			—
Convertible Debentures	(2,616		)	2,616			—			—
Other	904			(758		)	(146		)	—
Total	$	48,298		$	(48,295	)	$	(3	)	$	—

Bellatrix Exploration Ltd. 38

($000s)	Balance, January 1, 2017			Recognized in profit (loss)			Recognized in equity		Balance, December 31, 2017
Property, plant and equipment and exploration and evaluation assets	$	(12,555	)	$	5,710		$	—	$	(6,845	)
Decommissioning liabilities	16,967			(602		)	—		16,365
Risk management contract asset	—			(8,943		)	—		(8,943		)
Risk management contract liability	4,477			(3,271		)	—		1,206
Share issue costs	1,950			(1,110		)	—		840
Non-capital losses	38,895			20			—		38,915
Finance lease obligation	2,276			(416		)	—		1,860
Deferred capital obligation	5,910			(5,910		)	—		—
Deferred financing obligation	2,032			(1,626		)	—		406
Deferred gain on sale	2,890			625			—		3,515
Alberta non-capital losses greater than Federal non-capital losses	1,935			—			—		1,935
Senior Notes	418			338			—		756
Convertible Debentures	(3,028		)	412			—		(2,616		)
Other	1,546			(642		)	—		904
Total	$	63,713		$	(15,415	)	$	—	$	48,298

16. FINANCE INCOME AND EXPENSES

($000s)	2018		2017
Interest on Credit Facilities (1)	$	4,302	$	2,194
Interest on Second Lien Notes (2)	3,224		—
Interest on Senior Notes (2)	26,219		30,378
Interest on Convertible Debentures (2)	5,681		5,381
Accretion on decommissioning liabilities (non-cash)	1,328		1,287
Finance expense	$	40,754	$	39,240

(1) Includes interest at a floating rate, for the year ended December 31, 2018. The weighted average interest rates for amounts borrowed under the Credit Facilities was 4.42%.

(2) Includes amortized costs related to the issuance of the Second Lien Notes, Senior Notes and Convertible Debentures (detailed in note 7).

17. FOREIGN EXCHANGE

Bellatrix incurs gains and losses in relation to the foreign currency translation of its Second Lien Notes and Senior Notes. The Second Lien Notes and Senior Notes are translated from United States dollars to Canadian dollars using the closing foreign exchange rate for the period with an unrealized foreign exchange gain or loss included in earnings in the period. Realized and unrealized foreign exchange gains and losses are recognized as Second Lien Notes and Senior Notes and other minor foreign currency based transactions are translated and settled during the period.

During the second quarter of 2018 Bellatrix terminated, at no cost, $62.5 million of United States dollar foreign exchange forward purchase contracts which had a maturity date in May 2020.

($000s)	2018			2017
Unrealized gain (loss) on foreign exchange	(18,617		)	22,165
Unrealized gain (loss) on foreign exchange contracts	3,422			(3,867		)
Total Unrealized gain (loss) on foreign exchange	$	(15,195	)	$	18,298
Realized gain (loss) on foreign exchange	$	(8,296	)	$	(797	)
Gain (loss) on foreign exchange	$	(23,491	)	$	17,501

Bellatrix Exploration Ltd. 39

18. PER SHARE AMOUNTS

The calculation of basic earnings per share for the year ended December 31, 2018 was based on a net loss of $146.3 million (2017: net loss of $91.4 million). 

	2018			2017
Basic common shares outstanding	80,909,225			49,378,026
Fully dilutive effect of:
Share options outstanding	952,532			1,622,132
Shares issuable on conversion of Convertible Debentures	6,172,840			6,172,840
Warrants outstanding	3,088,205			—
Fully diluted common shares outstanding	91,122,802			57,172,998
Weighted average shares outstanding	59,734,872			49,351,848
Dilutive effect of share options, Convertible Debentures and Warrants (1)	—			—
Diluted weighted average shares outstanding	59,734,872			49,351,848
Net (loss) profit per share - basic	$	(2.45	)	$	(1.85	)
Net (loss) profit per share - diluted	$	(2.45	)	$	(1.85	)

(1) For the year ended December 31, 2018, a total of 952,532 (2017: 1,622,132) share options, 6,172,840 (2017: 6,172,840) shares issuable on conversion of Convertible Debentures and 3,088,205 Warrants (2017: nil) were excluded from the calculation as they were anti-dilutive.

19. COMMITMENTS

The following is a summary of Bellatrix’s commitments as at December 31, 2018:

($000s)	1 Year		2-3 Years		4-5 Years		More than 5 years		Total
Operating leases (1)	$	22,433	$	41,107	$	33,782	$	14,745	$	112,067
Transportation and processing agreements (2)	$	53,943	$	92,147	$	66,161	$	101,882	$	314,133

(1) Operating leases is comprised of the Company’s commitment for office space, net of recoveries and gross operating leases for field equipment. The Company is committed to payments under fixed term operating leases for office space which do not currently provide for early termination.

(2) Transportation agreements is comprised of commitments to third parties to transport natural gas. Processing agreements is comprised of commitments to process natural gas and natural gas liquids through processing facilities.

Bellatrix has commitments of 60,000 MMbtu/d under its physical market diversification contracts, refer to note 13.

Bellatrix is involved in litigation and claims arising in the normal course of operations. Such claims are not expected to have a material impact on Bellatrix’s results of operations or cash flows.

Bellatrix and Keyera Partnership ("Keyera") have entered into a midstream services and governance agreement pursuant to which Bellatrix will have exclusive access to the purchased capacity (approximately 80.5 MMcf/d post commissioning of Phase 2) for a term of 10 years, and will remain the operator of the Alder Flats Plant.  In exchange for exclusive access to the purchased capacity during the term, Keyera will be entitled to receive, on an annual basis, a guaranteed fee calculated with reference to the capital fees that Keyera will otherwise receive in accordance with the terms of the construction, ownership and operation agreement governing the Alder Flats Plant.

Bellatrix Exploration Ltd. 40

20. RELATED PARTY TRANSACTIONS

Key Management Compensation

Key management includes officers and directors (executive and non-executive) of the Company. The compensation paid or payable to key management for employee services is shown below:

($000s)	2018			2017
Short-term employee benefits (1)	$	4,805		$	4,901
Share-based compensation (2)	(431		)	452
Total key management compensation	$	4,374		$	5,353

(1) Includes termination benefits for the year ended December 31, 2018 of nil (2017: $1.3 million)

(2) Share-based compensation includes share options, RAs, PAs, and DSUs.

Bellatrix retained one of its directors, Steven J. Pully, who has substantial expertise in debt refinancing transactions, to act as special advisor to a special committee of independent directors (the "Special Committee") that was formed to facilitate and lead the Company's refinancing efforts. As a result of the significant increase in the amount of time Mr. Pully was expected to spend performing in this new role, the Company and Mr. Pully entered into an agreement (the “Advisor Agreement”) pursuant to which Mr. Pully would earn a monthly retainer of $35,000 per month for his services, and could earn additional fees upon the completion of pre-established refinancing milestones. As a result of the successful completion of the Second Lien Refinancing, Mr. Pully earned fees of $1.1 million pursuant to the Advisor Agreement through December 31, 2018.

21. SUPPLEMENTAL DISCLOSURES

($000s)	2018			2017
Changes in non-cash working capital items:
Accounts receivable	$	8,717		$	(6,445	)
Loans receivable	—			15,000
Deposits and prepaid expenses	193			1,496
Accounts payable and accrued liabilities	(10,958		)	(3,578		)
Total	$	(2,048	)	$	6,473
Changes related to:
Operating activities	$	16,692		$	(272	)
Financing activities	(6,371		)	16,353
Investing activities	(12,369		)	(9,608		)
Total	$	(2,048	)	$	6,473

Statement of Profit (Loss) and Comprehensive Income (Loss) Presentation

A mixed presentation of nature and function was used for the Company’s presentation of operating expenses in the Statement of Profit (Loss) and Comprehensive Income (Loss) for the current and comparative years. General and administrative expenses are presented by their function. Other expenses, including production, transportation, depletion and gain (loss) on dispositions are presented by their nature. Such presentation is in accordance with industry practice.

Total employee compensation costs included in total production and general administrative expenses in the Statements of Profit (Loss) and Comprehensive Income (Loss) for the years ended December 31, 2018 and 2017 are detailed in the following table:

($000s)	2018		2017
Production	$	7,169	$	7,860
General and administrative (1)	13,399		19,274
Employee compensation	$	20,568	$	27,134

(1) Amount shown is net of capitalization.

Bellatrix Exploration Ltd. 41

EX-13.2

Exhibit 13.2

MANAGEMENT’S DISCUSSION AND ANALYSIS

March 14, 2019 – The following Management’s Discussion and Analysis of financial results (“MD&A”) as provided by the management of Bellatrix Exploration Ltd. (“Bellatrix” or the “Company”) should be read in conjunction with the audited financial statements of the Company for the years ended December 31,2018 and 2017 (the "Financial Statements") as well as Bellatrix’s Annual Information Form (“AIF”) that is filed on SEDAR at www.sedar.com and on the Company’s website at www.bxe.com. The Company’s EDGAR filings and forms are available through the U.S. Securities and Exchange Commission at www.sec.gov. This commentary is based on information available to, and is dated as of March 14, 2019. The financial data presented is in Canadian dollars, except where indicated otherwise.

Overview and Description of the Business

Bellatrix Exploration Ltd. (“Bellatrix” or the “Company”) 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. Common shares of Bellatrix trade on the Toronto Stock Exchange (“TSX”) under the symbol “BXE”.

FOURTH QUARTER AND ANNUAL 2018 HIGHLIGHTS

	Three months ended December 31,						Year ended December 31,
	2018			2017			2018			2017
SELECTED FINANCIAL RESULTS
(CDN$000s except share and per share amounts)
Cash flow from operating activities	28,239			13,425			62,475			55,210
Per basic share (1)		$0.39			$0.27			$1.05			$1.12
Per diluted share (1)		$0.39			$0.27			$1.05			$1.12
Adjusted funds flow (2)	15,508			15,700			48,025			58,240
Per basic share (1)		$0.21			$0.32			$0.80			$1.18
Per diluted share (1)		$0.21			$0.32			$0.80			$1.18
Net profit (loss)	(89,788		)	(13,053		)	(146,339		)	(91,363		)
Per basic share(1)		($1.24	)		($0.26	)		($2.45	)		($1.85	)
Per diluted share (1)		($1.24	)		($0.26	)		($2.45	)		($1.85	)
Capital – exploration and development	13,654			25,755			50,329			120,651
Total capital expenditures – net (2)	44,187			26,212			75,604			65,084
Credit Facilities	47,763			52,066			47,763			52,066
Second Lien Notes	137,097			—			137,097			—
Senior Notes	196,000			305,409			196,000			305,409
Convertible Debentures (liability component)	41,732			39,426			41,732			39,426
Adjusted working capital deficiency (2)	20,740			23,926			20,740			23,926
Total net debt (2)	443,332			420,827			443,332			420,827
Total assets	1,235,743			1,340,923			1,235,743			1,340,923
Total shareholders’ equity	672,725			774,022			672,725			774,022

Bellatrix Exploration Ltd. 1

SELECTED OPERATING RESULTS		Three months ended December 31,				Year ended December 31,
		2018		2017		2018		2017
Total revenue (2)		56,949		60,897		228,712		249,399
Average daily sales volumes
Crude oil, condensate and NGLs	(bbl/d)	10,281		9,602		9,876		9,192
Natural gas	(mcf/d)	148,319		164,848		154,553		166,078
Total oil equivalent	(boe/d)	35,001		37,077		35,635		36,872
Average realized prices
Crude oil and condensate	($/bbl)	50.98		69.64		73.63		62.93
NGLs (excluding condensate)	($/bbl)	20.89		27.68		24.46		21.52
Crude oil, condensate and NGLs	($/bbl)	26.34		36.61		34.05		31.61
Natural gas	($/mcf)	2.24		1.79		1.78		2.27
Natural gas (including risk management (3))	($/mcf)	2.96		2.70		2.46		2.85
Total oil equivalent	($/boe)	17.21		17.42		17.16		18.12
Total oil equivalent (including risk management (3))	($/boe)	19.86		20.80		19.50		20.45
Selected Key Operating Statistics
Operating netback (2)	($/boe)	7.25		6.34		6.16		6.69
Operating netback (2) (including risk management (3))	($/boe)	9.90		9.72		8.51		9.02
Production expenses	($/boe)	(6.59	)	(7.81	)	(7.50	)	(8.31	)
Transportation	($/boe)	(2.15	)	(1.92	)	(2.10	)	(1.75	)
General & administrative	($/boe)	(2.46	)	(2.57	)	(2.18	)	(2.18	)
Royalties as a % of sales (after transportation)		11	%	11	%	12	%	11	%
Net wells drilled		2.0		1.9		9.2		23.9
COMMON SHARES
Common shares outstanding (4)		80,909,225		49,378,026		80,909,225		49,378,026
Weighted average shares (1)		72,436,105		49,378,026		59,734,872		49,351,848
SHARE TRADING STATISTICS
TSX and Other (5)
(CDN$, except volumes) based on intra-day trading
High		1.60		3.52		2.22		6.83
Low		0.60		1.85		0.60		1.85
Close		0.63		2.15		0.63		2.15
Average daily volume		580,438		371,933		605,342		227,648
NYSE (6)
(US$, except volumes) based on intra-day trading
High		1.24		2.80		1.78		5.15
Low		0.45		1.44		0.45		1.44
Close		0.47		1.72		0.47		1.72
Average daily volume		95,282		125,134		115,884		96,969

(1) Basic weighted average shares for the three months and year ended December 31, 2018 were 72,436,105 (2017: 49,378,026) and 59,734,872 (2017: 49,351,848), respectively. In computing weighted average diluted loss per share, weighted average diluted cash flow from operating activities per share, and weighted average diluted adjusted funds flow per share for the three months and year ended December 31, 2018, a total of nil (2017: nil) and nil (2017: nil) common shares were added to the denominator as a consequence of applying the treasury stock method to the Company’s outstanding share options, and a total of nil (2017: nil) and nil (2017: nil) common shares issuable on conversion of the Convertible Debentures were added to the denominator for the three months and year resulting in diluted weighted average common shares of 72,436,105 (2017: 49,378,026) and 59,734,872 (2017: 49,351,848), respectively.

(2) Refer to “Non-GAAP measures” in respect of the terms "adjusted funds flow", "total net debt", "adjusted working capital deficiency", “operating netbacks”, “total capital expenditures - net” and “total revenue”.

(3) The Company has entered into various commodity price risk management contracts which are considered to be economic hedges. Per unit metrics after risk management include only the realized portion of gains or losses on commodity contracts. The Company does not apply hedge accounting to these contracts. As such, these contracts are revalued to fair value at the end of each reporting date. This results in recognition of unrealized gains or losses over the term of these contracts which is reflected each reporting period until these contracts are settled, at which

Bellatrix Exploration Ltd. 2

time realized gains or losses are recorded. These unrealized gains or losses on commodity contracts are not included for purposes of per unit metrics calculations disclosed.

(4) Fully diluted common shares outstanding for the three months and year ended December 31, 2018 were 91,122,802 (2017: 57,172,998). This includes 952,532 (2017: 1,622,132) of share options outstanding, 6,172,840 (2017: 6,172,840) of shares issuable on conversion of the Convertible Debentures, and 3,088,205 (2017: nil) of warrants outstanding. Shares issuable on conversion of the Convertible Debentures are calculated by dividing the $50 million principal amount of the Convertible Debentures by the conversion price of $8.10 per share.

(5) TSX and Other includes the trading statistics for the TSX and other Canadian trading markets.

(6) Bellatrix voluntarily delisted the Company's common shares from the New York Stock Exchanged ("NYSE") effective February 11, 2019.

Future Operations

As previously announced, the revolving period under the Company’s Credit Facilities currently expires on May 30, 2019, but is extendible annually thereafter at the option of the Company, subject to lender approval. If the revolving period is not extended in May 2019, the Credit Facilities would enter a six-month term-out period to November 30, 2019. The Company has been advancing efforts and evaluating potential alternatives to optimize its capital structure, improve liquidity and enhance long term stakeholder value.  Such efforts include, among other things, Bellatrix’s ongoing discussions with parties across the Company’s capital structure in connection with potential transaction alternatives, including refinancing its outstanding US$145.8 million of 8.5% senior unsecured notes ("Senior Notes") due May 15, 2020 and extending the maturity of the Credit Facilities beyond November 30, 2019. The Company cautions that it can make no assurances as to whether any agreement with respect to a potential transaction may be reached, or the terms or timing of any such potential transaction.

As a result, there is currently significant uncertainty related to these future events and conditions that raise substantial doubt about whether the Company will continue as a going concern, and therefore, whether it will realize its assets and settle its liabilities in the normal course of business and at the amounts stated in the Financial Statements. Readers are cautioned to review note 2(c) and note 7 of the Financial Statements for additional information in this regard. However, management believes that the Company will be successful in obtaining alternative debt financing and extending near term debt maturities in a timely manner and, accordingly, has prepared the Financial Statements on a going concern basis. Accordingly, no adjustments have been made to the Financial Statements relating to the recoverability and classification of the asset carrying amounts or the amount and classification of liabilities that may be necessary should the Company not continue as a going concern. These adjustments could be material.

Bellatrix continues to generate sufficient cash flow to meet its obligations in the ordinary course, including interest payments, capital spending and abandonment and remediation expenses, subject to achieving an extension of debt maturities.

2018Fourth Quarter and Annual 2018 Financial and Operational Results

SALES VOLUMES

Bellatrix Exploration Ltd. 3

Sales volumes averaged 35,001 boe/d for the three months ended December 31, 2018, a decrease of 6% compared to 37,077 boe/d in the fourth quarter of 2017. The fourth quarter volumes were 35,001, a 4% increase from third quarter 2018 volumes of 33,530 boe/d. Sales volumes for the year ended December 31, 2018 decreased by 3% to 35,635 boe/d compared to 36,872 boe/d in 2017. The total change in sales volumes between the three months and year ended December 31, 2018 and December 31, 2017 was impacted by natural production declines and proactive curtailment of natural gas volumes during periods of weak daily AECO natural gas prices during 2018. These decreases were offset by production volumes added through strong developmental drilling in the Spirit River liquids rich natural gas play and the contribution of two joint venture partner property acquisitions completed in the fourth quarter of 2018. Sales volumes for the year ended December 31, 2018 have exceeded previous full year 2018 average production guidance by approximately 1%.

The completion of Phase 2 of the Bellatrix O’Chiese Nees-Ohpawganu’ck deep-cut gas plant at Alder Flats (the “Alder Flats Plant”) in March 2018 has further enhanced Bellatrix's natural gas liquid (“NGL”) extraction capabilities. Total NGL recoveries (including plant condensate) at the Alder Flats Plant have increased in the last 9 months of 2018, with NGL sales yields of approximately 73 bbl/MMcf, up approximately 18% from first quarter total sales yields of approximately 62 bbl/MMcf. The Alder Flats Plant deep-cut process provides enhanced NGL yields of approximately 10 to 35 bbl/MMcf over third-party plants in the Company's core area, resulting in an increase in the Company's average corporate liquids weighting to approximately 27% in 2018, up from 25% in 2017. This has also contributed to a 7% increase in realized crude oil, condensate and NGL production in 2018 when compared to 2017.

Bellatrix maintains several long term firm transportation (“FT”) agreements, ensuring market egress for current and forecast natural gas volumes at multiple receipt points on the Nova Gas Transmission Ltd. (the “NGTL”) system. The NGTL system has experienced curtailments of both interruptible and firm service capacity as the operator continued work in 2018 to expand capacity along the system. Having secured excess FT relative to the Company's current production levels, these recent system wide curtailments have had minimal impact on Bellatrix's ability to deliver volumes, but have impacted realized pricing as discussed below.

Sales Volumes
		Three months ended December 31,		Year ended December 31,
		2018	2017	2018	2017
Crude oil and condensate	(bbl/d)	1,861	2,043	1,926	2,240
NGLs (excluding condensate)	(bbl/d)	8,420	7,559	7,950	6,952
Total crude oil, condensate and NGLs	(bbl/d)	10,281	9,602	9,876	9,192
Natural gas	(mcf/d)	148,319	164,848	154,553	166,078
Total sales volumes (6:1 conversion)	(boe/d)	35,001	37,077	35,635	36,872

Crude oil, condensate and NGL sales volumes increased by 7% in the fourth quarter of 2018, averaging 10,281 bbl/d compared to 9,602 bbl/d in the same period in 2017. Crude oil, condensate and NGL sales volumes increased by 7% in the year ended December 31, 2018, averaging 9,876 bbl/d compared to 9,192 bbl/d in the same period of 2017. In the three months and year ended December 31, 2018, crude oil, condensate and NGL volumes natural production declines were offset by approximately 18% increase in liquid recoveries due to the commissioning of Phase 2 of the Alder Flats Plant in March 2018.

Sales of natural gas averaged 148.3 MMcf/d during the three months ended December 31, 2018, compared to 164.8 MMcf/d in the same period in 2017, a decrease of 10%. Natural gas sales volumes decreased 7% to 154.6 MMcf/d during the year ended December 31, 2018, compared to 166.1 MMcf/d in the same period in 2017. In 2018, the Company focused drilling activity on the Spirit River liquids-rich natural gas play, as well as capital investment in optimization activities to mitigate natural declines.

DRILLING ACTIVITY

	Three months ended December 31, 2018				Three months ended December 31, 2017
	Gross	Net	Success Rate		Gross	Net	Success Rate
Cardium	1	0.02	100	%	—	—	—	%
Spirit River	3	2.0	100	%	2	1.9	100	%
Total	4	2.0	100	%	2	1.9	100	%

DRILLING ACTIVITY
	Year ended December 31, 2018				Year ended December 31, 2017
	Gross	Net	Success Rate		Gross	Net	Success Rate
Ellerslie	—	—	—	%	4	1.6	100	%
Cardium	2	1.0	100	%	3	3.0	100	%
Spirit River	12	8.2	100	%	26	19.3	100	%
Total	14	9.2	100	%	33	23.9	100	%

During the fourth quarter of 2018, Bellatrix drilled 3 gross (2.0 net) Spirit River liquids rich natural gas wells and 1 gross (0.02 net) non-operated Cardium well. In the year ended December 31, 2018, Bellatrix drilled and/or participated in 12 gross (8.2 net) Spirit River liquids rich natural gas wells and 2 gross (1.0 net) Cardium wells. One Spirit River well was brought on stream in November with the remaining three wells brought on stream in January 2019. The Company continues to focus capital investment in its low cost Spirit River natural gas play, which delivers strong results at current natural gas and liquids prices and takes advantage of the increased processing capacity at the Alder Flats Plant. Bellatrix’s drilling activity in 2018 was weighted 86% towards Spirit River liquids rich natural gas wells.

By comparison, during the fourth quarter of 2017, Bellatrix drilled 2 gross (1.9 net) Spirit River liquids rich natural gas wells. In the year ended December 31, 2017, Bellatrix drilled and/or participated in 26 gross (19.3 net) Spirit River liquids rich natural gas wells, 3 gross (3.0 net) Cardium wells, and 4 gross (1.6 net) non-operated Ellerslie liquids rich natural gas wells.

Bellatrix Exploration Ltd. 4

COMMODITY PRICES

Average Commodity Prices
	Three months ended December 31,				Year ended December 31,
	2018	2017	% Change		2018	2017	% Change
Crude oil:
WTI (US$/bbl)	58.51	55.40	6		64.77	50.95	27
Canadian Light crude blend ($/bbl)	48.27	65.68	(27	)	68.49	61.85	11
Bellatrix’s average realized prices ($/bbl)
Crude oil and condensate	50.98	69.64	(27	)	73.63	62.93	17
NGLs (excluding condensate)	20.89	27.68	(25	)	24.46	21.52	14
Total crude oil, condensate and NGLs	26.34	36.61	(28	)	34.05	31.61	8
Crude oil, condensate and NGLs (including risk management (1))	24.85	33.98	(27	)	31.81	30.50	4
Natural gas:
NYMEX (US$/mmbtu)	3.03	2.93	3		2.93	3.11	(6	)
AECO daily index ($/mcf)	1.56	1.69	(8	)	1.50	2.16	(31	)
AECO monthly index ($/mcf)	1.90	1.96	(3	)	1.53	2.43	(37	)
Bellatrix’s average realized prices ($/mcf)
Natural gas	2.24	1.79	25		1.78	2.27	(22	)
Natural gas (including risk management)	2.96	2.70	10		2.46	2.85	(14	)
Exchange rate (CDN$/US$1.00)	1.3221	1.2705	4		1.2957	1.2966	—

(1) Per unit metrics including risk management include realized gains or losses on commodity contracts and exclude unrealized gains or losses on commodity contracts.

Bellatrix’s natural gas average realized sales price before commodity price risk management contracts for the fourth quarter of 2018 increased by 25% to $2.24/mcf compared to $1.79/mcf in the same period in 2017. Bellatrix’s natural gas average realized price, including commodity price risk management contracts for the three months ended December 31, 2018, averaged $2.96/mcf compared to $2.70/mcf in the comparative 2017 period.

Bellatrix’s natural gas sales were primarily priced with reference to the daily and monthly AECO indices, however, beginning in February 2018, Bellatrix added new U.S. market exposure, thereby diversifying its sales price markets away from AECO. These new market sales to Chicago, Dawn and Malin resulted in gains of approximately CAD$7.5 million for the fourth quarter of 2018 and a 2018 gain of approximately CAD$11.4 million. Deliveries to these alternative markets represented approximately 45% of Bellatrix’s net natural gas production in the fourth quarter of 2018. This longer term diversification strategy reduces Bellatrix's exposure to the AECO daily spot market on approximately 50% of Bellatrix 2019 projected natural gas production. During the fourth quarter of 2018, the AECO daily reference price decreased by 8% and the AECO monthly reference price decreased 3% compared to the fourth quarter of 2017. The AECO market continues to be negatively impacted by the changes initiated in July 2017 to the operating methodology used by the pipeline operator to regulate the flow of available gas in the Alberta market during periods of maintenance. Maintenance on the primary Alberta natural gas pipeline system was lower in the fourth quarter of 2018 than the third quarter 2018; however, higher Alberta basin production added additional sales gas volumes to an already oversupplied market. Unseasonably cold weather in October and November 2018 added incremental demand for natural gas and the average AECO daily price for the fourth quarter increased by 25% over the third quarter 2018 prices. Despite the price increase, AECO pricing remains highly discounted from pricing in other North American markets and producing basins.

Bellatrix's oil production is primarily condensate and light, sweet crude oil which historically has priced closely with Canadian Light crude blend prices. Canadian oil prices were negatively impacted by growing inventories in western Canada throughout 2018. The differential to WTI at the Edmonton market averaged -US$26.30/bbl in the fourth quarter of 2018, considerably weaker than the price differential in the fourth quarter of 2017. Similarly, Bellatrix's condensate production experienced wider WTI differentials for Edmonton deliveries that averaged -US$13.53/bbl for the fourth quarter of 2018. These differential moves were partially offset by a 6% increase in WTI price relative to the same period in 2017. In the fourth quarter of 2018, Bellatrix realized an average price of $50.98/bbl before commodity price risk management contracts for crude oil and condensate, a decrease of 27% from the average price of $69.64/bbl received in the fourth quarter of 2017. The Canadian Light crude blend price decreased by 27% and the average WTI crude oil benchmark price increased by 6% between the fourth quarters of 2018 and 2017.

Bellatrix’s average realized price for NGLs (excluding condensate) decreased by 25% to $20.89/bbl during the fourth quarter of 2018, compared to $27.68/bbl received in the comparable 2017 period. Both propane and butane delivered lower prices in the

Bellatrix Exploration Ltd. 5

Edmonton market compared to the third quarter of 2018. Recently announced projects set to be constructed in the Redwater area, Alberta will provide much needed new markets for propane as well as a new west coast propane export terminal scheduled to begin operations in the second quarter of 2019.

REVENUE

Total revenue of $56.9 million for the three months ended December 31, 2018 decreased by 6% compared to $60.9 million realized in the fourth quarter of 2017. The lower total revenue realized in the fourth quarter of 2018 compared to 2017 was primarily attributable to a 1% decline in realized average commodity prices and a 6% decrease in sales volumes in the period. Higher natural gas prices and increased NGL volumes helped mitigate wider oil and condensate differentials over the comparative periods and market diversification strategies resulted in an increase of $7.5 million in revenues in the fourth quarter of 2018.

Bellatrix’s total revenue was $228.7 million for the year ended December 31, 2018, a decrease of 8% compared to $249.4 million realized in the year ended December 31, 2017. The decrease in total revenue in the year ended December 31, 2018 compared to 2017 was a result of a 5% decrease in realized average commodity prices as well as a 3% decrease in sales volumes.

Crude oil, condensate and NGL revenue before other income, royalties and commodity price risk management contracts for the three months ended December 31, 2018 decreased by 23% to $24.9 million from $32.3 million realized during the same period in 2017. The decrease in revenue realized between the periods was the result of a 28% decrease in realized crude oil, condensate and NGL prices as a result of the increase in oil and condensate differentials in the fourth quarter of 2018, partially offset by a 7% increase in associated sales volumes.

For the 2018 year, Bellatrix realized crude oil, condensate and NGL revenue before other income, royalties and commodity price risk management contracts of $122.7 million, a 16% increase from $106.1 million realized in 2017. The increase in revenue realized between the years was the result of an 8% increase in average crude oil, condensate and NGL prices as well as a 7% increase in associated sales volumes between periods.

For the three months and year ended December 31, 2018, total crude oil, condensate and NGL revenues contributed 45% and 55% of petroleum and natural gas sales, respectively, compared to 54% and 43% in the comparable 2017 periods.

Natural gas revenue before other income, royalties and commodity price risk management contracts increased by 13% in the fourth quarter of 2018 to $30.5 million from $27.1 million during the same period in 2017. This was a result of a 25% increase in average realized natural gas prices, partially offset by a 10% decrease in associated sales volumes between the periods.

For the year ended December 31, 2018, natural gas revenue before other income, royalties and commodity price risk management contracts was $100.4 million, a decrease of 27% from $137.8 million realized in the 2017 year. The decrease in revenue realized was attributable to a 7% decrease in natural gas production volumes, as well as a 22% decrease in average realized natural gas prices.

Revenue
	Three months ended December 31,		Year ended December 31,
($000s)	2018	2017	2018	2017
Crude oil and condensate	8,729	13,089	51,761	51,448
NGLs (excluding condensate)	16,183	19,252	70,970	54,602
Crude oil, condensate and NGLs	24,912	32,341	122,731	106,050
Natural gas	30,514	27,073	100,405	137,775
Petroleum and natural gas sales	55,426	59,414	223,136	243,825
Other income (1)	1,523	1,483	5,576	5,574
Total revenue (2)	56,949	60,897	228,712	249,399

(1)Other income primarily consists of processing and other third party income.

(2) Total Revenue is considered to be a non-GAAP measure and includes petroleum and natural gas sales and other income.

COMMODITY PRICE RISK MANAGEMENT

The Company has a commodity price risk management policy which permits management to use various commodity price risk management strategies to reduce the impact of price volatility for a maximum of 36 months beyond the transaction date. The program is designed to provide price protection on a portion of the Company’s future production in the event of adverse commodity price movement, while retaining significant exposure to upside price movements. By doing this, the Company seeks to provide a

Bellatrix Exploration Ltd. 6

measure of stability to adjusted funds flow, as well as to ensure Bellatrix realizes positive economic returns from its capital development and acquisition activities. The Company plans to continue its commodity price risk management strategies, focusing on maintaining sufficient cash flow to fund Bellatrix’s capital expenditure program. Any remaining production is realized at market prices.

As at December 31, 2018, the Company has entered into commodity price risk management arrangements as follows:

Natural gas fixed price arrangements

Type		Period	Volume	Price			Index
Natural gas fixed	Financial	January 2019	10,000 GJ/d	$	2.54	CDN	AECO
Natural gas fixed	Financial	February 2019	10,000 GJ/d	$	2.43	CDN	AECO
Natural gas fixed	Financial	April 1, 2019 to October 31, 2019	20,000 GJ/d	$	1.79	CDN	AECO

Natural gas basis differential arrangements

Type		Period	Volume	Price			Index
Natural gas	Financial	April 1, 2019 to October 31, 2020	10,551 GJ/d	$	(1.17	)US	AECO 7A/NYMEX
Natural gas	Financial	January 1, 2019 to October 31, 2020	10,551 GJ/d	$	(1.19	)US	AECO 7A/NGI Chicago
Natural gas	Financial	January 1, 2019 to October 31, 2020	5,275 GJ/d	$	(1.23	)US	AECO/Dawn Gas Daily

Crude oil call option arrangements

Type		Period	Volume	Price			Index
Oil	Financial	January 1, 2019 to December 31, 2019	1,000 bbl/d	$	87.50	CDN	WTI - NYMEX
Oil	Financial	January 1, 2020 to December 31, 2020	1,000 bbl/d	$	77.90	CDN	WTI - NYMEX

Subsequent to December 31, 2018, the Company monetized certain natural gas basis differential arrangements from April 1, 2019 to October 31, 2019 of 26,377 GJ/d for proceeds of $2.4 million. In addition, the Company entered into commodity price risk management arrangements as follows:

Natural gas fixed price arrangements

Type		Period	Volume	Price			Index
Natural gas fixed	Financial	March 2019	40,000 GJ/d	$	2.38	CDN	AECO

Bellatrix maintains strong commodity price risk management and market diversification coverage through 2020 which is expected to reduce the impact of commodity price volatility on the Company's business. Bellatrix has diversified its natural gas price exposure through physical sales contracts that give the Company exposure to the Dawn, Chicago, and Malin natural gas pricing hubs. This combined long-term diversification strategy reduces Bellatrix’s exposure to AECO pricing on approximately 50% of the Company’s 2019 projected natural gas volumes (based on the mid-point of 2019 average production guidance).

When the Company has outstanding commodity price risk management contracts at a reporting date, the fair value, or mark-to-market value, of these contracts is reflected in its financial statements as an unrealized asset or liability. Fair value is based on the estimated amount that would have been received or paid, after any adjustments for credit risk, to settle the contracts as at the reporting date and would differ from what would eventually be realized. Changes in the fair value of the commodity contracts are recognized in the Company’s Statements of Profit (Loss) and Comprehensive Income (Loss).

The following are summaries of the gain (loss) on commodity price risk management contracts for the three months ended December 31, 2018 and 2017:

Commodity contracts
Three months ended December 31, 2018
($000s)	Crude Oil		Natural Gas	NGL's		Total
Realized cash gain (loss) on contracts	(1,241	)	9,938	(164	)	8,533
Unrealized gain (loss) on contracts (1)	11,835		3,233	233		15,301
Total gain (loss) on commodity contracts	10,594		13,171	69		23,834

(1) Unrealized gain (loss) on commodity contracts represents non-cash adjustments for changes in the fair value of these contracts during the period. 

Bellatrix Exploration Ltd. 7

Commodity contracts
Three months ended December 31, 2017
($000s)	Crude Oil		Natural Gas	NGL's		Total
Realized cash gain (loss) on contracts	—		13,848	(2,324	)	11,524
Unrealized gain (loss) on contracts (1)	(1,550	)	7,246	1,630		7,326
Total gain (loss) on commodity contracts	(1,550	)	21,094	(694	)	18,850

(1) Unrealized gain (loss) on commodity contracts represents non-cash adjustments for changes in the fair value of these contracts during the period. 

The following are summaries of the gain (loss) on commodity price risk management contracts for years ended December 31, 2018 and 2017:

Commodity contracts
Year ended December 31, 2018
($000s)	Crude Oil		Natural Gas		NGL's	Total
Realized cash gain (loss) on contracts	(8,126	)	38,587		75	30,536
Unrealized gain (loss) on contracts (1)	(1,019	)	(19,980	)	2,917	(18,082	)
Total gain (loss) on commodity contracts	(9,145	)	18,607		2,992	12,454

 (1) Unrealized gain (loss) on commodity contracts represents non-cash adjustments for changes in the fair value of these contracts during the period. 

Commodity contracts
Year ended December 31, 2017
($000s)	Crude Oil		Natural Gas	NGL's		Total
Realized cash gain (loss) on contracts	—		35,048	(3,724	)	31,324
Unrealized gain (loss) on contracts (1)	(1,550	)	49,706	(2,918	)	45,238
Total gain (loss) on commodity contracts	(1,550	)	84,754	(6,642	)	76,562

 (1) Unrealized gain (loss) on commodity contracts represents non-cash adjustments for changes in the fair value of these contracts during the period. 

ROYALTIES

Bellatrix pays royalties to the respective provincial governments and landowners where it operates. Each province that Bellatrix operates in has established a separate and distinct royalty regime which impacts Bellatrix’s average corporate royalty rate. The Company’s royalties are primarily paid in the province of Alberta.

In the fourth quarter of 2018, the Company incurred $5.4 million in royalties, a decrease from $6.1 million in the fourth quarter of 2017. As a percentage of petroleum and natural gas sales revenue (after transportation costs), royalties were 11% in the three months ended December 31, 2018, consistent with 11% in the comparative 2017 period. For the year ended December 31, 2018, Bellatrix incurred total royalties of $23.8 million compared to $24.0 million incurred in 2017. Overall royalties as a percentage of petroleum and natural gas sales revenue (after transportation costs) in 2018 were 12%, compared with 11% in 2017. The Company's average corporate royalty rates were consistent for the 2018 and 2017 years as the impact of the increase in realized crude oil, condensate and NGL prices were offset by the increased gas cost allowance ("GCA") related to infrastructure and facilities and the decreases in realized natural gas prices.

Bellatrix Exploration Ltd. 8

Royalties by Commodity Type
	Three months ended December 31,			Year ended December 31,
($000s, except where noted)	2018		2017	2018		2017
Crude oil, condensate, and NGLs	6,104		5,804	30,228		22,365
$/bbl	6.45		6.57	8.39		6.67
Average crude oil, condensate and NGL royalty rate (%)	25		18	25		21
Natural Gas	(703	)	263	(6,439	)	1,596
$/mcf	(0.05	)	0.02	(0.11	)	0.03
Average natural gas royalty rate (%)	(2	)	1	(6	)	1
Total	5,401		6,067	23,789		23,961
Total $/boe	1.68		1.78	1.83		1.78
Average total royalty rate (%)	11		11	12		11

EXPENSES

	Three months ended December 31,				Year ended December 31,
($000s)	2018		2017		2018		2017
Production	21,210		26,657		97,526		111,816
Transportation	6,935		6,537		27,285		23,549
Royalties	5,401		6,067		23,789		23,961
General and administrative	7,928		8,761		28,389		29,377
Interest and financing charges (1)	9,856		9,628		39,426		37,953
Share-based compensation	(671	)	(630	)	(503	)	532

(1) Excludes financing charges in relation to the Company’s accretion of decommissioning liabilities, unrealized foreign exchange gain (loss), and realized foreign exchange gain (loss).

EXPENSES PER BOE

	Three months ended December 31,				Year ended December 31,
($/boe)	2018		2017		2018		2017
Production	6.59		7.81		7.50		8.31
Transportation	2.15		1.92		2.10		1.75
Royalties	1.68		1.78		1.83		1.78
General and administrative	2.46		2.57		2.18		2.18
Interest and financing charges (1)	3.06		2.82		3.03		2.82
Share-based compensation	(0.21	)	(0.18	)	(0.04	)	0.04

(1) Excludes financing charges in relation to the Company’s accretion of decommissioning liabilities, unrealized foreign exchange gain (loss), and realized foreign exchange gain (loss).

PRODUCTION EXPENSES

Production expenses for the three months and year ended December 31, 2018 totaled $21.2 million ($6.59/boe) and $97.5 million ($7.50/boe) compared to $26.7 million ($7.81/boe) and $111.8 million ($8.31/boe) in the comparative 2017 periods, respectively.Production expenses decreased on a per boe basis between 2018 and 2017 as a result of the commissioning of Phase 2 of the Alder Flats Plant, renegotiation of processing agreements which reduced take-or-pay fees effective July 1, 2018 at certain third party facilities, the disposition of higher cost structure non-core properties in 2017 and the acquisition of joint venture partner production in the fourth quarter of 2018 that were processed through key Bellatrix infrastructure.

Upon completion of Phase 2 of the Alder Flats Plant in March 2018, Bellatrix has redirected approximately 65 MMcf/d of gross natural gas volumes from higher cost third party processing plants to the Alder Flats Plant to optimally process under its ownership and processing volume commitments. Operating costs for natural gas processed through Bellatrix’s ownership interest in the Alder

Bellatrix Exploration Ltd. 9

Flats Plant are approximately $0.16/mcf, providing significant cost benefits for the Company. The redirection of natural gas volumes from third-party plants is anticipated to drive long term sustained operating cost reductions for the Company.

Production expenditures in the 2018 year of $7.50/boe are below Bellatrix’s previous full year 2018 production expenditure guidance range of $7.65/boe to $7.90/boe. In addition, the Company continues to undertake cost containment efforts focused on increased operational efficiencies, field optimization work, and increased competitive pricing of contract services.

Production Expenses by Commodity Type
	Three months ended December 31,		Year ended December 31,
($000s, except where noted)	2018	2017	2018	2017
Crude oil, condensate and NGLs	6,322	7,047	27,329	28,143
$/bbl	6.68	7.98	7.58	8.39
Natural gas	14,888	19,610	70,197	83,673
$/mcf	1.09	1.29	1.24	1.38
Total production expenses	21,210	26,657	97,526	111,816
Total $/boe	6.59	7.81	7.50	8.31

TRANSPORTATION

Transportation expenses for the three months and year ended December 31, 2018 were $6.9 million ($2.15/boe) and $27.3 million ($2.10/boe) compared to $6.5 million ($1.92/boe) and $23.5 million ($1.75/boe) in the same periods in 2017, respectively. The increase in transportation costs per boe for the full year 2018 compared to 2017 was primarily due to secured transportation agreements previously entered into for Phase 2 of the Alder Flats Plant which were based on the initial expected start-up date for the expansion of the second quarter of 2017.

OPERATING NETBACK

Operating Netback – Corporate
	Three months ended December 31,				Year ended December 31,
($/boe)	2018		2017		2018		2017
Total Revenue (1)	17.67		17.85		17.59		18.53
Production	(6.59	)	(7.81	)	(7.50	)	(8.31	)
Transportation	(2.15	)	(1.92	)	(2.10	)	(1.75	)
Royalties	(1.68	)	(1.78	)	(1.83	)	(1.78	)
Operating netback(2)	7.25		6.34		6.16		6.69
Risk management gain (loss)(3)	2.65		3.38		2.35		2.33
Operating netback after risk management	9.90		9.72		8.51		9.02

(1)Total Revenue is considered to be a non-GAAP measure and includes petroleum and natural gas sales and other income.

(2)Operating netbacks is considered to be a non-GAAP measure. Operating netbacks are calculated by subtracting royalties, transportation, and production expenses from total revenue.

(3)Risk management includes realized gains or losses on commodity contracts and excludes unrealized gains or losses on commodity contracts.

During the three months ended December 31, 2018, the Company’s corporate operating netback, before commodity risk management contracts, increased by 14% to $7.25/boe compared to $6.34/boe in the fourth quarter of 2017. The increased operating netback realized in the fourth quarter of 2018 was primarily the result of lower production and royalty expenses offset by a 1% decrease in average realized combined commodity prices and increased transportation expenses. After including commodity risk management contracts, the corporate operating netback for the three months ended December 31, 2018 was $9.90/boe compared to $9.72/boe in the fourth quarter of 2017.

For the year ended December 31, 2018, the corporate operating netback before commodity risk management contracts was $6.16/boe, a decrease of 8% compared to $6.69/boe in 2017. The decreased operating netback realized in 2018 was primarily the result of a 5% decrease in average realized combined commodity prices and increased transportation and royalty expenses, partially offset by decreased production expenses. After including commodity risk management contracts, the corporate operating netback for the year ended December 31, 2018 was $8.51/boe compared to $9.02/boe in 2017.

Bellatrix Exploration Ltd. 10

Operating Netback – Crude Oil, Condensate, and NGLs
	Three months ended December 31,				Year ended December 31,
($/bbl)	2018		2017		2018		2017
Sales	26.34		36.61		34.05		31.61
Production	(6.68	)	(7.98	)	(7.58	)	(8.39	)
Transportation	(4.85	)	(4.54	)	(4.55	)	(3.73	)
Royalties	(6.45	)	(6.57	)	(8.39	)	(6.67	)
Operating netback (1)	8.36		17.52		13.53		12.82
Risk management gain (loss) (2)	(1.48	)	(2.63	)	(2.23	)	(1.11	)
Operating netback after risk management	6.88		14.89		11.30		11.71

(1)Operating netbacks is considered to be a non-GAAP measure. Operating netbacks are calculated by subtracting royalties, transportation, and production expenses from total revenue.

(2)Risk management includes realized gains or losses on commodity contracts and excludes unrealized gains or losses on commodity contracts.

The operating netback before commodity price risk management contracts for crude oil, condensate and NGLs during the fourth quarter of 2018 averaged $8.36/bbl, a decrease of 52% from the $17.52/bbl realized during the same period in 2017. The decrease between the periods was primarily a result of 28% decrease in crude oil, condensate and NGL commodity prices and an increase in transportation expenses, offset partially by decreased production and royalty expenses. After including commodity price risk management contracts, the operating netback for crude oil, condensate, and NGLs for the three months ended December 31, 2018 was $6.88/bbl compared to $14.89/bbl in the same period in 2017.

The operating netback for crude oil, condensate, and NGLs increased by 6% to $13.53/bbl for the year ended December 31, 2018, from $12.82/bbl realized in 2017. The higher netback was primarily attributable to an 8% stronger crude oil, condensate, and NGL commodity prices and decreased production expenses, partially offset by an increase in transportation and royalty expenses. After including commodity price risk management contracts, the operating netback for crude oil, condensate, and NGLs for the year ended December 31, 2018 was $11.30/bbl compared to $11.71/bbl in 2017.

Operating Netback – Natural Gas
	Three months ended December 31,				Year ended December 31,
($/mcf)	2018		2017		2018		2017
Sales	2.24		1.79		1.78		2.27
Production	(1.09	)	(1.29	)	(1.24	)	(1.38	)
Transportation	(0.17	)	(0.17	)	(0.19	)	(0.18	)
Royalties	0.05		(0.02	)	0.11		(0.03	)
Operating netback(1)	1.03		0.31		0.46		0.68
Risk management gain (loss)(2)	0.73		0.91		0.68		0.58
Operating netback after risk management	1.76		1.22		1.14		1.26

(1)Operating netbacks is considered to be a non-GAAP measure. Operating netbacks are calculated by subtracting royalties, transportation, and production expenses from total revenue. The detailed calculations of operating netbacks are found in the MD&A.

(2)Risk management includes realized gains or losses on commodity contracts and excludes unrealized gains or losses on commodity contracts.

The operating netback for natural gas before commodity price risk management contracts during the fourth quarter of 2018 of $1.03/mcf was 232% higher than the $0.31/mcf recorded in the same period in 2017. The increase to the realized netback between the fourth quarters of 2018 and 2017 was driven by a 25% increase in realized natural gas prices and reductions in production and royalty expenses. After including commodity risk management contracts, the operating netback for natural gas for the fourth quarter of 2018 was $1.76/mcf compared to $1.22/mcf in the same period in 2017.

For the year ended December 31, 2018, the operating netback for natural gas was $0.46/mcf, a decrease of 32% from $0.68/mcf realized in 2017. The reduction in netback between the years is a result of a 22% decrease in realized natural gas prices and increased transportation expenses, offset by lower production and royalty expenses. After including commodity risk management contracts, the operating netback for natural gas for the year ended December 31, 2018 was $1.14/mcf compared to $1.26/mcf in the 2017 year.

Bellatrix Exploration Ltd. 11

GENERAL AND ADMINISTRATIVE

Bellatrix incurred lower gross general and administrative (“G&A”) expenses (before capitalized G&A and recoveries) in the fourth quarter of 2018 and the year ended December 31, 2018 when compared to the same periods of 2017 by 16% and 10%, respectively. Net G&A expenses (after capitalized costs and recoveries) for the three months and year ended December 31, 2018 were $7.9 million ($2.46/boe) and $28.4 million ($2.18/boe) compared to $8.8 million ($2.57/boe) and $29.4 million ($2.18/boe) in the comparative 2017 periods, a decrease of 10% and 3%, respectively. The overall decrease to net G&A for the year ended December 31, 2018 compared to the same period in 2017 was primarily attributable to an decrease in gross G&A expenses related to a decrease in personnel related costs. In the fourth quarter of 2018 the Company incurred $1.3 million related to capital refinancing transaction activities.

General and Administrative Expenses
	Three months ended December 31,				Year ended December 31,
($000s, except where noted)	2018		2017		2018		2017
Gross expenses	10,308		12,210		39,439		43,638
Capitalized	(1,625	)	(1,770	)	(7,036	)	(7,594	)
Recoveries	(755	)	(1,679	)	(4,014	)	(6,667	)
G&A expenses	7,928		8,761		28,389		29,377
G&A expenses, per unit ($/boe)	2.46		2.57		2.18		2.18

ONEROUS CONTRACTS

Onerous contracts result from unfavourable leases in which the unavoidable costs of meeting the obligations under the contracts exceed the economic benefits expected to be received. As at December 31, 2018, the Company recorded a provision of $5.4 million related to unoccupied office lease premises representing the minimum future payments that the Company is required to make. The onerous contract provision is expected to be settled in periods up to and including the year 2024.

INTEREST AND FINANCING CHARGES

For the three months and year ended December 31, 2018, Bellatrix recorded $9.9 million ($3.06/boe) and $39.4 million ($3.03/boe), respectively, of interest and financing charges related to amounts outstanding under its Credit Facilities, Second Lien Notes, Senior Notes and Convertible Debentures (each term as defined below), compared to $9.6 million ($2.82/boe) and $38.0 million ($2.82/boe), respectively, during the same periods in 2017. Interest and financing charges increased in the current period due to an increase in the amount outstanding under the Credit Facilities and the increase in weighted average interest rate for amounts borrowed under the Credit Facilities compared to the same period of 2017.

Interest and Financing Charges(1)
	Three months ended December 31,		Year ended December 31,
($000s, except where noted)	2018	2017	2018	2017
Interest on Credit Facilities	1,101	779	4,302	2,194
Interest on Second Lien Notes	2,657	—	3,224	—
Interest on Senior Notes	4,635	7,466	26,219	30,378
Interest on Convertible Debentures	1,463	1,383	5,681	5,381
Interest and financing charges	9,856	9,628	39,426	37,953
Interest and financing charges ($/boe)	3.06	2.82	3.03	2.82

(1) Excludes financing charges in relation to the Company’s accretion of decommissioning liabilities, unrealized foreign exchange gain (loss), and realized foreign exchange gain (loss).

Bellatrix’s total net debt at December 31, 2018 of $443.3 million represents an increase of $22.5 million from the December 31, 2017 amount of $420.8 million. Total net debt at December 31, 2018 of $443.3 million included $47.8 million of Credit Facilities, $137.1 million of Second Lien Notes, $196.0 million of Senior Notes (includes $26.7 million of unrealized foreign exchange gain recognized on the mark-to-market of the United States dollar denominated Second Lien Notes and Senior Notes in the year ended December 31, 2018), $41.7 million of Convertible Debentures (liability component) and an adjusted working capital deficiency of $20.7 million.

Bellatrix Exploration Ltd. 12

Reconciliation of Total Liabilities to Total Net Debt
	As at December 31,
($000s)	2018		2017
Total liabilities per financial statements	563,018		566,901
Current liabilities (excluding current Credit Facilities amounts )	(66,424	)	(100,489	)
Decommissioning liabilities	(61,487	)	(58,687	)
Other deferred liabilities	(10,863	)	(7,402	)
Risk management contract liability	(1,652	)	(3,422	)
Adjusted working capital
Current assets	(50,323	)	(81,291	)
Current liabilities	114,187		100,489
Current Credit Facilities	(47,763	)	—
Current portion of other deferred liabilities	(1,909	)	(20,790	)
Current portion of decommissioning liability	(2,387	)	(1,924	)
Current portion of risk management contract asset	9,852		31,910
Current portion of risk management contract liability	(917	)	(4,468	)
	20,740		23,926
Total net debt (1)	443,332		420,827
Convertible Debentures (liability component)	(41,732	)	(39,426	)
Net debt (1)	401,600		381,401

(1)Total net debt is considered to be a Non-GAAP measure and therefore may not be comparable with the calculation of similar measures for other entities. The Company’s calculation of total net debt excludes other deferred liabilities, long-term risk management contract liabilities, decommissioning liabilities, and the deferred tax liability. Total net debt includes the adjusted working capital deficiency, Second Lien Notes, Senior Notes. Convertible Debentures (liability component), current Credit Facilities and Credit Facilities. The adjusted working capital deficiency is a non-GAAP measure calculated as net working capital deficiency excluding current risk management assets and liabilities, current portion of other deferred liabilities, current portion of decommissioning liability and the current Credit Facilities. Net debt excludes the liability component of the Convertible Debentures.

SHARE-BASED COMPENSATION

Bellatrix has an Award Incentive Plan (the “Award Plan”) where the Company may grant restricted awards (“RAs”) and performance awards (“PAs”) to officers, employees, and other service providers. Awards under the Award Plan may be settled in cash, in common shares of the Company, or a combination thereof. In the case of PAs, settlement is subject to a “payout multiplier” (the payout multiplier shall be based on such corporate performance measures as determined by the Board of Directors (or the Compensation Committee) of the Company) and may range between zero and two times. Under Bellatrix’s Deferred Share Unit Plan, the Company may grant deferred share units ("DSUs") to non-employee directors.

Effective July 1, 2017, the Company consolidated its common shares on the basis of 1 new common share for every 5 old common shares outstanding. The number of outstanding share options, DSUs, RAs and PAs have also been adjusted proportionately. The corresponding exercise prices have increased by the same ratio.

The following table summarizes the DSUs, RAs, and PAs movement for the year ended December 31, 2018:

	Share Options		DSUs	RAs		PAs
Balance, December 31, 2017	1,622,132		517,898	823,487		573,055
Granted	95,000		304,056	880,200		335,800
Exercised	(722,800	)	—	(317,840	)	(77,870	)
Forfeited	(41,800	)	—	(202,846	)	(67,910	)
Balance, December 31, 2018	952,532		821,954	1,183,001		763,075

Bellatrix Exploration Ltd. 13

The following table provides a summary of the Company’s share-based compensation plans for the three months and years ended December 31, 2018 and December 31, 2017.

	Three months ended December 31,				Year ended December 31,
($000s)	2018		2017		2018		2017
Share options expense	41		159		334		1,074
DSUs expense (recovery)	(510	)	(694	)	(669	)	(583	)
RAs expense (recovery)	(91	)	(24	)	(80	)	178
PAs expense (recovery)	(111	)	(71	)	(88	)	(137	)
Share-based compensation expense (recovery)	(671	)	(630	)	(503	)	532

Lower share-based compensation expense in the year ended December 31, 2018 compared to the year ended December 31, 2017 is a result of a decrease in the Company’s share price.

DEPLETION, DEPRECIATION AND IMPAIRMENT

Depletion and Depreciation

Depletion and depreciation expense for the three months and year ended December 31, 2018, was $23.9 million ($7.41/boe) and $105.3 million ($8.09/boe) compared to $27.8 million ($8.15/boe) and $120.7 million ($8.96/boe), recognized in the comparative 2017 periods, respectively. The decrease in the Company’s depletion and depreciation expense, on a per boe basis between the periods, can be attributed to the lower capital cost base stemming from the non-core asset dispositions completed in 2017 and an 11% increase in reserves base.

For the year ended December 31, 2018, Bellatrix has included a total of $863 million (2017: $832 million) for future development costs in the depletion calculation and excluded from the depletion calculation a total of $41.4 million (2017: $46.6 million) for estimated salvage in the depletion and depreciation calculations.

Depletion and Depreciation
	Three months ended December 31,		Year ended December 31,
($000s, except where noted)	2018	2017	2018	2017
Depletion and Depreciation	23,869	27,797	105,286	120,652
Depletion and Depreciation per unit ($/boe)	7.41	8.15	8.09	8.96

Impairment Loss

Exploration & Evaluation Assets

Bellatrix performed an assessment of possible indicators of impairment or impairment reversal on E&E assets. At December 31, 2018, impairment indicators were identified for E&E assets, primarily as a result of sustained low natural gas prices. No impairment was recognized on E&E assets as the estimated recoverable amount of the assets exceeded their carrying value. The estimated recoverable amount was based on a fair value less costs of disposal calculation determined principally on recent and relevant land sales.

Property, Plant and Equipment

Bellatrix performed an assessment of possible indicators of impairment or impairment reversal on all of the Company’s cost generating units ("CGUs"). At December 31, 2018, impairment indicators were identified for the Company’s core Central Alberta CGU, non-core North Alberta CGU and non-core South Alberta CGU, primarily as a result of sustained low natural gas prices.

The recoverable amount of the Central Alberta, North Alberta and South Alberta CGUs as at December 31, 2018 was determined using a value in use ("VIU") approach, as Bellatrix determined that VIU was greater than fair value less costs to sell ("FVLCS"). VIU was calculated as the net present value of the before-tax cash flows from proved plus probable oil and gas reserves of each CGU based on reserves estimated by Bellatrix’s independent reserve evaluator at December 31, 2018, adjusted for the net present value of the before-tax abandonment and reclamation costs on proved plus probable undeveloped oil and gas reserves.

Bellatrix Exploration Ltd. 14

No impairment was recognized in the Company's core Central Alberta CGU as the estimated recoverable amount of the CGU exceeded its carrying value for the year ended December 31, 2018. The VIU of the Central Alberta CGU was based on before-tax discount rates ranging from 12-15%.

For the year ended December 31, 2018, a non-cash impairment loss of $0.8 million was recognized in the Company’s non-core North Alberta CGU. The estimated recoverable amount after decommissioning liabilities of the North Alberta CGU as at December 31, 2018 was negative $5.2 million. A non-cash impairment loss of $1.3 million was recognized in the Company’s non-core South Alberta CGU. The estimated recoverable amount after decommissioning liabilities of the South Alberta CGU was negative $18.9 million. The VIU of the North Alberta and South Alberta CGU was based on before-tax discount rates ranging from 15-20%.

A 1% increase to the discount rates applied in the impairment calculation for the North Alberta CGU and South Alberta CGU would result in an increase in impairment loss of approximately $0.2 million and nil, respectively, for the year ended December 31, 2018, whereas a 1% decrease to the discount rates applied would result in a corresponding decrease to the impairment loss recognized.

For the year ended December 31, 2017, a non-cash impairment loss of $12.2 million was recognized in the Company’s non-core North Alberta CGU. The estimated recoverable amount after decommissioning liabilities of the North Alberta CGU as at December 31, 2017 was negative $4.7 million. A non-cash impairment loss of $1.0 million was recognized in the Company's non-core South Alberta CGU. The estimated recoverable amount after decommissioning liabilities of the South Alberta CGU was negative $18.3 million. The VIU determination of estimated recoverable amounts of each CGU was based on before-tax discount rates ranging from 15-20%.

FOREIGN EXCHANGE

Bellatrix incurs gains and losses in relation to the foreign currency translation of its United States dollar denominated Second Lien Notes and Senior Notes. The Second Lien Notes and Senior Notes are translated from the United States dollar to Canadian dollar using the closing foreign exchange rate for the period. Unrealized foreign exchange gains or losses are included in earnings in the period related to the translation of the outstanding balance of the Second Lien Notes and Senior Notes at the end of the period. Realized foreign exchange gains and losses are recognized as the Second Lien Notes, Senior Notes, and other minor foreign currency based transactions are translated and settled during the period.

	Three months ended December 31,				Year ended December 31,
($000s)	2018		2017		2018		2017
Realized gain (loss) on foreign exchange	(557	)	(313	)	(8,296	)	(797	)
Unrealized gain (loss) on foreign exchange (1) (2)	(16,567	)	(364	)	(18,617	)	22,165
Unrealized gain (loss) on foreign exchange contracts	117		212		3,422		(3,867	)
Gain (loss) on foreign exchange	(17,007	)	(465	)	(23,491	)	17,501

(1) Exchange rate (CDN$/US$1.00) at December 31, 2018 was 1.3646.

(2) Exchange rate (CDN$/US$1.00) at December 31, 2017 was 1.2518 .

For the three months and year ended December 31, 2018, Bellatrix recorded a foreign exchange loss of $17.0 million and loss of $23.5 million, respectively. This was primarily due to the impact of the change in the value of the Canadian dollar relative to the United States dollar over the three months and year ended December 31, 2018 on the Company’s United States dollar denominated Second Lien Notes and Senior Notes which resulted in an unrealized loss of $16.6 million and an unrealized loss of $18.6 million, respectively (2017: $0.4 million loss and $22.2 million gain, respectively). This was partially offset by a realized loss of $0.7 million and $8.3 million on the settlement of Senior Notes for the three months and year ended December 31, 2018, respectively. This was also partially offset by the change in the fair value of the United States foreign exchange forward contract which resulted in an unrealized gain for the three months and year ended December 31, 2018 of $0.1 million and $3.4 million, respectively (2017: $0.2 million gain and $3.9 million loss, respectively).

The Company may utilize foreign exchange derivative contracts to manage foreign exchange risks in order to maintain cash flow stability. Foreign exchange derivative transactions are conducted in accordance with the risk management policy that has been approved by the Board of Directors. The aggregate amount hedged under all foreign exchange derivative contracts is limited to the outstanding principal amount of the Second Lien Notes and Senior Notes or 60% of the Company’s United States dollar revenues over the previous three months. Additionally, the term of foreign exchange contracts is limited to the remaining term of the related Second Lien Notes and Senior Notes.

During the third quarter of 2018 Bellatrix terminated, at no cost, $62.5 million of United States dollar foreign exchange forward purchase contracts which had a maturity date in May 2020.

Bellatrix Exploration Ltd. 15

INCOME TAXES

Deferred income tax expense (recovery) is a non-cash item relating to temporary differences between the accounting and tax basis of Bellatrix's assets and liabilities. For the year ended December 31, 2018, the Company recognized a deferred income tax expense of $48.3 million, compared to a deferred tax expense of $15.4 million during 2017. As at December 31, 2018, Bellatrix was in a net unrecognized deferred tax asset position due to uncertainty of Bellatrix's ability to realize the tax assets in future years (refer to liquidity and capital resources sections). This resulted in a non-cash deferred tax expense of $70.2 million during the year ended December 31, 2018 related to the unrecognized benefit of deductible temporary differences in excess of taxable temporary differences of approximately $165 million and non capital loss carryforwards of $133 million. The deferred tax expense recognized in 2017 was primarily attributable to the completion of the non-core property disposition in the second quarter of 2017.

At December 31, 2018, Bellatrix had approximately $1.40 billion in tax pools available for deduction against future income as follows:

Tax Pools

		December 31,	December 31,
($000s)	Rate %	2018	2017
Intangible resource pools:
Canadian exploration expenses	100	78,800	79,500
Canadian development expenses	30	628,900	611,500
Canadian oil and gas property expenses	10	87,500	70,500
Foreign resource expenses	10	500	600
Alberta non-capital losses greater than Federal non-capital losses	(Alberta) 100	23,200	16,400
Undepreciated capital cost (1)	6 – 100	432,900	413,500
Non-capital losses (expire through 2036)	100	132,900	144,100
Financing costs	20 Straight-Line	10,500	14,900
Total		1,395,200	1,351,000

(1) Approximately $401 million of undepreciated capital cost pools are class 41, which is claimed at a 25% rate.

NET PROFIT (LOSS)

For the three months ended December 31, 2018, Bellatrix recognized a net loss of $89.8 million ($1.24 per basic share and diluted share), compared to a net loss of $13.1 million ($0.26 per basic share and diluted share) in the fourth quarter of 2017. The increase in net loss recorded in the fourth quarter of 2018 compared to the same period in 2017 was primarily the result of an increase in deferred tax expense, unrealized foreign exchange losses, the recognition of a loss on onerous contracts, as well as a decrease in revenues resulting from a 1% decline in average realized prices and 6% decline in sales volumes. The increase was partially offset by a decrease in impairment and production expenses as well as an increase in unrealized gain on commodity contracts in 2018.

For the year ended December 31, 2018, Bellatrix recognized a net loss of $146.3 million ($2.45 per basic and diluted share), compared to a net loss of $91.4 million ($1.85 per basic share and diluted share) in the same period in 2017. The increase in net loss recorded in 2018 compared to 2017 was primarily the result of an increase in deferred tax expense, unrealized loss on commodity contracts and unrealized foreign exchange losses as well as a decrease in revenues resulting from an 5% decrease in average realized commodity prices and a 3% decrease in sales volumes. The increase was partially offset by a decrease in impairment loss, production and depletion and depreciation expenses.

CASH FLOW FROM OPERATING ACTIVITIES AND ADJUSTED FUNDS FLOW

As detailed previously in this MD&A, adjusted funds flow is a non-GAAP measure that does not have any standardized meaning under GAAP. Bellatrix’s method of calculating adjusted funds flow may differ from that of other companies, and accordingly, may not be comparable to measures used by others.

Reconciliation of Cash Flow from Operating Activities to Adjusted Funds Flow
	Three months ended December 31,			Year ended December 31,
($000s)	2018		2017	2018		2017
Cash flow from operating activities	28,239		13,425	62,475		55,210
Decommissioning costs incurred	874		1,255	2,242		2,758
Change in non-cash working capital	(13,605	)	1,020	(16,692	)	272
Adjusted funds flow	15,508		15,700	48,025		58,240

Bellatrix’s cash flow from operating activities for the three months ended December 31, 2018 increased by 110% to $28.2 million ($0.39 per basic share and diluted share) from $13.4 million ($0.27 per basic share and diluted share) generated in the fourth

Bellatrix Exploration Ltd. 16

quarter of 2017. The increase in cash flow from operating activities between the fourth quarters of 2017 and 2018 was mainly attributable to change in non-cash working capital and decreased production expenses, offset partially by a 1% decrease in realized average commodity prices and a 6% decrease in sales volumes. Bellatrix’s cash flow from operating activities for the year ended December 31, 2018 increased by 13% to $62.5 million ($1.05 per basic and diluted share) from $55.2 million ($1.12 per basic and diluted share) generated during 2017. The increase in cash flow from operating activities between the years 2017 and 2018 was principally due to change in non-cash working capital and decreased production expenses, offset partially by an 5% decrease in realized average commodity prices as well as a 3% decrease in sales volumes.

Bellatrix generated adjusted funds flow of $15.5 million ($0.21 per basic share and diluted share) in the fourth quarter of 2018, a decrease of 1% from $15.7 million ($0.32 per basic share and diluted share) generated in the comparative 2017 period. Adjusted funds flow remained relatively consistent between 2017 and 2018 as a 1% decrease in realized average commodity prices and a 6% decrease in sales volumes in the period was offset by a decrease in production expenses. Bellatrix generated adjusted funds flow of $48.0 million ($0.80 per basic share and diluted share) in the year ended December 31, 2018, a decrease of 18% from $58.2 million ($1.18 per basic and diluted share) generated in 2017. The decrease in adjusted funds flow between the years 2017 and 2018 was principally due to a 5% decrease in realized average commodity prices as well as a 3% decrease in sales volumes and increased realized foreign exchange losses, partially offset by a decrease in production expenses.

Bellatrix maintains a commodity price risk management program to provide a measure of stability to adjusted funds flow. Unrealized mark–to–market gains or losses are non-cash adjustments to the fair market value of the contract over its entire term and are included in the calculation of net profit (loss).

Cash Flow from Operating Activities, Adjusted Funds Flow, and Net Profit (Loss)
	Three months ended December 31,				Year ended December 31,
($000s, except per share amounts)	2018		2017		2018		2017
Cash flow from operating activities	28,239		13,425		62,475		55,210
Basic   ($/share)	0.39		0.27		1.05		1.12
Diluted ($/share)	0.39		0.27		1.05		1.12
Adjusted funds flow	15,508		15,700		48,025		58,240
Basic   ($/share)	0.21		0.32		0.80		1.18
Diluted ($/share)	0.21		0.32		0.80		1.18
Net profit (loss)	(89,788	)	(13,053	)	(146,339	)	(91,363	)
Basic   ($/share)	(1.24	)	(0.26	)	(2.45	)	(1.85	)
Diluted ($/share)	(1.24	)	(0.26	)	(2.45	)	(1.85	)

CAPITAL EXPENDITURES

In 2018, Bellatrix’s strategic priority continued to be focused on profitable resource development in the Spirit River liquids rich natural play while maintaining financial strength and liquidity. During the three months ended December 31, 2018, Bellatrix invested $13.7 million in exploration and development projects, compared to $25.8 million in the same period in 2017. During the year ended December 31, 2018, Bellatrix invested $50.3 million in exploration and development projects, compared to $120.7 million in the same period in 2017.

Bellatrix Exploration Ltd. 17

Capital Expenditures
	Three months ended December 31,				Year ended December 31,
($000s)	2018		2017		2018		2017
Lease acquisitions and retention	328		187		1,427		3,507
Geological and geophysical	21		446		4		818
Drilling and completion costs	12,431		22,226		43,337		102,388
Facilities and equipment	874		2,896		5,561		13,938
Capital – exploration and development(1)	13,654		25,755		50,329		120,651
Capital – corporate assets	289		338		1,311		1,985
Property acquisitions	9,031		114		9,035		614
Total capital expenditures – cash	22,974		26,207		60,675		123,250
Property dispositions – cash (2)	(228	)	(56	)	(1,106	)	(48,798	)
Total net capital expenditures – cash	22,746		26,151		59,569		74,452
Property acquisitions – non-cash	21,497		—		21,498		—
Property disposition – non-cash (3)	—		—		(2,452	)	(3,465	)
Other – non-cash (3)	(56	)	61		(3,011	)	(5,904	)
Total capital expenditures – net (4)	44,187		26,212		75,604		65,083

(1) Excludes capitalized costs related to decommissioning liabilities expenditures incurred during the period.

(2) Property dispositions – cash does not include transaction costs.

(3) Other includes non-cash adjustments for the current period’s decommissioning liabilities and share based compensation.

(4) Refer to "Non-GAAP measures" for the term "total capital expenditures – net"

In the fourth quarter of 2018, capital spending on exploration and development activities of $13.7 million was focused primarily on drilling and completing 3 gross (2.0 net) Spirit River liquids rich natural gas wells and 1 gross (0.02 net) non-operated Cardium well. One Spirit River well was brought on stream in November with the remaining 3 wells brought on stream in January 2019. Additionally 3 wells drilled in the third quarter of 2018 were completed and brought on stream in the fourth quarter of 2018.

With the Company's long-term infrastructure build out complete, Bellatrix expects the majority of future capital investment to be utilized directly in drilling, completion and production addition activities, with minimal capital required for facilities and infrastructure projects over the near term. Management expects that its existing facilities and processing capacity will provide the capability to grow production volumes beyond 60,000 boe/d, with minimal future facility related capital.

In the fourth quarter of 2018, Bellatrix completed the acquisitions of assets from two joint venture partners within its core Ferrier area of west central Alberta which included, at the respective closing dates of each acquisition, approximately 2,200 boe/d (79% natural gas, 21% liquids) of low decline production and 1,250 boe/d (65% of natural gas, 35% liquids) of low decline (<15%) production. The acquisitions were funded through a combination of the issuance of 10.75 million common shares of Bellatrix, $9.41 million in cash and $9.1 million in purchase price adjustments.

(Gain) Loss on Dispositions

Bellatrix recognized a deferred financing obligation and a deferred gain pursuant to the sale of a 35% working interest in the Alder Flats Plant in 2016. The Phase 2 expansion project of the Alder Flats Plant was fully commissioned and began selling volumes mid-March 2018. During the year ended December 31, 2018 Bellatrix recognized a gain of $14.0 million related to the realized deferred gain and unspent portion of the deferred financing obligation.

During the fourth quarter of 2018, Bellatrix completed the renegotiation of processing agreements for facilities in Bellatrix's core area of west central Alberta, which resulted in a reduction of take-or-pay fees effective July 1, 2018. As part of the transaction, Bellatrix divested a non-controlling working interest ownership in an inactive raw gas gathering pipeline. The disposition of the pipeline resulted in a loss on disposition of $3.4 million.

During the third quarter of 2017, Bellatrix completed the sale of certain non-core oil and gas properties in the West Pembina area of Alberta for gross proceeds of $16.0 million, effective July 1, 2017. Bellatrix recorded a loss of $18.6 million on the sale.

During the second quarter of 2017, Bellatrix completed the sale of certain non-core oil and gas properties in the Strachan area of Alberta for gross proceeds of $34.5 million, effective April 1, 2017. Bellatrix recorded a loss of $37.0 million on the sale. Additionally, in the second quarter of 2017, Bellatrix transferred certain production facilities and infrastructure to a third party midstream company in exchange for proceeds of $20 million. Under the terms of the agreement, Bellatrix will have exclusive access to, and operatorship of, the infrastructure.

Bellatrix Exploration Ltd. 18

DECOMMISSIONING LIABILITIES

($000s)	2018		2017
Balance, beginning of year	60,611		62,844
Incurred on development activities	678		1,501
Acquired through asset acquisitions	3,462		—
Revisions on estimates	37		3,210
Decommissioning costs incurred	(2,242	)	(2,758	)
Reversed on dispositions	—		(5,473	)
Accretion expense	1,328		1,287
Balance, end of year	63,874		60,611

Environmental stewardship is a core value at Bellatrix and abandonment and reclamation activities continue to be made in a prudent, responsible manner with the oversight of the Reserve, Safety and Environment Committee of the Board. Ongoing abandonment expenditures for all of Bellatrix’s assets are funded entirely out of cash flow from operating activities. Bellatrix’s Liability Management Rating is well within the Alberta Energy Regulator’s ("AER"), the British Columbia Oil and Gas Commission's ("BCOGC") and the Saskatchewan Ministry of Economy ("MOE") requirements.

DEBT

Credit Facilities

At December 31, 2018, the Company had $47.8 million outstanding under its syndicated revolving credit facilities (the “Credit Facilities”) provided by four financial institutions. In connection with the completion of the Second Lien Refinancing (defined below), the agreement governing the Credit Facilities was amended and restated, with the borrowing base reconfirmed at $100 million with total commitments of $95 million. The terms of the Credit Facilities were amended and restated to, among other things, allow for the completion of the transactions comprising the Second Lien Refinancing, amend the interest and fees payable under the Credit Facilities and provide for an additional financial covenant (refer to Covenants below). The revolving period of the Credit Facilities is to May 30, 2019, and revolving period is extendible annually thereafter at the option of the Company, subject to lender approval. If not renewed in May 2019, the Credit Facilities would enter a six-month term-out period to November 30, 2019. The next semi-annual redetermination is scheduled for May 2019.

The Credit Facilities bear interest at a floating rate. For the year ended December 31, 2018 the weighted average interest rate for amounts borrowed under the Credit Facilities was 4.42%. The Credit Facilities are secured by a $1.0 billion debenture containing a first ranking charge and security interest. The Company has provided a negative pledge and undertaking to provide fixed charges over its properties in certain circumstances.

As at December 31, 2018, total outstanding letters of credit were $13.9 million which reduced the amount otherwise available to be drawn under the Credit Facilities.

The agreement governing the Credit Facilities contains market standard terms and conditions, and includes, for instance, restrictions on asset dispositions and hedging. Generally, dispositions of properties to which the Company is given lending value in the determination of the borrowing base require lender approval if the net present value attributed to all properties sold in a fiscal year, discounted at 10%, exceeds 5% of the borrowing base in effect at the time of such disposition. The aggregate amount hedged under all oil and gas commodity swaps cannot exceed 80% of the Company’s average daily sales volume for the first year of a rolling 3 year period, 70% for the second year of such period or 60% for the third year of such period, with the average daily sales volume being based on the Company’s production for the previous fiscal quarter.

A copy of the agreement governing the Credit Facilities has been filed with Canadian and US securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), through the SEC website (www.sec.gov).

Second Lien Notes

During 2018, Bellatrix completed a debt refinancing transaction (the "Second Lien Refinancing") pursuant to a note purchase agreement ("Note Purchase Agreement") with certain holders of the Senior Notes (the “Exchanging Noteholders”) to exchange US$80.12 million of the Company’s Senior Notes for US$72.11 million of second lien notes due 2023 (the “Second Lien Notes”). The Second Lien Notes bear interest at 8.5% per annum, payable quarterly, and are secured by a $250 million demand debenture over all of the Company’s assets, which is subordinated to the security provided under the Credit Facilities. The Note Purchase Agreement provides that the maturity date of Second Lien Notes will be accelerated to March 14, 2020 if more than US$25 million principal amount of Senior Notes remaining outstanding as at March 14, 2020.

Bellatrix Exploration Ltd. 19

In addition, the Exchanging Noteholders agreed to subscribe for between US$30 million and US$40 million of additional Second Lien Notes, with the proceeds to be used for capital expenditures, development capital and Senior Notes purchases. During the year, the Exchanging Noteholders subscribed for US$30 million of additional Second Lien Notes.

The Exchanging Noteholders also agreed to allow for up to US$50 million in additional Second Lien Note issuances to be used exclusively for future Senior Note exchanges on or before February 28, 2019. Such availability period, as of March 13, 2019 has not been further extended by the parties to the Second Lien Notes Agreement. However, the Company remains in ongoing confidential discussions with parties across its capital structure in connection with potential transaction alternatives. If any of the incremental US$50 million of Second Lien Note capacity is utilized, then the Exchanging Noteholders' commitment to subscribe for additional Second Lien Notes will be limited to US$30 million. The Note Purchase Agreement also provides for the ability to issue additional subordinate secured and unsecured debt in subsequent refinancing and capital raising transactions.

Pursuant to the Note Purchase Agreement, Bellatrix issued warrants to purchase an aggregate of 3,088,205 common shares of Bellatrix to the Exchanging Noteholders at an exercise price of $1.30 per Common Share expiring five years from the issuance date of the warrants. The Warrants will only vest if and when the Company accesses any of the incremental US$50 million of Second Lien Note capacity, and the issuance of Bellatrix common shares pursuant to the exercise of the warrants will be subject to the approval of the TSX.

A copy of the Note Purchase Agreement has been filed with Canadian and US securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) and through the SEC website (www.sec.gov).

Second Lien Notes
($000s)	Liability Component	Warrants
Balance, December 31, 2017	—	—
Issuance of Second Lien Notes in exchange for Senior Notes(2)	92,451	1,652
Issuance of additional Second Lien Notes for cash proceeds	39,815	—
Unrealized foreign exchange gain (1)	4,719	—
Amortization of discount	112	—
Balance, December 31, 2018	137,097	1,652

(1) Exchange rate (CDN$/US$1.00) at December 31, 2018 was 1.3646.

(2) Warrants component of Second Lien Notes is presented net of tax.

Senior Notes

At December 31, 2018, the Company had outstanding US$145.8 million of 8.50% senior unsecured notes due May 15, 2020 (the “Senior Notes”). The Senior Notes are governed by the terms of an indenture dated May 21, 2015 between the Company and U.S. Bank National Association (the "Note Indenture"). Interest is payable on the Senior Notes semi-annually and the Senior Notes are redeemable at the Company's option, in whole or in part at specified redemption prices. The Senior Notes are redeemable at the following redemption prices (expressed as a percentage of the principal amount of the Senior Notes): May 15, 2018 to May 14, 2019 at 102.125%, May 15, 2019 and thereafter at 100.000%. The Senior Notes are carried at amortized cost, net of debt issuance costs of $1.3 million, which accrete up to the principal balance at maturity using the effective interest rate of 9.6%. The Senior Notes were initially recognized at fair value, net of debt issue costs, and have subsequently been carried at amortized cost.

Beginning in May of 2018, Bellatrix entered into a number of agreements with certain arms' length third parties to exchange US$24.1 million aggregate principal amount of Senior Notes for an aggregate of 19,900,032 Common Shares. As a result of such debt to equity exchanges and the Second Lien Refinancing, the amount outstanding under the Senior Notes was reduced by approximately US$104.2 million in 2018.

Bellatrix Exploration Ltd. 20

($000s)	Amount
Balance, December 31, 2016	324,691
Unrealized foreign exchange gain (1) (2)	(22,079	)
Amortization of discount and debt issue costs	2,797
Balance, December 31, 2017	305,409
Unrealized foreign exchange gain (1) (2)	22,032
Amortization of discount and debt issue costs	2,617
Settlement of Senior Notes for equity	(30,673	)
Settlement of Senior Notes for Second Lien Notes	(103,385	)
Balance, December 31, 2018	196,000

(1) Exchange rate (CDN$/US$1.00) at December 31, 2018 was 1.3646 (December 31, 2017: 1.2518).

(2) Amount does not include unrealized loss on foreign exchange contracts of $3.4 million (December 31, 2017: $3.9 million loss).

Bellatrix is aware that the Company's outstanding Senior Notes have recently been trading at a discount to par value. In order to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, Bellatrix may, from time to time, seek to purchase such debt for cash, in exchange for common shares, or for a combination of cash and common shares, in each case in open market purchases and/or privately negotiated transactions. Bellatrix will evaluate any such transactions in light of then-existing market conditions, taking into account the Company's current liquidity and prospects for future access to capital. The amounts involved in any such transactions, individually or in the aggregate, may be material. Any such purchases would require the consent of the lenders under our Credit Facilities.

A copy of the Note Indenture has been filed with Canadian and US securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) and through the SEC website (www.sec.gov).

Convertible Debentures

At December 31, 2018 Bellatrix had outstanding $50 million principal amount of 6.75% convertible unsecured subordinated debentures (the “Convertible Debentures”). The Convertible Debentures are governed by the terms of an indenture dated August 9, 2016 between the Company and Computershare Trust Company of Canada (the “Debenture Indenture”). The Convertible Debentures bear interest at a rate of 6.75% per annum, payable semiannually in arrears on September 30 and March 31 of each year. The maturity date of the Convertible Debentures is September 30, 2021 (the “Debenture Maturity Date”). Each $1,000 principal amount of Convertible Debenture is convertible at the option of the holder into approximately 123.4568 common shares of Bellatrix (representing a conversion price of $8.10) prior to 5:00 p.m. (Calgary time) on the earlier of: (i) the last business day immediately prior to the Debenture Maturity Date, (ii) the last business day immediately preceding any Redemption Date (as defined in the Debenture Indenture), and (iii) if called for repurchase pursuant to a mandatory repurchase as a result of a Change of Control (as defined in the Debenture Indenture) on the last business day preceding the date of payment. The Convertible Debentures are not redeemable prior to September 30, 2019, except in limited circumstances following a Change of Control. On and after September 30, 2019 and up to and including September 30, 2020, the Convertible Debentures may be redeemed in whole or in part from time to time at the Company’s option, on not more than 60 days’ and not less than 30 days’ prior written notice, at a price equal to their principal amount plus accrued and unpaid interest, provided that the volume weighted average trading price of the common shares on the TSX for the 20 consecutive trading days preceding the date on which the notice of redemption is given is not less than 125% of the conversion price. On or after September 30, 2020 and prior to the Debenture Maturity Date, the Convertible Debentures may be redeemed in whole or in part from time to time at the Company’s option, on not more than 60 days' and not less than 30 days' prior written notice at a price equal to their principal amount plus accrued and unpaid interest. The Convertible Debentures are direct, subordinated unsecured obligations of the Company, subordinated to the Credit Facilities, Second Lien Notes, Senior Notes and any other senior indebtedness.

On a redemption date or on the Debenture Maturity Date, as applicable, subject to required regulatory approvals and provided that no Event of Default (as defined in the Debenture Indenture) has occurred and is continuing, Bellatrix may, at its option, on not more than 60 days' and not less than 40 days' prior notice, elect to satisfy its obligation to repay, in whole or in part, the principal amount of the Convertible Debentures which are to be redeemed or which will mature by issuing and delivering freely tradable common shares of the Company to the holders of the Convertible Debentures. Payment for such Convertible Debentures subject to the election would be satisfied by delivering that number of common shares obtained by dividing the principal amount of the Convertible Debentures subject to the election which are to be redeemed or which will mature by 95% of the current market price of the common shares on such redemption date or Debenture Maturity Date, as applicable. Any accrued and unpaid interest will be paid in cash.

A copy of the Debenture Indenture has been filed with Canadian and US securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) and through the SEC website (www.sec.gov).

Bellatrix Exploration Ltd. 21

Covenants

The agreement governing the Credit Facilities includes two financial covenants that must be met quarterly. The covenants require that the Company maintain a ratio of outstanding Senior Debt (defined below) to consolidated earnings before interest, taxes, depletion, depreciation and amortization (“EBITDA”), as defined by the terms of the agreement governing the Credit Facilities and adjusted for non-cash charges, for a trailing twelve month period of not more than 5.0 times until December 31, 2020, 4.5 times during the fiscal year ended December 31, 2021 and 4.0 times thereafter (the “Senior Debt Covenant”) and a First Lien Debt (defined below) to EBITDA ratio of not more than 3.0 times (the "First Lien Covenant").

As at December 31, 2018, the Company was in compliance with the Senior Debt Covenant and First Lien Covenant with a Senior Debt to EBITDA ratio of 2.88 times and a First Lien Debt to EBITDA ratio of 1.15 times.

The agreement governing the Second Lien Notes contains one financial covenant which requires the Company to maintain a ratio of outstanding Senior Debt to EBITDA for a trailing twelve month period of not more than 5.0 times until December 31, 2020, 4.5 times during the fiscal year ended December 31, 2021 and 4.0 times thereafter (the “Second Lien Covenant”). The calculations for the financial covenants are based on specific definitions that are not in accordance with IFRS and the calculations cannot be readily replicated by referring to the financial statements.

The following table lists the covenant under the Credit Facilities and Second Lien Notes and the Company’s compliance therewith as at December 31, 2018.

	Covenant as at, December 31, 2018		Position at December 31, 2018
Credit Facilities – Covenants	Maximum Ratio
Senior Debt (1) to EBITDA (2) for the last four fiscal quarters	5.00	x	2.88	x
First Lien Debt (3) to EBITDA (2) for the last four fiscal quarters	3.00	x	1.15	x
Second Lien Notes - Covenant
Senior Debt (1) to EBITDA (2) for the last four fiscal quarters	5.00	x	2.88	x

(1)“Senior Debt” is defined as Consolidated Total Debt, excluding any unsecured or subordinated debt (Senior Notes and Convertible Debentures (liability component)). “Consolidated Total Debt” is defined as determined on a consolidated basis in accordance with GAAP and without duplication, all debt of the Borrower. The Company’s calculation of Consolidated Total Debt excludes decommissioning liabilities, onerous contracts and deferred tax liability. The calculation includes outstanding letters of credit, Credit Facilities, finance lease obligations, deferred lease inducements, deferred capital obligations, deferred financing obligations and net working capital deficiency (excess), calculated as working capital deficiency excluding current risk management contract assets and liabilities, current decommissioning liabilities and current onerous contracts. Senior Debt at December 31, 2018 was $224.4 million.

(2)EBITDA is calculated based on terms and definitions set out in the agreements governing the Credit Facilities and Second Lien Notes which adjusts net income for financing costs, income taxes, depletion and depreciation, certain specific unrealized and non-cash transactions, and acquisition and disposition activity and is calculated based on a trailing twelve month basis. EBITDA for the trailing twelve months ended December 31, 2018 was $77.9 million.

(3) "First Lien Debt" is defined as Consolidated Total Debt, excluding any unsecured, second lien or subordinated debt (Second Lien Notes, Senior Notes and Convertible Debentures (liability component)). First Lien Debt at December 31, 2018 was $89.8 million.

The Senior Notes do not contain any maintenance financial covenants, but do contain covenants limiting the Company’s ability to incur additional indebtedness, including borrowings under the Credit Facilities, unless one of two alternative tests are satisfied. The first test applies to all future indebtedness and requires that, after giving effect to the incurrence of additional indebtedness, the Company’s fixed charge coverage ratio (which is the ratio of cash flow to fixed charges (both as defined in the Note Indenture) over the trailing four fiscal quarters) will be at least 2.25 to 1.0.

The second test allows the Company to incur additional indebtedness, irrespective of the fixed charge coverage ratio test, as long as the additional indebtedness, is not more than, subject to certain exceptions, the lesser of (i) the greater of (1) $675 million, and (2) 35% of adjusted consolidated net tangible assets ("ACNTA"), plus $150 million and (ii) 50% of the discounted future net revenues from proved oil and natural gas reserves included in the calculation of ACNTA. ACNTA is defined in the Note Indenture and is determined primarily by the value of discounted future net revenues from proved oil and natural gas reserves plus the capitalized cost attributable to the Company’s unevaluated properties. As a result, the Company can currently incur up to $525 million under bank facilities (which include the Credit Facilities) subject to the maximum borrowing base of the Credit Facilities, without reference to limitations that would otherwise apply due to the fixed charge coverage ratio test.

Bellatrix Exploration Ltd. 22

The following table lists the covenant under Second Lien Notes and Senior Notes and the Company’s position therewith as at December 31, 2018:

	Covenant as at, December 31, 2018	Position at December 31, 2018
Second Lien Notes and Senior Notes – Incurrence Covenant	Minimum Ratio
Fixed charge coverage (1)	2.25x	2.00x

(1) Fixed charge coverage is computed as the ratio of fixed charges (as defined in the Note Indenture, fixed charges generally includes interest expense plus paid or accrued dividends, if any) to trailing twelve month cash flow (as defined in the indenture governing the Note Indenture, cash flow includes the net loss and adds back provision for taxes, fixed charges, depletion, and various other non-recurring expenses and charges). For the trailing twelve months ended December 31, 2018, fixed charges were $39.8 million and cash flow was $79.7 million.

Bellatrix currently has commitments associated with the Credit Facilities outlined above and the commitments outlined under the “Commitments” section.

LIQUIDITY AND CAPITAL RESOURCES

As an oil and gas company, Bellatrix has a declining asset base and therefore relies on ongoing development and acquisitions to replace production and add additional reserves. Future oil and natural gas production and reserves are highly dependent on the success of exploiting the Company’s existing asset base and in identifying or acquiring additional reserves. To the extent Bellatrix is successful or unsuccessful in these activities, cash flow could be increased or decreased. In addition, the Company’s cash flow depends on a number of factors, including commodity prices, sales volumes, production expenses, transportations expenses, and royalties.

Bellatrix remains highly focused on key business objectives of maintaining financial strength and liquidity, and optimizing capital investments in the current commodity price environment. Bellatrix expects to be able to fund its $40 to $50 million 2019 net capital budget by reinvesting cash flow, asset dispositions, and if necessary, borrowings under its Credit Facilities to the extent available (see "Liquidity Risk" below). Bellatrix continually monitors its capital spending program in light of prevailing commodity prices and the United States/Canadian dollar exchange rate with the aim of ensuring the Company will be able to meet future anticipated obligations incurred from normal ongoing operations.

In addition to cash flow from operations, the Company’s other main source of liquidity is its Credit Facilities. At December 31, 2018, the Company had $47.8 million outstanding under the Company’s Credit Facilities at a year to date weighted average interest rate of 4.42% and $13.9 million of outstanding letters of credit. The borrowing base under the Company’s Credit Facilities was $100 million and total commitments under the Credit Facilities were $95 million. The revolving period of the Credit Facilities has an initial term of one year that is extendible annually at the option of the Company, subject to lender approval, with a six-month term-out period to November 30, 2019 if not renewed (refer to “Credit Facilities” above). In addition to the semi-annual borrowing base redeterminations, the Credit Facilities incorporate the debt covenants (as discussed above) which also have the ability to effectively limit the Company’s maximum drawings permitted under the Credit Facilities.

Total net debt at December 31, 2018 includes borrowings under the Credit Facilities, Second Lien Notes, Senior Notes, Convertible Debentures (liability component) and the adjusted working capital deficiency. Total net debt excludes unrealized risk management contract assets and liabilities, deferred taxes, other deferred liabilities, deferred capital obligation and decommissioning liabilities.

Total net debt levels of $443.3 million at December 31, 2018 increased by $22.5 million from $420.8 million at December 31, 2017. The increase in total net debt reflects an increase in USD denominated debt primarily due to amortization of discount and debt issue costs as well as changes in the United States dollar to the Canadian dollar, offset partially by a decrease in the amounts outstanding under the Credit Facilities.

As at December 31, 2018 the Company has eliminated net debt associated with its Senior Notes by US$32.1 million (approximately $41.8 million CAD). This included a US$24.1 million reduction through note exchanges for common shares of Bellatrix, as well as a US$8.0 million reduction (approximately $10.5 million CAD) through the Second Lien Refinancing pursuant to which $80.1 million of Senior Notes were exchanged for US$72.1 million of Second Lien Notes. In addition, the Second Lien Refinancing exchange benefited the Company’s long term debt maturity profile as it extended the maturity on US$72.1 million of the Company's debt by three years, from 2020 to 2023.

On January 22, 2019, the Company announced that its board of directors had determined to commence procedures for the voluntary delisting of the Company's common shares from the New York Stock Exchange ("NYSE"). Bellatrix has filed a Form 25 with the Securities and Exchange Commission ("SEC") to affect the voluntary delisting of Bellatrix's common shares from the NYSE and the last day of trading was February 11, 2019.

Bellatrix Exploration Ltd. 23

Debt to Adjusted Funds Flow Ratio
	Year ended December 31,
($000s, except where noted)	2018	2017
Shareholders’ equity	672,725	774,022
Credit Facilities	47,763	52,066
Adjusted working capital deficiency (1)	20,740	23,926
Subtotal	68,503	75,992
Second Lien Notes	137,097	—
Senior Notes (2)	196,000	305,409
Net debt (1)	401,600	381,401
Convertible Debentures (liability component)	41,732	39,426
Total net debt (1) at year end	443,332	420,827
Debt to adjusted funds flow ratio (annualized) (3) (4)
Adjusted funds flow (4) (annualized)	62,032	62,800
Net debt (1) to periods adjusted funds flow ratio (annualized) (3)	6.5x	6.1x
Total net debt to periods adjusted funds flow ratio (annualized) (3)	7.1x	6.7x
Debt to adjusted funds flow ratio (4)
Adjusted funds flow for the year (4)	48,025	58,240
Net debt (1) to adjusted funds flow ratio (4) for the year	8.4x	6.5x
Total net debt (1) to adjusted funds flow ratio (4) for the year	9.2x	7.2x

(1)Net debt and total net debt as presented do not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. The Company’s calculation of total net debt excludes other deferred liabilities, long-term risk management liabilities, decommissioning liabilities, and the deferred tax liability. Total net debt includes the adjusted working capital deficiency, Convertible Debentures (liability component), current Credit Facilities, non-current Credit Facilities, Second Lien Notes and Senior Notes. The adjusted working capital deficiency as presented does not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. The Company calculated adjusted working capital deficiency as net working capital deficiency excluding current risk management contract assets and liabilities, current portion of other deferred liabilities, current portion of Credit Facilities and the current portion of decommissioning liabilities. Net debt excludes the liability component of Convertible Debentures that is included in total net debt.

(2) For the year ended December 31, 2018, includes unrealized foreign exchange loss of $18.6 million (2017: $22.2 million gain) and does not include an unrealized gain of $3.4 million (2017: $3.9 million loss) on foreign exchange contracts.

(3) For the years ended December 31, 2018 and 2017, total net debt to period’s adjusted funds flow ratio (annualized) is calculated based upon fourth quarter adjusted funds flow annualized.

(4) Adjusted funds flow as presented do not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. Adjusted funds flow is calculated as cash flow from operating activities, excluding decommissioning costs incurred, changes in non-cash working capital incurred, and transaction costs. 

As at December 31, 2018 the Company’s ratio of total net debt to annualized adjusted funds flow (based on fourth quarter adjusted funds flow) was 7.1 times.The total net debt to annualized adjusted funds flow ratio as at December 31, 2018 increased from that at December 31, 2017 of 6.7 times primarily due to an increase in 2018 USD denominated debt primarily due to amortization of discount and debt issue costs as well as changes in the United States dollar to the Canadian dollar. The Company continues to preserve liquidity through the priority use of adjusted funds flow.

Liquidity Risk

Liquidity risk is the risk that Bellatrix will not be able to meet its financial obligations as they become due. Bellatrix actively manages its liquidity through daily and longer-term cash, debt, and equity management strategies. Such strategies encompass, among other factors: having adequate sources of financing available through its Credit Facilities, estimating future cash generated from operations based on reasonable production and pricing assumptions, analysis of economic risk management opportunities, and maintaining sufficient cash flows to ensure compliance with the Credit Facilities and Senior Debt Covenant described above. The Company also mitigates liquidity risk by maintaining an insurance program to minimize exposure to insurable losses.

Amounts outstanding under the Credit Facilities were $47.8 million and total outstanding letters of credit were $13.9 million at December 31, 2018. The revolving period under the Company’s Credit Facilities ends on May 30, 2019, and the Credit Facilities are extendible annually thereafter at the option of the Company, subject to lender approval. If the revolving period is not renewed in May 2019, the Credit Facilities would enter a six-month term-out period to November 30, 2019. Bellatrix also has Senior Notes and Convertible Debentures outstanding with fixed interest rates (as outlined above in “Senior Notes” and “Convertible Debentures”), which mature on May 15, 2020 and September 30, 2021, respectively. The Note Purchase Agreement provides that the maturity

Bellatrix Exploration Ltd. 24

date of Second Lien Notes will be accelerated to March 14, 2020 if more than US$25 million principal amount of Senior Notes remains outstanding as at March 14, 2020.

There remains uncertainty and liquidity risk until such time as the Company implements a financing arrangement that addresses the pending maturities under the May 2020 Senior Notes and the Credit Facilities. Bellatrix is engaged in ongoing confidential discussions with parties across the Company’s capital structure in connection with potential transaction alternatives, including refinancing the remaining Senior Notes which mature in May 2020 in order to extend the maturity of the Credit Facilities beyond November 30, 2019. There are no assurances that a transaction will be completed and that an extension of the Credit Facilities will be obtained by the Company or on what terms.

Future liquidity depends primarily on the ability of the Company to refinance its debt obligations, cash flow generated from operations, availability under the Credit Facilities and Bellatrix’s ability to comply with the Senior Debt Covenants and other covenants contained therein (as outlined above in “Covenants”), and the ability to access debt and equity markets. There can be no assurance that the Company will complete financing arrangements that address the pending maturities of the Credit Facilities in 2019 and Senior Notes in 2020, or that future debt or equity financing, additional credit under the Credit Facilities, or cash generated by operations will be available or sufficient to meet these requirements or for other corporate purposes or, if debt or equity financing is available, that it will be on terms acceptable to Bellatrix.

Effective July 1, 2017, the Company consolidated its common shares on the basis of 1 new common share for every 5 old common shares outstanding. The number of outstanding share options, DSUs, RAs and PAs have also been adjusted proportionately. The corresponding exercise prices have increased by the same ratio. The conversion price and ratio on the Convertible Debentures have also been adjusted proportionately.

As at March 13, 2018, there was $50 million principal amount of Convertible Debentures outstanding which are convertible, at the option of the holder, into approximately 6,172,840 common shares of the Company based on a conversion price of $8.10 per share. The Company may elect to issue common shares of the Company to satisfy the obligation to repay, in whole or in part, the principal amount of the Convertible Debentures upon redemption or maturity of the Convertible Debentures (any accrued and unpaid interest on such redemption or maturity will be paid in cash). The exact number of common shares of the Company that may be issuable on redemption or maturity would be determined by dividing the principal amount of the Convertible Debentures by 95% of the current market price of the common shares on the redemption date or maturity date, as applicable.

From time to time, the Company accesses capital markets to meet its additional financing needs and to maintain flexibility in funding its capital programs. As at December 31, 2018, the Company has the ability to issue up to an additional $476.0 million in equity securities under its $500 million Shelf Prospectus, which expires on July 29, 2020. Management expects to renew the Shelf Prospectus before expiry.

As at March 13, 2019, Bellatrix had outstanding a total of 952,532 options at an average exercise price of $8.49 per share and had 80,909,225 common shares outstanding. Additionally, Bellatrix had 821,954 DSUs, 763,075 PAs and 1,140,704 RAs outstanding as of March 13, 2019. Awards under the Award Plan may be settled in cash, in common shares of the Company, or a combination thereof.

Pursuant to the Award Plan, there is one common share underlying each Award subject to, in the case of PAs, the payout multiplier, and Awards may be settled in cash (equivalent to the value of the common shares underlying such Awards), common shares of the Company or a combination thereof. Pursuant to the DSU Plan, there is one common share underlying each DSU and DSUs are settled in cash (equivalent to the value of the common shares underlying such DSUs) after the director holding such DSUs ceases to be a director of the Company. As at March 14, 2019, there were also warrants outstanding to purchase 3,088,205 common shares of Bellatrix at an exercise price of $1.30 per common share.

Credit Risk

Credit risk is the risk of financial loss to Bellatrix if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from Bellatrix’s trade receivables from joint venture partners, petroleum and natural gas marketers, and financial derivative counterparties.

A substantial portion of Bellatrix’s accounts receivable are with customers and joint venture partners in the petroleum and natural gas industry and are subject to normal industry credit risks. Bellatrix currently sells substantially all of its production to ten primary purchasers under standard industry sale and payment terms. The most significant 60 day exposure to a single counterparty is approximately $13.9 million. Purchasers of Bellatrix’s natural gas, crude oil and natural gas liquids are subject to a periodic internal credit review to minimize the risk of non-payment. Bellatrix has continued to closely monitor and reassess the creditworthiness of its counterparties, including financial institutions. This has resulted in Bellatrix mitigating its exposures to certain counterparties by obtaining financial assurances or reducing credit where it is deemed warranted and permitted under contractual terms.

Bellatrix may be exposed to third party credit risk through its contractual arrangements with its current or future partners and joint venture partners, marketers of its petroleum and natural gas production, derivative counterparties and other parties. In the event

Bellatrix Exploration Ltd. 25

such entities fail to meet their contractual obligations to Bellatrix, such failures may have a material adverse effect on the Company’s business, financial condition, results of operations and prospects. In addition, poor credit conditions in the industry and of joint venture partners may impact a joint venture partner’s willingness to participate in Bellatrix’s ongoing capital program, potentially delaying the program and the results of such program until Bellatrix finds a suitable alternative partner.

ENVIRONMENTAL INITIATIVES IMPACTING BELLATRIX

Bellatrix operates in jurisdictions that have regulated greenhouse gas (“GHG”) emissions and other air pollutants. While some regulations are in effect, further changes and amendments are at various stages of review, discussion and implementation. There is uncertainty around how any future federal legislation will harmonize with provincial regulation, as well as the timing and effects of regulations. Climate change regulation at both the federal and provincial level has the potential to significantly affect the regulatory environment of the crude oil and natural gas industry in Canada. Such regulations impose certain costs and risks on the industry, and there remains some uncertainty with regard to the impacts of federal or provincial climate change and environmental laws and regulations, as Bellatrix is unable to predict additional legislation or amendments that governments may enact in the future. Any new laws and regulations, or additional requirements to existing laws and regulations, could have a material impact on the Company's operations and cash flow.

Additional information is available in Bellatrix’s Annual Information Form ("AIF") that is filed on SEDAR at www.sedar.com.

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

 The Company had the following commitments and contractual obligations as at December 31, 2018:

Liabilities ($000s)	Total	< 1 Year	1-3 Years	3-5 Years	More than 5 years
Accounts payable and accrued liabilities	61,211	61,211	—	—	—
Risk management liability	2,569	917	1,652	—	—
Credit Facilities – principal	47,763	47,763	—	—	—
Second Lien Notes (1)(2)	139,331	—	—	139,331	—
Senior Notes (1)	198,904	—	198,904	—	—
Convertible Debentures (liability component) (1)	50,000	—	50,000	—	—
Decommissioning liabilities	63,874	2,387	2,611	6,227	52,649
Finance lease obligation	5,721	475	938	915	3,393
Total	569,373	112,753	254,105	146,473	56,042

(1) Principal amount of the instruments

(2) Maturity date of Second Lien Notes will be accelerated to March 14, 2020 if more than US$25 million principal amount of Senior Notes remaining outstanding as at March 14, 2020.

Off-Balance Sheet Arrangements

The Company has certain fixed-term lease agreements, primarily compressor and office space leases, which were entered into in the normal course of operations. Additionally, Bellatrix leases certain production facilities from a third party midstream company. Bellatrix maintains operatorship and preferential access to the facilities for its operated production volumes and retains, at its sole discretion, the option to repurchase the facilities at any time during the agreement period. Pursuant to the agreement, Bellatrix will pay an annual rental fee over the duration of the agreement.

Bellatrix and Keyera Partnership ("Keyera") have entered into a midstream services and governance agreement pursuant to which Bellatrix will have exclusive access to the purchased capacity (approximately 80.5 MMcf/d post commissioning of Phase 2) for a term of 10 years, and will remain the operator of the Alder Flats Plant.  In exchange for exclusive access to the purchased capacity during the term, Keyera will be entitled to receive, on an annual basis, a guaranteed fee calculated with reference to the capital fees that Keyera will otherwise receive in accordance with the terms of the construction, ownership and operation agreement governing the Alder Flats Plant.

All leases have been treated as operating leases whereby the lease payments are included in operating expenses or G&A expenses, depending on the nature of the lease. The lease agreements for office space do not currently provide for early termination. No asset or liability value has been assigned to these leases in the balance sheet as of December 31, 2018.

Bellatrix Exploration Ltd. 26

The Company’s contractual obligations and commitments as at December 31, 2018 were as follows:

($000s)	1 Year		2-3 Years		4-5 Years		More than 5 years		Total
Operating leases (1)	$	22,433	$	41,107	$	33,782	$	14,745	$	112,067
Transportation and processing agreements (2)	$	53,943	$	92,147	$	66,161	$	101,882	$	314,133

(1) Operating leases is comprised of the Company’s commitment for office space, net of recoveries and gross operating leases for field equipment. The Company is committed to payments under fixed term operating leases for office space which do not currently provide for early termination.

(2) Transportation agreements is comprised of commitments to third parties to transport natural gas. Processing agreements is comprised of commitments to process natural gas and natural gas liquids through processing facilities.

2018 OPERATIONAL PERFORMANCE

2018 performance included the following operational and financial achievements:

• Production volumes in the fourth quarter of 2018 averaged 35,001 boe/d (71% natural gas weighted). Full year 2018 average production volumes of 35,635 boe/d represented 1% outperformance compared with the mid-point of Bellatrix’s full year average production guidance range (35,000 to 35,500 boe/d).

• Record low production expenses in the fourth quarter of 2018 averaged $6.59/boe, down 16% compared with average production expenses of $7.80/boe over the first nine months of 2018. The Company achieved full year 2018 average production expenditures of $7.50/boe, 4% below the mid point of the guidance range of $7.65/boe to $7.90/boe.

• Bellatrix continues to improve drilling efficiency and reduce costs. During the fourth quarter of 2018, Bellatrix averaged 8.7 days from spud to rig release on single mile horizontal Spirit River natural gas wells. This represented a 13% improvement as compared to the first nine months of 2018. All-in Spirit River well costs continue to track approximately $3.4 million (drill, complete, equip and tie-in).

Bellatrix full year 2018 operational performance relative to guidance expectations is summarized below:

	Full Year 2018 Results	2018 Annual Guidance (1)	Actual Results Versus Guidance
Average daily production (boe/d)	35,635	35,250	1	%
Average product mix
Natural gas (%)	72	73	(1	)%
Crude oil, condensate and NGLs (%)	28	27	4	%
Capital Expenditures ($000’s)
Total net capital expenditures(2)	51,640	52,500	(2	)%
Production expense ($/boe)	7.50	7.78	(4	)%

(1) 2018 Annual Guidance metrics represent the mid-point of the previously set guidance range (November 1, 2018) where applicable.

(2) Capital spending includes exploration and development capital projects and corporate assets, and excludes property acquisitions, property dispositions, and facilities.

OUTLOOK AND 2019 CORPORATE GUIDANCE

Bellatrix’s Board of Directors approved a 2019 capital budget between $40 to $50 million, designed to maintain average production volumes of between 34,000 to 36,000 boe/d. Bellatrix plans to fund the 2019 capital budget primarily through cash flow from operating activities. The capital budget incorporates forward pricing expectations of US$65/bbl WTI, $1.60/GJ AECO, a $1.34 CAD/USD exchange rate, and is underpinned by strong commodity price risk management protection and natural gas diversification contracts.

Bellatrix Exploration Ltd. 27

Bellatrix’s 2019 guidance estimates are outlined in the following table.

	2019 Annual Guidance (January 15, 2019)
Production
Average daily production (boe/d)	34,000 - 36,000
Average product mix
Natural gas (%)	72
Crude oil, condensate and NGLs (%)	28
Net Capital Expenditures
Total net capital expenditures ($000) (1)	40,000 - 50,000

(1) Excludes property acquisitions and dispositions and is Bellatrix's sustaining capital requirements for 2019. Sustaining capital refers to capital expenditures to maintain production from existing facilities at current production levels. Sustaining capital does not have any standardized meaning and therefore may note be comparable to similar measures presented by other entities.

FINANCIAL REPORTING UPDATE

NEWLY ADOPTED ACCOUNTING POLICIES

IFRS 9 Financial Instruments ("IFRS 9")

The Company adopted IFRS 9 effective January 1, 2018. IFRS 9 replaces IAS 39 - Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 introduces new requirements for the classification and measurement of financial assets, amends the requirements related to hedge accounting, and introduces a forward-looking expected loss impairment model.

The adoption of this standard had no impact on the Company’s financial statements on the date of adoption, or for comparative periods. There was no change in the carrying amounts recognized under IAS 39, despite the new measurement categories stipulated under IFRS 9. The Company has applied IFRS 9 retrospectively, without restatement.

A comparison of financial instrument subsequent measurement categories, pre and post adoption of IFRS 9, is as follows:

Financial Assets and Liabilities	IAS 39	IFRS 9
Accounts receivable	Amortized cost	Amortized cost
Commodity risk management contracts	FVTPL(1)	FVTPL(1)
Foreign exchange risk management contracts	FVTPL(1)	FVTPL(1)
Accounts payable and accrued liabilities	Amortized cost	Amortized cost
Deferred share units	FVTPL(1)	FVTPL(1)
Restricted awards	FVTPL(1)	FVTPL(1)
Performance awards	FVTPL(1)	FVTPL(1)
Credit Facilities	Amortized cost	Amortized cost
Second Lien Notes	N/A	Amortized cost
Senior Notes	Amortized cost	Amortized cost
Convertible Debentures	Amortized cost	Amortized cost
Finance lease obligation	Amortized cost	Amortized cost

(1) "FVTPL" means fair value through fair value through profit or loss

The adoption of IFRS 9 did not result in any additional provision for impairment.

IFRS 15 Revenue from Contracts with Customers ("IFRS 15")

The Company adopted IFRS 15 with a date of initial application of January 1, 2018. Bellatrix used the cumulative effect method to adopt the new standard. Bellatrix has reviewed its revenue streams and major contracts with customers using the IFRS 15 five-step model and there are no material changes to the timing or amounts of revenue recognized. However, IFRS 15 contains new disclosure requirements.

IFRS 3 Business Combinations ("IFRS 3")

The Company early adopted the amended IFRS 3 with a date of initial application of November 1, 2018. The amendments provides clarification on determining whether an acquisition made is of a business or a group of assets and introduces an optional concentration test that permits a simplified assessment. The amendments are applied prospectively to all business combinations and asset acquisitions. These impact the two joint venture partner acquisitions in the fourth quarter of 2018 which management has assessed do not meet the definition of a business combination.

FUTURE ACCOUNTING POLICIES

IFRS 16 Leases ("IFRS 16")

IFRS 16 replaces IAS 17 - "Leases" and the standard will come into effect for annual periods beginning on or after January 1, 2019. For lessees applying IFRS 16, a single recognition and measurement model for leases would apply, with required recognition of right-of-use (“ROU”) assets and lease liabilities for most leases. All contracts that meet the definition of a lease under IFRS 16, including those presently accounted for as operating leases, will be recorded on the balance sheet. The standard may be applied retrospectively or using a modified retrospective approach. The Company has selected to use the modified retrospective approach which does not require restatement of prior period financial information as the cumulative effect of applying the standard to prior periods is recorded as an adjustment to opening retained earnings. On initial adoption, Bellatrix has elected to use the following practical expedients permitted under the standard:

• Certain short-term leases and leases of low value assets that have been identified at January 1, 2019 will not be recognized on the balance sheet.

• At January 1, 2019, Bellatrix will not recognize leases with terms ending within 12 months as short-term leases.

• Leases having similar characteristics will be measured as a portfolio by applying a single discount rate.

Bellatrix Exploration Ltd. 28

• For certain leases having associated initial direct costs, Bellatrix will, at initial measurement on transition, exclude these direct costs from the measurement of the ROU asset.

• At January 1, 2019, any provision for onerous contracts previously recognized will be applied to the associated ROU asset recognized upon transition to IFRS 16, In these cases, there will be no impairment assessment made under IAS 36 - “Impairment of Assets”.

On adoption of IFRS 16, the Company will recognize lease liabilities in relation to leases under the principles of the new standard measured at the present value of the remaining lease payments, discounted using the Company’s incremental borrowing rate as at January 1, 2019. The associated ROU assets will be measured at the amount equal to the lease liability on January 1, 2019 less any amount previously recognized under IAS 37 for onerous contracts with no impact on retained earnings.

Adoption of the new standard will result in the recognition of additional lease liabilities and ROU assets in excess of approximately $80 million. The Company’s leases that will be recognized on its balance sheet at January 1, 2019 include leases of office leases, compressor leases and equipment leases. The impact on the statement of profit (loss) and comprehensive income (loss) will be as follows:

• Lower general and administrative expenses, operating costs and higher other income

• Higher finance expenses due to the interest recognized on the lease obligations; and

• Higher depreciation expense related to the ROU assets.

BUSINESS RISKS AND UNCERTAINTIES

Bellatrix's production and exploration activities are concentrated in the Western Canadian Sedimentary Basin, where activity is highly competitive and includes a variety of different sized companies ranging from smaller junior producers to the much larger integrated petroleum companies.

Bellatrix is subject to the various types of business risks and uncertainties including:

• financial risks, which includes commodity price risk, counterparty risks, liquidity risks and other risks related to the Company's financing arrangements;

• finding and developing oil and natural gas reserves at economic costs; and

• operational risks such as risks related to health and safety, transportation and processing restrictions, project execution and the environment.

A description of the risk factors and uncertainties affecting Bellatrix can be found under the heading "Forward Looking Statements" and a full discussion of the material risk factors affecting Bellatrix can be found in the Company’s AIF and Form 40-F for the year ended December 31, 2017, which may be accessed through the SEDAR website (www.sedar.com), through the SEC website (www.sec.gov), and at Bellatrix's website (www.bxe.com).

The following explains how material risks and uncertainties impact Bellatrix’s business:

Exploration, Development and Production Risks

Oil and natural gas operations involve many risks that even a combination of experience, knowledge and careful evaluation may not be able to overcome. The long‑term commercial success of Bellatrix depends on its ability to find, acquire, develop and commercially produce oil and natural gas reserves. Without the continual addition of new reserves, Bellatrix's existing reserves, and the production from them, will decline over time as Bellatrix produces from such reserves. A future increase in Bellatrix's reserves will depend on both the ability of Bellatrix to explore and develop its existing properties and its ability to select and acquire suitable producing properties or prospects. There is no assurance that Bellatrix will be able to continue to find satisfactory properties to acquire or participate in. Moreover, management of Bellatrix may determine that current markets, terms of acquisition, participation or pricing conditions make potential acquisitions or participation uneconomic. There is also no assurance that Bellatrix will discover or acquire further commercial quantities of oil and natural gas.

Future oil and natural gas exploration may involve unprofitable efforts from dry wells or from wells that are productive but do not produce sufficient petroleum substances to return a profit after drilling, completing (including hydraulic fracturing), operating and other costs. Completion of a well does not ensure a profit on the investment or recovery of drilling, completion and operating costs.

Drilling hazards, environmental damage and various field operating conditions could greatly increase the cost of operations and adversely affect the production from successful wells. Field operating conditions include, but are not limited to, delays in obtaining governmental approvals or consents, shut‑ins of wells resulting from extreme weather conditions, insufficient storage or transportation capacity or geological and mechanical conditions. While diligent well supervision, effective maintenance operations and the development of enhanced oil recovery technologies can contribute to maximizing production rates over time, it is not possible to eliminate production delays and declines from normal field operating conditions, which can negatively affect revenue and cash flow levels to varying degrees.

Bellatrix Exploration Ltd. 29

Oil and natural gas exploration, development and production operations are subject to all the risks and hazards typically associated with such operations, including, but not limited to, fire, explosion, blowouts, cratering, sour gas releases, spills and other environmental hazards. These typical risks and hazards could result in substantial damage to oil and natural gas wells, production facilities, other property, the environment and cause personal injury or threaten wildlife. Particularly, Bellatrix may explore for and produce sour natural gas in certain areas. An unintentional leak of sour gas could result in personal injury, loss of life or damage to property and may necessitate an evacuation of populated areas, all of which could result in liability to Bellatrix.

Oil and natural gas production operations are also subject to all the geological and seismic risks typically associated with such operations, including encountering unexpected formations or pressures, premature decline of reservoirs and the invasion of water into producing formations. Losses resulting from the occurrence of any of these risks may have a material adverse effect on Bellatrix's business, financial condition, results of operations and prospects.

As is standard industry practice, Bellatrix is not fully insured against all risks, nor are all risks insurable. Although the Company maintains liability insurance and business interruption insurance in an amount that it considers consistent with industry practice, liabilities associated with certain risks could exceed policy limits or not be covered. In either event, Bellatrix could incur significant costs.

Prices, Markets and Marketing

Numerous factors beyond Bellatrix's control do, and will continue to, affect the marketability and price of oil and natural gas acquired, produced, or discovered by Bellatrix. The Company's ability to market its oil and natural gas may depend upon its ability to acquire capacity on pipelines that deliver natural gas to commercial markets or contract for the delivery of crude oil by rail. Deliverability uncertainties related to the distance Bellatrix's reserves are from pipelines, railway lines, processing and storage facilities; operational problems affecting pipelines, railway lines and processing and storage facilities; and government regulation relating to prices, taxes, royalties, land tenure, allowable production, the export of oil and natural gas and many other aspects of the oil and natural gas business may also affect Bellatrix.

Prices for oil and natural gas are subject to large fluctuations in response to relatively minor changes in the supply of and demand for oil and natural gas, market uncertainty and a variety of additional factors beyond the control of Bellatrix. These factors include economic and political conditions in the United States, Canada, Europe, China and emerging markets, the actions of OPEC and other oil and natural gas exporting nations, governmental regulation, political stability in the Middle East, Northern Africa and elsewhere, the foreign supply and demand of oil and natural gas, risks of supply disruption, the price of foreign imports and the availability of alternative fuel sources. Prices for oil and natural gas are also subject to the availability of foreign markets and Bellatrix's ability to access such markets. A material decline in prices could result in a reduction of Bellatrix's net production revenue. The economics of producing from some wells may change because of lower prices, which could result in reduced production of oil or natural gas and a reduction in the volumes and the value of Bellatrix's reserves. The Company might also elect not to produce from certain wells at lower prices.

All these factors could result in a material decrease in Bellatrix's expected net production revenue and a reduction in its oil and natural gas production, development and exploration activities. Any substantial and extended decline in the price of oil and natural gas would have an adverse effect on Bellatrix's carrying value of its reserves, borrowing capacity, revenues, profitability and cash flows from operations and may have a material adverse effect on Bellatrix's business, financial condition, results of operations and prospects.

Oil and natural gas prices are expected to remain volatile for the near future because of market uncertainties over the supply and the demand of these commodities due to the current state of the world economies, increased growth of shale oil production in the United States, OPEC actions, political uncertainties, sanctions imposed on certain oil producing nations by other countries and ongoing credit and liquidity concerns. Volatile oil and natural gas prices make it difficult to estimate the value of producing properties for acquisitions and often cause disruption in the market for oil and natural gas producing properties, as buyers and sellers have difficulty agreeing on such value. Price volatility also makes it difficult to budget for, and project the return on, acquisitions and development and exploitation projects.

Project Risks

The Company manages a variety of small and large projects in the conduct of its business. Project delays may impact expected revenues from operations. Significant project cost overruns could make a project uneconomic. The Company's ability to execute projects and market oil and natural gas depends upon numerous factors beyond Bellatrix's control, including:

• the availability of processing capacity;

• the availability and proximity of pipeline capacity;

• the availability of storage capacity;

• the availability of, and the ability to acquire, water supplies needed for drilling, hydraulic fracturing, and waterfloods or Bellatrix's ability to dispose of water used or removed from strata at a reasonable cost and in accordance with applicable environmental regulations;

Bellatrix Exploration Ltd. 30

• the effects of inclement weather;

• the availability of drilling and related equipment;

• unexpected cost increases;

• accidental events;

• currency fluctuations;

• regulatory changes;

• the availability and productivity of skilled labour; and

• the regulation of the oil and natural gas industry by various levels of government and governmental agencies.

• Because of these factors, Bellatrix could be unable to execute projects on time, on budget, or at all and may be unable to market the oil and natural gas that it produces effectively.

Gathering and Processing Facilities and Pipeline Systems

The Company delivers its products through gathering and processing facilities and by pipeline. The amount of oil and natural gas that Bellatrix can produce and sell is subject to the accessibility, availability, proximity and capacity of these gathering and processing facilities and pipeline systems. The lack of availability of capacity in any of the gathering and processing facilities and pipeline systems could result in Bellatrix's inability to realize the full economic potential of its production or in a reduction of the price offered for Bellatrix's production. The lack of firm pipeline capacity continues to affect the oil and natural gas industry and limit the ability to transport produced oil and gas to market. In addition, the pro-rationing of capacity on inter-provincial pipeline systems continues to affect the ability to export oil and natural gas. Unexpected shut downs or curtailment of capacity of pipelines for maintenance or integrity work or because of actions taken by regulators could also affect Bellatrix's production, operations and financial results. As a result, producers are increasingly turning to rail as an alternative means of transportation. In recent years, the volume of crude oil shipped by rail in North America has increased dramatically. Any significant change in market factors or other conditions affecting these infrastructure systems and facilities, as well as any delays or uncertainty in constructing new infrastructure systems and facilities could harm Bellatrix's business and, in turn, Bellatrix's financial condition, operations and cash flows. Announcements and actions taken by the governments of British Columbia and Alberta relating to approval of infrastructure projects may continue to intensify, leading to increased challenges to interprovincial and international infrastructure projects moving forward. In addition, while the federal government has recently introduced draft legislation to overhaul the existing environmental assessment process and replace the NEB with a new regulatory agency, the impact of the new proposed regulatory scheme on proponents and the timing of receipt of approvals of major projects remains unclear.

A portion of Bellatrix's production may, from time to time, be processed through facilities owned by third parties and over which Bellatrix does not have control. From time to time, these facilities may discontinue or decrease operations either as a result of normal servicing requirements or as a result of unexpected events. A discontinuation or decrease of operations could have a materially adverse effect on Bellatrix's ability to process its production and deliver the same for sale.

Midstream and pipeline companies may take actions to maximize their return on investment which may in turn adversely affect producers and shippers, especially when combined with a regulatory framework that may not always align with the interests of particular shippers.

Failure to Realize Anticipated Benefits of Acquisitions and Dispositions

The Company considers acquisitions and dispositions of businesses and assets in the ordinary course of business. Achieving the benefits of acquisitions depends on successfully consolidating functions and integrating operations and procedures in a timely and efficient manner and Bellatrix's ability to realize the anticipated growth opportunities and synergies from combining the acquired businesses, operations and assets with those of Bellatrix. The integration of acquired businesses may require substantial management effort, time and resources diverting management's focus from other strategic opportunities and operational matters. Management continually assesses the value and contribution of services provided by third parties and the resources required to provide such services. In this regard, non‑core assets may be periodically disposed of so Bellatrix can focus its efforts and resources more efficiently. Depending on the state of the market for such non‑core assets, certain non‑core assets of Bellatrix may realize less on disposition than their carrying value on the financial statements of Bellatrix.

Substantial Capital Requirements

The Company anticipates making substantial capital expenditures for the acquisition, exploration, development and production of oil and natural gas reserves in the future. As future capital expenditures will be financed out of cash generated from operations, borrowings and possible future equity sales, Bellatrix's ability to do so is dependent on, among other factors:

• the overall state of the capital markets;

• Bellatrix's credit rating (if applicable);

• commodity prices;

• interest rates;

• royalty rates;

• tax burden due to current and future tax laws; and

Bellatrix Exploration Ltd. 31

• investor appetite for investments in the energy industry and Bellatrix's securities in particular.

Further, if Bellatrix's revenues or reserves decline, it may not have access to the capital necessary to undertake or complete future drilling programs. The current conditions in the oil and gas industry have negatively impacted the ability of oil and gas companies to access additional financing. There can be no assurance that debt or equity financing, or cash generated by operations will be available or sufficient to meet these requirements or for other corporate purposes or, if debt or equity financing is available, that it will be on terms acceptable to Bellatrix. The Company may be required to seek additional equity financing on terms that are highly dilutive to existing shareholders. The inability of Bellatrix to access sufficient capital for its operations could have a material adverse effect on Bellatrix's business financial condition, results of operations and prospects.

Additional Funding Requirements

The Company's cash flow from its reserves may not be sufficient to fund its ongoing activities at all times and from time to time, Bellatrix may require additional financing in order to carry out its oil and natural gas acquisition, exploration and development activities. Failure to obtain financing on a timely basis could cause Bellatrix to forfeit its interest in certain properties, miss certain acquisition opportunities and reduce or terminate its operations. Due to the conditions in the oil and gas industry and/or global economic and political volatility, Bellatrix may from time to time have restricted access to capital and increased borrowing costs. The current conditions in the oil and gas industry have negatively impacted the ability of oil and gas companies to access additional financing.

As a result of global economic and political volatility, Bellatrix may from time to time have restricted access to capital and increased borrowing costs. Failure to obtain such financing on a timely basis could cause Bellatrix to forfeit its interest in certain properties, miss certain acquisition opportunities and reduce or terminate its operations. If Bellatrix's revenues from its reserves decrease as a result of lower oil and natural gas prices or otherwise, it will affect Bellatrix's ability to expend the necessary capital to replace its reserves or to maintain its production. To the extent that external sources of capital become limited, unavailable or available on onerous terms, Bellatrix's ability to make capital investments and maintain existing assets may be impaired, and its assets, liabilities, business, financial condition and results of operations may be affected materially and adversely as a result. In addition, the future development of Bellatrix's petroleum properties may require additional financing and there are no assurances that such financing will be available or, if available, will be available upon acceptable terms. Alternatively, any available financing may be highly dilutive to existing shareholders. Failure to obtain any financing necessary for Bellatrix's capital expenditure plans may result in a delay in development or production on Bellatrix's properties.

Credit Facility and Debt Arrangements

The Company is required to comply with covenants under its Credit Facilities and in the event that Bellatrix does not comply with these covenants, Bellatrix's access to capital could be restricted or repayment could be required. Even if Bellatrix is able to obtain new financing, it may not be on commercially reasonable terms or terms that are acceptable to Bellatrix. Events beyond Bellatrix's control may contribute to the failure of Bellatrix to comply with such covenants. A failure to comply with covenants could result in default under the Credit Facilities, which could result in Bellatrix being required to repay amounts owing thereunder. The acceleration of Bellatrix's indebtedness under one agreement may permit acceleration of indebtedness under other agreements that contain cross default or cross-acceleration provisions. In addition, the Credit Facilities may impose operating and financial restrictions on Bellatrix that could include restrictions on, the payment of dividends, repurchase or making of other distributions with respect to Bellatrix's securities, incurring of additional indebtedness, the provision of guarantees, the assumption of loans, making of capital expenditures, entering into of amalgamations, mergers, take-over bids or disposition of assets, among others.

The Company's lenders use Bellatrix's reserves, commodity prices, applicable discount rate and other factors, to periodically determine Bellatrix's borrowing base. There remains a substantial amount of uncertainty as to when and if commodity prices will recover. Continued depressed commodity prices or further reductions in commodity prices could result in a further reduction to Bellatrix's borrowing base, reducing the funds available to Bellatrix under the Credit Facilities. This could result in the requirement to repay a portion, or all, of Bellatrix's indebtedness.

The revolving period under the Credit Facilities ends on May 30, 2019 unless extended by the lenders thereunder. The maturity date under the Credit Facilities is six months after the end of the revolving period. Unless the revolving period is extended, the maturity date is November 30, 2019. There is no certainty that the lenders under the Credit Facilities will grant such extension. Future liquidity and operations of the Company are dependent on the ability of the Company to generate sufficient operating cash flows to fund its on-going operations.

Issuance of and Refinancing Debt

From time to time, Bellatrix may enter into transactions to acquire assets or shares of other entities. These transactions may be financed in whole or in part with debt, which may increase Bellatrix's debt levels above industry standards for oil and natural gas companies of similar size. Depending on future exploration and development plans, Bellatrix may require additional debt financing that may not be available or, if available, may not be available on favourable terms. Neither Bellatrix's articles nor its by‑laws limit

Bellatrix Exploration Ltd. 32

the amount of indebtedness that Bellatrix may incur.The level of Bellatrix's indebtedness from time to time could impair Bellatrix's ability to obtain additional financing on a timely basis to take advantage of business opportunities that may arise.

To the extent that external sources of capital become limited or unavailable or only available on onerous terms, Bellatrix’s ability to obtain additional financing or refinance existing debt may be impaired, and the Company's assets, liabilities, business, financial condition and results of operations may be materially and adversely affected as a result.

Third Party Credit Risk

The Company may be exposed to third party credit risk through its contractual arrangements with its current or future joint venture partners, marketers of its petroleum and natural gas production and other parties. In addition, Bellatrix may be exposed to third party credit risk from operators of properties in which Bellatrix has a working or royalty interest. Poor credit conditions in the industry and of joint venture partners may affect a joint venture partner's willingness to participate in Bellatrix's ongoing capital program, potentially delaying the program and the results of such program until Bellatrix finds a suitable alternative partner. To the extent that any of such third parties go bankrupt, become insolvent or make a proposal or institute any proceedings relating to bankruptcy or insolvency, it could result in Bellatrix being unable to collect all or a portion of any money owing from such parties. Any of these factors could materially adversely affect Bellatrix's financial and operational results.

Hedging Activities

From time to time, Bellatrix may enter into agreements to receive fixed prices on its oil and natural gas production to offset the risk of revenue losses if commodity prices decline. However, to the extent that Bellatrix engages in price risk management activities to protect itself from commodity price declines, it may also be prevented from realizing the full benefits of price increases above the levels of the derivative instruments used to manage price risk. In addition, Bellatrix's hedging arrangements may expose it to the risk of financial loss in certain circumstances, including instances in which:

• production falls short of the hedged volumes or prices fall significantly lower than projected;

• there is a widening of price-basis differentials between delivery points for production and the delivery point assumed in the hedge arrangement;

• the counterparties to the hedging arrangements or other price risk management contracts fail to perform under those arrangements; or

• a sudden unexpected event materially impacts oil and natural gas prices.

Similarly, from time to time Bellatrix may enter into agreements to fix the exchange rate of Canadian to United States dollars or other currencies in order to offset the risk of revenue losses if the Canadian dollar increases in value compared to other currencies. However, if the Canadian dollar declines in value compared to such fixed currencies, Bellatrix will not benefit from the fluctuating exchange rate.

Reliance on Joint Venture Partners

The Company relies on joint venture partners with respect to the evaluation, acquisition and development of, and future production from, certain of its properties and a failure or inability to perform or a differing development objective by such partners, including, without limitation, O’Chiese Energy Limited Partnership, could materially affect the development of such properties.

Operational Dependence

Other companies operate some of the assets in which Bellatrix has an interest. The Company has limited ability to exercise influence over the operation of those assets or their associated costs, which could adversely affect Bellatrix's financial performance. The Company's return on assets operated by others depends upon a number of factors that may be outside of Bellatrix's control, including, but not limited to, the timing and amount of capital expenditures, the operator's expertise and financial resources, the approval of other participants, the selection of technology and risk management practices.

In addition, due to the current low and volatile commodity prices, many companies, including companies that may operate some of the assets in which Bellatrix has an interest, may be in financial difficulty, which could impact their ability to fund and pursue capital expenditures, carry out their operations in a safe and effective manner and satisfy regulatory requirements with respect to abandonment and reclamation obligations. If companies that operate some of the assets in which Bellatrix has an interest fail to satisfy regulatory requirements with respect to abandonment and reclamation obligations Bellatrix may be required to satisfy such obligations and to seek reimbursement from such companies. To the extent that any of such companies go bankrupt, become insolvent or make a proposal or institute any proceedings relating to bankruptcy or insolvency, it could result in such assets being shut-in, Bellatrix potentially becoming subject to additional liabilities relating to such assets and Bellatrix having difficulty collecting revenue due from such operators or recovering amounts owing to Bellatrix from such operators for their share of abandonment and reclamation obligations. Any of these factors could have a material adverse affect on Bellatrix's financial and operational results.

Information Technology Systems and Cyber-Security

Bellatrix Exploration Ltd. 33

The Company has become increasingly dependent upon the availability, capacity, reliability and security of the Company's information technology infrastructure and the Company's ability to expand and continually update this infrastructure, to conduct daily operations. The Company depends on various information technology systems to estimate reserve quantities, process and record financial data, manage the Company's land base, manage financial resources, analyze seismic information, administer the Company's contracts with the Company's operators and lessees and communicate with employees and third-party partners.

Further, Bellatrix is subject to a variety of information technology and system risks as a part of its normal course operations, including potential breakdown, virus, cyber-attack, cyber-fraud, security breach, and destruction or interruption of Bellatrix’s information technology systems by third parties or insiders. Unauthorized access to these systems by employees or third parties could lead to corruption or exposure of confidential, fiduciary or proprietary information, interruption to communications or operations or disruption to the Company's business activities or the Company's competitive position. The Company applies technical and process controls in line with industry-accepted standards to protect the Company's information assets and systems. Disruption of critical information technology services, or breaches of information security, could have a negative effect on the Company's performance and earnings, as well as on the Company's reputation. The significance of any such event is difficult to quantify, but may in certain circumstances be material and could have a material adverse effect on Bellatrix’s business, financial condition and results of operations.

Royalty Regimes

There can be no assurance that the governments in the jurisdictions in which Bellatrix has assets will not adopt new royalty regimes or modify the existing royalty regimes which may have an impact on the economics of Bellatrix's projects. An increase in royalties would reduce Bellatrix's earnings and could make future capital investments, or Bellatrix's operations, less economic. On January 29, 2016, the Government of Alberta adopted a new royalty regime which took effect on January 1, 2017.

Environmental

All phases of the oil and natural gas business present environmental risks and hazards and are subject to environmental regulation pursuant to a variety of federal, provincial and local laws and regulations. Environmental legislation provides for, among other things, restrictions and prohibitions on the spill, release or emission of various substances produced in association with oil and gas industry operations. In addition, such legislation sets out the requirements with respect to oilfield waste handling and storage, habitat protection and the satisfactory operation, maintenance, abandonment and reclamation of well and facility sites.

Compliance with environmental legislation can require significant expenditures and a breach of applicable environmental legislation may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving in a manner expected to result in stricter standards and enforcement, larger fines and liability and potentially increased capital expenditures and operating costs. The discharge of oil, natural gas or other pollutants into the air, soil or water may give rise to liabilities to governments and third parties and may require Bellatrix to incur costs to remedy such discharge. Although Bellatrix believes that it will be in material compliance with current applicable environmental legislation, no assurance can be given that environmental compliance requirements will not result in a curtailment of production or a material increase in the costs of production, development or exploration activities or otherwise have a material adverse effect on Bellatrix's business, financial condition, results of operations and prospects.

Variations in Foreign Exchange Rates and Interest Rates

World oil and natural gas prices are quoted in United States dollars. The Canadian/United States dollar exchange rate, which fluctuates over time, consequently affects the price received by Canadian producers of oil and natural gas. Material increases in the value of the Canadian dollar relative to the United States dollar will negatively affect Bellatrix's production revenues. Accordingly, exchange rates between Canada and the United States could affect the future value of Bellatrix's reserves as determined by independent evaluators. Although a low value of the Canadian dollar relative to the United States dollar may positively affect the price Bellatrix receives for its oil and natural gas production, it could also result in an increase in the price for certain goods used for Bellatrix's operations, which may have a negative impact on Bellatrix's financial results.

To the extent that Bellatrix engages in risk management activities related to foreign exchange rates, there is a credit risk associated with counterparties with which Bellatrix may contract.

An increase in interest rates could result in a significant increase in the amount Bellatrix pays to service debt, resulting in a reduced amount available to fund its exploration and development activities, and if applicable, the cash available for dividends and could negatively impact the market price of the Common Shares.

Reserves Estimates

There are numerous uncertainties inherent in estimating quantities of oil, natural gas and natural gas liquids reserves and the future cash flows attributed to such reserves. The reserve and associated cash flow information set forth in this document are estimates only. Generally, estimates of economically recoverable oil and natural gas reserves and the future net cash flows from such estimated reserves are based upon a number of variable factors and assumptions, such as:

Bellatrix Exploration Ltd. 34

• historical production from the properties;

• production rates;

• ultimate reserve recovery;

• timing and amount of capital expenditures;

• marketability of oil and natural gas;

• royalty rates; and

• the assumed effects of regulation by governmental agencies and future operating costs (all of which may vary materially from actual results).

For those reasons, estimates of the economically recoverable oil and natural gas reserves attributable to any particular group of properties, classification of such reserves based on risk of recovery and estimates of future net revenues associated with reserves prepared by different engineers, or by the same engineers at different times may vary. The Company's actual production, revenues, taxes and development and operating expenditures with respect to its reserves will vary from estimates and such variations could be material.

The estimation of proved reserves that may be developed and produced in the future is often based upon volumetric calculations and upon analogy to similar types of reserves rather than actual production history. Recovery factors and drainage areas are often estimated by experience and analogy to similar producing pools. Estimates based on these methods are generally less reliable than those based on actual production history. Subsequent evaluation of the same reserves based upon production history and production practices will result in variations in the estimated reserves. Such variations could be material.

In accordance with Applicable Securities Laws, Bellatrix's independent reserves evaluator has used forecast prices and costs in estimating the reserves and future net cash flows as summarized herein. Actual future net cash flows will be affected by other factors, such as actual production levels, supply and demand for oil and natural gas, curtailments or increases in consumption by oil and natural gas purchasers, changes in governmental regulation or taxation and the impact of inflation on costs. The reserve evaluation is effective as of a specific effective date and, except as may be specifically stated, has not been updated and therefore does not reflect changes in Bellatrix's reserves since that date.

Income Taxes

The Company files all required income tax returns and believes that it is in full compliance with the provisions of the Income Tax Act, R.S.C. 1985, c. 1 (5^th Supp.) and all other applicable provincial tax legislation. However, such returns are subject to reassessment by the applicable taxation authority. In the event of a successful reassessment of Bellatrix, whether by re-characterization of exploration and development expenditures or otherwise, such reassessment may have an impact on current and future taxes payable.

Income tax laws relating to the oil and natural gas industry, such as the treatment of resource taxation or dividends, may in the future be changed or interpreted in a manner that adversely affects Bellatrix. Furthermore, tax authorities having jurisdiction over Bellatrix may disagree with how Bellatrix calculates its income for tax purposes or could change administrative practices to Bellatrix's detriment.

Liability Management

Alberta, Saskatchewan and British Columbia have developed liability management programs designed to prevent taxpayers from incurring costs associated with suspension, abandonment, remediation and reclamation of wells, facilities and pipelines in the event that a licensee or permit holder is unable to satisfy its regulatory obligations. These programs involve an assessment of the ratio of a licensee's deemed assets to deemed liabilities. If a licensee's deemed liabilities exceed its deemed assets, a security deposit is generally required. Changes to the required ratio of Bellatrix's deemed assets to deemed liabilities or other changes to the requirements of liability management programs may result in significant increases to Bellatrix's compliance obligations. In addition, the liability management regime may prevent or interfere with Bellatrix's ability to acquire or dispose of assets, as both the vendor and the purchaser of oil and gas assets must be in compliance with the liability management programs (both before and after the transfer of the assets) for the applicable regulatory agency to allow for the transfer of such assets. The recent Alberta Court of Queen's Bench decision, Redwater Energy Corporation (Re), found an operational conflict between the Bankruptcy and Insolvency Act and the AER's abandonment and reclamation powers when the licensee is insolvent, which was affirmed by a majority of the Alberta Court of Appeal, and has been appealed by the AER to the Supreme Court of Canada for final determination. In response to the decision, the AER issued interim rules to administer the liability management program and until the Government of Alberta can develop new regulatory measures to adequately address environmental liabilities. There remains a great deal of uncertainty as to what new regulatory measures will be developed by the provinces or in concert with the federal government, as the final ruling will become binding in all Canadian jurisdictions.

Climate Change

The Company's exploration and production facilities and other operations and activities emit greenhouse gases which may require Bellatrix to comply with GHG emissions legislation at the provincial or federal level. Climate change policy is evolving at regional,

Bellatrix Exploration Ltd. 35

national and international levels, and political and economic events may significantly affect the scope and timing of climate change measures that are ultimately put in place. As a signatory to the UNFCCand a signatory to theParis Agreement, which was ratified in Canada on October 3, 2016, the Government of Canada pledged to cut its GHG emissions by 30 per cent from 2005 levels by 2030. One of the pertinent policies announced to date by the Government of Canada to reduce GHG emission is the planned implementation of a nation-wide price on carbon emissions. Provincially, the Government of Alberta has already implemented a carbon levy on almost all sources of GHG emissions, now at a rate of $30 per tonne. The direct or indirect costs of compliance with GHG-related regulations may have a material adverse effect on Bellatrix's business, financial condition, results of operations and prospects. Some of Bellatrix's significant facilities may ultimately be subject to future regional, provincial and/or federal climate change regulations to manage GHG emissions. In addition, concerns about climate change have resulted in a number of environmental activists and members of the public opposing the continued exploitation and development of fossil fuels. Given the evolving nature of the debate related to climate change and the control of GHG and resulting requirements, it is expected that current and future climate change regulations will have the affect of increasing Bellatrix's operating expenses and in the long-term reducing the demand for oil and gas production resulting in a decrease in Bellatrix's profitability and a reduction in the value of its assets or asset write-offs.

CRITICAL ACCOUNTING ESTIMATES AND ACCOUNTING POLICIES

The reader is advised that the critical accounting estimates, policies, and practices as described herein continue to be critical in determining Bellatrix’s financial results.

The reader is cautioned that the preparation of financial statements in accordance with GAAP requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. The following discussion outlines accounting policies and practices that are critical to determining Bellatrix’s financial results.

Bellatrix Exploration Ltd. 36

Critical Accounting Judgments

Oil and Gas Reserves

Reserves and resources are used in the units of production calculation for depletion, depreciation and amortization, and the impairment analysis which affect net profit or loss. There are numerous uncertainties inherent in estimating oil and gas reserves. Estimating reserves is very complex, requiring many judgments based on geological, geophysical, engineering and economic data. Changes in these judgments could have a material impact on the estimated reserves. These estimates may change, having either a negative or positive effect on net profit as further information becomes available and as the economic environment changes.

Identification of CGUs

Bellatrix’s assets are aggregated into CGUs, for the purpose of calculating impairment, based on their ability to generate largely independent cash flows, geography, geology, production profile and infrastructure of their assets.

Impairment Indicators and Impairment Reversal

Judgment is required to assess when impairment indicators exist and impairment testing is required with respect to exploration and evaluation assets and property, plant and equipment.

Joint Arrangements

Judgment is required to determine when the Company has joint control over an arrangement. In establishing joint control, the Company considers whether unanimous consent is required to direct the activities that significantly affect the returns of the arrangement, such as the capital and operating activities of the arrangement. Additionally, the Company assesses the rights and obligations arising from the arrangement by considering its governance structure, legal form, and terms agreed upon by the parties sharing control, including the contractual rights of each partner, dispute resolution procedures, termination provisions, and procedures for subsequent transactions in its determination of joint control.

Once joint control has been established, judgment is also required to classify the joint arrangement. The type of joint arrangement is determined through analysis of the rights and obligations arising from the arrangement by considering its legal structure, legal form and terms agreed upon by the parties sharing control. An arrangement that is not structured through a separate vehicle in which the controlling parties have rights to the assets, revenues and substantially all of the economic benefits generated through the arrangement, in addition to obligations for the liabilities and expenses, is classified as a joint operation. An arrangement in which these criteria are not met is classified as a joint venture.

Non-monetary Transactions

Judgment is required to determine whether non-monetary transactions have commercial substance.

Critical Estimates and Assumptions

Recoverability of asset carrying values

The Company assesses its oil and gas properties, including exploration and evaluation assets, for possible impairment if there are events or changes in circumstances that indicate that carrying values of the assets may not be recoverable, or at least at every reporting date. 

The assessment of any impairment of property, plant and equipment is dependent upon estimates of recoverable amount that take into account factors such as reserves, future estimated commodity prices, royalties and costs, economic and market conditions, timing of cash flows, discount rates, the useful lives of assets and their related salvage values. By their nature, these estimates and assumptions are subject to measurement uncertainty and may impact the carrying value of the Company’s assets in future periods.

Decommissioning obligations

Provisions for decommissioning obligations associated with the Company’s drilling operations are based on current legal and constructive requirements, technology, price levels and expected plans for remediation. Actual costs and cash outflows can differ from estimates because of changes in laws and regulations, public expectations, prices, discovery and analysis of site conditions and changes in clean up technology. 

Bellatrix Exploration Ltd. 37

Income taxes

Deferred tax assets and liabilities are recognized for the estimated tax consequences between amounts included in the financial statements and their tax base using substantively enacted future income tax rates. Timing of future revenue streams and future capital spending changes can affect the timing of any temporary differences, and accordingly affect the amount of the deferred tax asset or liability calculated at a point in time. Deferred tax assets are recognized when it is considered probable that deductible temporary differences will be recovered in future periods, which requires Management judgment. These differences could materially impact earnings.

Bellatrix has hired individuals and consultants who have the skills required to make such estimates and ensures that individuals or departments with the most knowledge of the activity are responsible for the estimates. Further, past estimates are reviewed and compared to actual results, and actual results are compared to budgets in order to make more informed decisions on future estimates. For further information on the determination of certain estimates inherent in the financial statements, refer to Note 4 “Critical Judgments and Accounting Estimates” in the financial statements as at and for the year ended December 31, 2018.

LEGAL, ENVIRONMENTAL REMEDIATION AND OTHER CONTINGENT MATTERS

The Company is involved in various claims and litigation arising in the normal course of business. While the outcome of these matters is uncertain and there can be no assurance that such matters will be resolved in the Company’s favor, the Company does not currently believe that the outcome of adverse decisions in any pending or threatened proceeding related to these and other matters or any amount which it may be required to pay by reason thereof would have a material adverse impact on its financial position or results of operations.

The Company reviews legal, environmental remediation and other contingent matters to both determine whether a loss is probable based on judgment and interpretation of laws and regulations and determine that the loss can reasonably be estimated. When the loss is determined, it is charged to earnings. The Company’s management monitors known and potential contingent matters and make appropriate provisions by charges to earnings when warranted by the circumstances.

With the above risks and uncertainties the reader is cautioned that future events and results may vary substantially from that which Bellatrix currently foresees.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s President and Chief Executive Officer (“CEO”) and Executive Vice President and Chief Financial Officer (“CFO”) have designed, or caused to be designed under their supervision, disclosure controls and procedures (as defined in Rules 13(a) - 15(e) and 15(d) – 15(e) under the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”) and National Instrument 52-109, Certification of Disclosure in Issuer’s Annual and Interim Filings (“NI 52-109”)) to provide reasonable assurance that: (i) material information relating to the Company is made known to the CEO and CFO by others, particularly during the period in which the annual and interim filings are being prepared; and (ii) information required to be disclosed by the Company in its annual filings, interim filings (as these terms are defined in NI 52-109) or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time period specified in securities legislation. Such officers have evaluated, or caused to be evaluated under their supervision the effectiveness of the Company’s disclosure controls and procedures at the financial year end of the Company. Based on the evaluation, the officers concluded that Bellatrix’s disclosure controls and procedures were effective as at December 31, 2018.

Bellatrix Exploration Ltd. 38

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting (as defined in Rules 13(a) – 15(f) and 15(d) – 15(f) under the Exchange Act and NI 52-109). Internal control over the Company’s financial reporting is a process designed by, or designed under the supervision of, our President and CEO and our Executive Vice President and CFO, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for the external purposes in accordance with GAAP.

Under the supervision and with the participation of management, including our CEO and our CFO, an evaluation of the effectiveness of the Company’s internal control over financial reporting was conducted as of December 31, 2018 based on the criteria described in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management determined that, as of December 31, 2018, the Company’s internal control over financial reporting was effective.

The effectiveness of internal control over financial reporting as of December 31, 2018 was audited by KPMG LLP, an independent registered public accounting firm, as stated in their Report of Independent Registered Public Accounting Firm, which is included with the financial statements for the year ended December 31, 2018.

Changes in Internal Control over Financial Reporting

The Company is required to disclose herein any change in the Company’s internal control over financial reporting that occurred during the quarter and year ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. There has been no change in the Company’s internal control over financial reporting that occurred during the period commencing October 1, 2018 and ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations of the Effectiveness of Controls 

It should be noted that a control system, no matter how well conceived, can provide only reasonable, but not absolute, assurance that the objectives of the control system will be met and it should not be expected that the disclosure controls and procedures and internal controls over financial reporting will prevent all errors or fraud.

CEO AND CFO CERTIFICATIONS

The Company’s President and CEO and the Executive Vice President and CFO have attested to the quality of the public disclosure in our fiscal 2018 reports filed with the Canadian securities regulators and the SEC, and have filed certifications with them.

SENSITIVITY ANALYSIS

The table below shows sensitivities to adjusted funds flow as a result of product price, exchange rate, and interest rate changes. This determination is based on actual average prices received for the fourth quarter of 2018 and average production volumes of

Bellatrix Exploration Ltd. 39

35,001 boe/d during that period, as well as the same level of debt outstanding as at December 31, 2018. Diluted weighted average shares are based upon the fourth quarter of 2018. These sensitivities are approximations only, and not necessarily valid under other significantly different production levels or product mixes. Commodity price risk management activities can significantly affect these sensitivities. Changes in any of these parameters will affect funds flow as shown in the table below:

	Adjusted Funds Flow (1) (Annualized)	Adjusted Funds Flow (1) (Per Diluted Share)
Sensitivity Analysis	($000s)	($)
Change of US $1/bbl (2)	3,700	0.05
Change of $0.10/ mcf (2)	5,500	0.08
Change in prime of 1%	500	0.01
Change of US $0.01 CDN/ US exchange rate	600	0.01

(1) Refer to "Non-GAAP measures" in respect of the term "adjusted funds flow".

(2)Commodity price risk management activities are excluded from adjusted funds flow sensitivity calculations.

Bellatrix Exploration Ltd. 40

SELECTED QUARTERLY INFORMATION

The following table sets forth selected financial information of the Company for the quarters in 2018 and 2017.

2018 – Quarter ended (unaudited) ($000s, except per share amounts)	March 31			June 30			Sept. 30			Dec. 31
Total revenue (1)	66,215			54,022			51,525			56,949
Cash flow from operating activities	14,615			12,004			7,617			28,239
Cash flow from operating activities per share
Basic	$	0.30		$	0.22		$	0.12		$	0.39
Diluted	$	0.30		$	0.22		$	0.12		$	0.39
Adjusted funds flow (1)	14,670			10,142			7,705			15,508
Adjusted funds flow per share (1)
Basic	$	0.30		$	0.18		$	0.12		$	0.21
Diluted	$	0.30		$	0.18		$	0.12		$	0.21
Net profit (loss)	(12,901		)	(34,768		)	(8,882		)	(89,788		)
Net profit (loss) per share
Basic	$	(0.26	)	$	(0.63	)	$	(0.14	)	$	(1.24	)
Diluted	$	(0.26	)	$	(0.63	)	$	(0.14	)	$	(1.24	)
Total net capital expenditures - cash	23,826			5,882			2,716			22,746

(1)Refer to “Non-GAAP measures” in respect of the terms “adjusted funds flow”, “adjusted funds flow per share”, and “total revenue.”

2017 – Quarter ended (unaudited) ($000s, except per share amounts)	March 31		June 30			Sept. 30			Dec. 31
Total revenue (1)	66,024		74,325			48,153			60,897
Cash flow from operating activities	8,258		10,495			23,031			13,425
Cash flow from operating activities per share
Basic	$	0.17	$	0.21		$	0.47		$	0.27
Diluted	$	0.14	$	0.21		$	0.47		$	0.27
Adjusted funds flow (1)	14,891		19,347			8,300			15,700
Adjusted funds flow per share (1)
Basic	$	0.30	$	0.39		$	0.17		$	0.32
Diluted	$	0.26	$	0.39		$	0.17		$	0.32
Net profit (loss)	13,049		(69,236		)	(22,124		)	(13,053		)
Net profit (loss) per share
Basic	$	0.26	$	(1.40	)	$	(0.45	)	$	(0.26	)
Diluted	$	0.23	$	(1.40	)	$	(0.45	)	$	(0.26	)
Total net capital expenditures - cash	49,805		(25,741		)	24,238			26,151

(1)Refer to “Non-GAAP measures” in respect of the terms “adjusted funds flow”, “adjusted funds flow per share”, and “total revenue.” 

In the fourth quarter of 2018, Bellatrix drilled 3 gross (2.0 net) Spirit River liquids rich natural gas wells and 1 gross (0.02 net) non-operated Cardium well. Bellatrix focused its capital activity in the fourth quarter of 2018 primarily on drilling and completions projects. The Company's total revenue generated decreased to $56.9 million in the fourth quarter of 2018 from $60.9 million in the fourth quarter of 2017 as a result of 1% decline in realized average commodity prices and a 6% decrease in sales volumes. Sales volumes decreased to 35,001 boe/d in the fourth quarter of 2018 compared to 37,077 boe/d in the 2017 period.

In the third quarter of 2018, Bellatrix drilled and/or participated in 3 gross (1.0 net) Spirit River liquids rich gas wells and 1 gross (1.0 net) Cardium well. The Company's total revenue generated increased to $51.5 million in the third quarter of 2018 from $48.2 million in the third quarter of 2017 as a result of a 19% increase in combined realized commodity prices. Bellatrix incurred $7.4 million of total cash capital expenditures in the third quarter of 2018 compared to $37.7 million in the comparative 2017 period. Bellatrix focused its capital activity in the third quarter of 2018 primarily on drilling and completions projects. Sales volumes decreased to 33,530 boe/d in the third quarter of 2018 compared to 37,710 boe/d in the 2017 period.

Bellatrix Exploration Ltd. 41

In the second quarter of 2018 sales volumes decreased to 37,309 boe/d compared to 37,916 in the comparative 2017 period. The Company's total revenue generated decreased to $54.0 million in the second quarter of 2018 from $74.3 million in the second quarter of 2017 as a result of a 25% decline in realized average commodity prices. In the three months ended June 30, 2018, the Company's total cash capital expenditures were $5.9 million compared to negative $25.7 million in the comparative 2017 period. Bellatrix focused its capital activity in the second quarter of 2018 primarily on drilling and completions projects and on expenditures related to the completion of Phase 2 of the Alder Flats Plant.

In the first quarter of 2018 sales volumes increased to 36,740 boe/d compared to 34,750 boe/d in the comparative 2017 period. The Company's total revenue generated in the quarter remained consistent at $66.2 million in the first quarter of 2018 compared to $66.0 million in the first quarter of 2017 as a result of a 6% increase in production volumes offset by a 6% decrease in realized average commodity prices. Bellatrix incurred $23.8 million of total cash capital expenditures in the first quarter of 2018 compared to $49.8 million in the comparative 2017 period. Bellatrix focused its capital activity in the first quarter of 2018 primarily on drilling and completion projects and on expenditures related to the construction of Phase 2 of the Alder Flats Plant. Bellatrix drilled 6 gross (5.2 net) Spirit River liquids rich natural gas wells.

In the fourth quarter of 2017, sales volumes increased from 37,077 boe/d compared to 31,888 boe/d in the comparative 2016 period. The Company's total revenue generated in the quarter decreased to $60.9 million in the fourth quarter of 2017 from $67.9 million in the fourth quarter of 2016 as a result of a 24% decline in realized average commodity prices. In the three months ended December 31, 2017, the Company's total cash capital expenditures were $26.2 million compared to $24.8 million in the comparative 2016 period. Bellatrix focused its capital activity in the fourth quarter on drilling and completion projects and on the construction of the Phase 2 expansion project of the Alder Flats Plant. Bellatrix drilled 2 gross (1.9 net) Spirit River liquids rich natural gas wells.

In the third quarter of 2017, Bellatrix reduced amounts outstanding under its Credit Facilities to $8.3 million. Total net debt was $399.8 million at September 30, 2017. Bellatrix incurred $39.7 million of total cash capital expenditures in the third quarter of 2017 compared to $17.2 million in the comparative 2016 period. Bellatrix focused its capital activity in the third quarter primarily on drilling and completion projects and on expenditures related to the construction of Phase 2 of the Alder Flats Plant. The Company drilled and/or participated in 13 gross (8.4 net) Spirit River liquids rich gas wells, 1 gross (1.0 net) Cardium well, and 2 gross (0.8 net) non-operated Ellerslie liquids rich natural gas wells compared to 4 gross (2.3 net) Spirit River liquids rich gas wells in the comparative 2016 period. Sales volumes increased to 37,710 boe/d in the third quarter of 2017 compared to 34,409 boe/d in the comparative 2016 period.

In the second quarter of 2017, Bellatrix reduced amounts outstanding on its Credit Facilities and reduced its working capital deficiency by approximately $45.8 million from the first quarter of 2017 through the use of proceeds from the non-core Strachan asset sale. In the three months ended June 30, 2017, the Company’s total net cash capital expenditures were negative $25.7 million, compared to negative $69.9 million in the second quarter of 2016, primarily as a result of the smaller asset dispositions in the second quarter of 2017 compared to 2016. Total revenue increased 54% to $74.3 million in the three months ended June 30, 2017 from $48.3 million in the three months ended June 30, 2016 due to improved commodity prices in the period. The Company drilled 2 gross (1.2 net) wells, compared to nil wells drilled in the comparative 2016 period. Drilling in the first half of 2017 was offset by non-core property dispositions in the fourth quarter of 2016 and sales volumes remained consistent at 37,916 boe/d in the second quarter of 2017 compared to 38,000 boe/d in the comparative 2016 period.

In the first quarter of 2017, Bellatrix drilled and/or participated in 13 gross (10.6 net) wells. Total net cash capital expenditures were $49.8 million in the three months ended March 31, 2017, compared to a negative $80.4 million in the three months ended December 31, 2016, as a result of non-core property sale in the fourth quarter of 2016. The non-core property sales also reduced sales volumes by 10% from 38,467 in the first quarter of 2016 to 34,750 in the first quarter of 2017. Total revenue increased 20% to $66.0 million in the three months ended March 31, 2017, from $55.2 million in the three months ended March 31, 2016 due to improved commodity prices in the period, partially offset by decreased sales volumes.

Bellatrix Exploration Ltd. 42

SELECTED ANNUAL INFORMATION

The following table sets forth selected financial information of the Company for the most recently completed year ending December 31, 2018 and for comparative 2017 and 2016 years.

Years ended December 31, ($000s, except per share amounts)	2018			2017			2016
Total revenue (1)	228,712			249,399			227,874
Cash flow from operating activities	62,475			55,210			37,546
Cash flow from operating activities per share
Basic	$	1.05		$	1.12		$	0.88
Diluted	$	1.05		$	1.12		$	0.88
Adjusted funds flow (1)	48,025			58,240			40,916
Adjusted funds flow per share (1)
Basic	$	0.80		$	1.18		$	0.96
Diluted	$	0.80		$	1.18		$	0.96
Net profit (loss)	(146,339		)	(91,363		)	(26,668		)
Net profit (loss) per share
Basic	$	(2.45	)	$	(1.85	)	$	(0.62	)
Diluted	$	(2.45	)	$	(1.85	)	$	(0.62	)
Total net capital expenditures – cash	59,569			74,452			(220,178		)
Total assets	1,235,743			1,340,923			1,453,730
Total net debt (1)	443,332			420,827			396,195
Non-current financial (assets) liabilities
Future income taxes	—			(48,298		)	(63,713		)
Decommissioning liabilities	61,487			58,687			62,844
Sales volumes (boe/d)	35,635			36,872			35,677

(1) Refer to “Non-GAAP measures” in respect of the terms “adjusted funds flow”, “adjusted funds flow per share”, “total net debt” and “total revenue.”

CONVERSION: 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 report are derived from converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil.

NON-GAAP MEASURES: Throughout Bellatrix’s MD&A, the Company uses terms that are commonly used in the oil and natural gas industry, but do not have a standardized meaning presented by International Financial Reporting Standards (“IFRS”) and therefore may not be comparable to the calculations of similar measures for other entities. Management believes that the presentation of these non-GAAP measures provide useful information to investors and shareholders as the measure provide increased transparency and the ability to better analyze performance against prior periods on a comparable basis.

Operating netbacks are calculated by subtracting royalties, transportation, and operating expenses from total revenue. Management believes this measure is a useful supplemental measure of the amount of total revenue received after transportation, royalties and operating expenses. The Company’s calculation of total revenue includes petroleum and natural gas sales and other income, and excludes commodity price risk management. Total capital expenditures – net includes the cash impact of capital expenditures and property dispositions, as well as the non-cash capital impacts of corporate acquisitions, property acquisitions, adjustments to the Company’s decommissioning liabilities, and share based compensation. Bellatrix’s method of calculating these measures may differ from other entities, and accordingly, may not be comparable to measures used by other companies.

This MD&A contains the term “adjusted funds flow” which should not be considered an alternative to, or more meaningful than “cash flow from operating activities” as determined in accordance with GAAP as an indicator of the Company’s performance. Therefore reference to adjusted funds flow or adjusted funds flow per share may not be comparable with the calculation of similar measures for other entities. Management uses adjusted funds flow to analyze operating performance and leverage and considers adjusted funds flow 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. Adjusted funds flow is calculated as cash flow from operating activities, excluding decommissioning costs incurred, changes in non-cash working capital incurred, and transaction costs. The reconciliation between cash flow from operating activities and adjusted funds flow can be found in this MD&A. Adjusted funds flow per share is calculated using the weighted average number of shares for the period.

Bellatrix Exploration Ltd. 43

This MD&A also contains the terms “net debt”, “total net debt”, and “adjusted working capital deficiency”, which also are not recognized measures under GAAP. Therefore reference to total net debt, net debt and adjusted working capital deficiency may not be comparable with the calculation of similar measures for other entities. The Company’s calculation of total net debt excludes other deferred liabilities, deferred capital obligations, long-term risk management contract liabilities, decommissioning liabilities, and deferred tax liabilities. Total net debt includes the adjusted working capital deficiency, long term loans receivable, the liability component of the Convertible Debentures, current Credit Facilities and long term Credit Facilities. Net debt excludes the liability component of the Convertible Debentures. The adjusted working capital deficiency is a non-GAAP measure calculated as net working capital deficiency excluding current risk management contract assets and liabilities, current portion of other deferred liabilities, current portion of decommissioning liability and the current Credit Facilities. Management believes these measures are useful supplementary measures of the total amount of current and long-term debt. The reconciliation between total liabilities, total debt and net debt can be found in this MD&A.

FORWARD LOOKING STATEMENTS: Certain information contained herein and in the accompanying report to shareholders may contain forward looking statements within the meaning of applicable securities laws. The use of any of the words “position”, “continue”, “opportunity”, “expect”, “plan”, “maintain”, “estimate”, “assume”, “target”, “believe” “forecast”, “intend”, “strategy”, “will”, “elect”, “anticipate”, “enhance” and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this document contains forward-looking statements concerning management's assessment of future plans, the intent of the Company to advance and evaluate potential alternatives to optimize its capital structure, improve liquidity and enhance long term stakeholder value, the intent of the Company to continue with parties across the Company’s capital structure in connection with potential transaction alternatives, including refinancing the remaining Senior Notes and extending the maturity of the Credit Facilities, the expected ability of the Company to settle its liabilities, including debt maturities, when due, the expected ability of the Company to meet its obligations including interest payments, capital spending and abandonment and remediation expenses from cash flow, expectations of commodity prices and trends affecting commodity prices, the percent of forecast 2019 natural gas volumes hedged, the percent of forecast 2019 natural gas volumes subject to the long term diversification strategies, the expectation that hedging and market diversification strategies will reduce commodity price volatility on the Company's business, the expectation that the redirection of natural gas volumes from third-party plants to the Alder Flats Plant will drive long term sustained operating cost reductions for the Company, the intent of the Company to continue to undertake cost containment efforts focused on increased operational efficiencies, field optimization work, and increased competitive pricing of contract services, expected details of the Company's 2019 capital expenditure program, the expectation that the majority of future capital investment to be utilized directly in drilling, completion and production addition activities, with minimal capital required for facilities and infrastructure projects over the near term, the expectation that the Company's existing facilities and processing capacity will provide the capability to grow production volumes beyond 60,000 boe/d, with minimal future facility related capital, Bellatrix's intent to maintain a commodity price risk management program to provide a measure of stability to adjusted funds flow, the intent of the Company to remain highly focused on key business objectives of maintaining financial strength and liquidity, and optimizing capital investments in the current commodity price environment, the expectation that the Company will be able to fund its 2019 net capital budget by reinvesting cash flow, asset dispositions, and if necessary, borrowings under its Credit Facilities, the intent of Bellatrix to continually monitor its capital spending program in light of prevailing commodity prices and the United States/Canadian dollar exchange rate with the aim of ensuring the Company will be able to meet future anticipated obligations incurred from normal ongoing operations, 2019 outlook and corporate guidance including expected 2019 average production, forecast average product type mix with respect to 2019 production, expected details of the Company's 2019 capital budget, Bellatrix's intent to fund its budget from cash flow from operating activities and expected sensitivities to changes in commodity prices, interest rates and exchange rates. To the extent that any forward-looking information contained herein constitute a financial outlook, they were approved by management on March 14, 2019 and are included herein to provide readers with an understanding of the anticipated funds available to Bellatrix to fund its operations and readers are cautioned that the information may not be appropriate for other purposes. Forward-looking statements necessarily involve risks, including, without limitation, risks associated with the Company's ability to continue as a going concern, risks associated with the ability of the Company to refinance its debt prior to maturity, 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, 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, actions taken by the Company's lenders that reduce the Company's available credit and ability to access sufficient capital from internal and external sources. 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 shareholders 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 ability of the Company to continue as a going concern; the impact of increasing competition; the general stability of the economic and political environment in which the Company operates; the timely receipt of any required regulatory approvals; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manner; the ability of the Company to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves

Bellatrix Exploration Ltd. 44

through acquisition, development of exploration; the timing and costs of pipeline, storage and facility construction and expansion and the ability of the Company to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its oil and natural gas products. 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 on file with Canadian and United States securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), through the SEC website (www.sec.gov), 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.

The reader is further cautioned that the preparation of financial statements in accordance with GAAP requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Estimating reserves is also critical to several accounting estimates and requires judgments and decisions based upon available geological, geophysical, engineering and economic data. These estimates may change, having either a negative or positive effect on net earnings as further information becomes available, and as the economic environment changes.

Bellatrix Exploration Ltd. 45

EX-23.1

Exhibit 23.1

KPMG LLP

205 5th Avenue SW

Suite 3100

Calgary AB T2P 4B9

Telephone (403) 691-8000

Fax (403) 691-8008

www.kpmg.ca 

Consent of Independent Registered Public Accounting Firm

To the Board of Directors of Bellatrix Exploration Ltd.

We consent to the use of our reports, each dated March 14, 2019, with respect to the financial statements and the effectiveness of internal control over financial reporting appearing in the Current Report on Form 6-K of Bellatrix Energy Ltd. dated March 14, 2019.

We also consent to the incorporation by reference of such reports in the Registration Statement (No. 333-225841) on Form F-10 of Bellatrix Exploration Ltd.

Our report dated March 14, 2019 with respect to the financial statements contains an explanatory paragraph that states that the Company has significant uncertainties relating to its ability to meet its financial obligations on scheduled debt maturities which raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of that uncertainty.

/s/ KPMG LLP

Chartered Professional Accountants

March 14, 2019

Calgary, Canada

XML

Document Entity Information Document	12 Months Ended
	Dec. 31, 2018
Document And Entity Information [Abstract]
Entity Registrant Name	Bellatrix Exploration Ltd.
Entity Central Index	0001483405
Document Type	6-K
Document Period End Date	Dec. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY

XML

BALANCE SHEETS - CAD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Current assets
Accounts receivable (note 6)	$ 36,955	$ 45,672
Deposits and prepaid expenses	3,516	3,709
Current portion of risk management asset (note 6)	9,852	31,910
Current assets	50,323	81,291
Non-current assets [abstract]
Risk management asset (note 6)	3,291	1,213
Deferred taxes (note 15)	0	48,298
Exploration and evaluation assets (note 8)	17,707	22,731
Property, plant and equipment (note 9)	1,164,422	1,187,390
Total assets	1,235,743	1,340,923
Non-current liabilities [abstract]
Credit Facilities (note 7)	0	52,066
Second Lien Notes (note 7)	137,097	0
Senior Notes (note 7)	196,000	305,409
Convertible Debentures (liability component) (note 7)	41,732	39,426
Risk management liability (note 6)	1,652	3,422
Other deferred liabilities (note 11)	10,863	7,402
Decommissioning liabilities (note 10)	61,487	58,687
Total liabilities	563,018	566,901
Current liabilities
Accounts payable and accrued liabilities	61,211	73,307
Current portion of other deferred liabilities (note 11)	1,909	20,790
Current portion of risk management liability (note 6)	917	4,468
Current portion of Credit Facilities (note 7)	47,763	0
Current portion of decommissioning liability (note 10)	2,387	1,924
Current liabilities	114,187	100,489
SHAREHOLDERS’ EQUITY
Shareholders’ capital (note 12)	1,112,619	1,068,377
Warrants (note 7)	1,652	0
Convertible Debentures (equity component) (note 7)	7,818	7,818
Contributed surplus	56,499	56,092
Retained earnings (deficit)	(505,863)	(358,265)
Total shareholders’ equity	672,725	774,022
Total liabilities and shareholders’ equity	$ 1,235,743	$ 1,340,923

XML

STATEMENTS OF PROFIT (LOSS) AND COMPREHENSIVE INCOME (LOSS) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
REVENUES
Petroleum and natural gas sales (note 13)	$ 223,136	$ 243,825
Royalties	(23,789)	(23,961)
Other income (note 13)	5,576	5,574
Total revenues net of royalties	204,923	225,438
Realized gain on commodity contracts (note 6)	30,536	31,324
Unrealized gain (loss) on commodity contracts (note 6)	(18,082)	45,238
Revenues net of royalties and commodity contracts	217,377	302,000
EXPENSES
Production	97,526	111,816
Transportation	27,285	23,549
General and administrative	28,389	29,377
Loss on marketable securities	0	461
Share-based compensation (note 14)	(503)	532
Depletion, depreciation and impairment (note 9)	107,426	133,802
Loss on onerous contracts (note 11)	(5,362)	0
(Gain) loss on dispositions (note 9)	(8,164)	56,672
(Gain) loss on Senior Notes settlements (note 7)	(6,145)	0
Expenses	251,176	356,209
NET PROFIT (LOSS) BEFORE FINANCE AND TAXES	(33,799)	(54,209)
Finance expenses (note 16)	40,754	39,240
Realized (gain) loss on foreign exchange (note 17)	8,296	797
Unrealized (gain) loss on foreign exchange (note 17)	15,195	(18,298)
NET PROFIT (LOSS) BEFORE TAXES	(98,044)	(75,948)
TAXES
Deferred tax expense (recovery) (note 15)	48,295	15,415
NET PROFIT (LOSS) AND COMPREHENSIVE INCOME (LOSS)	$ (146,339)	$ (91,363)
Net profit (loss) per share (note 18)
Basic (in dollars per share)	$ (2.45)	$ (1.85)
Diluted (in dollars per share)	$ (2.45)	$ (1.85)

XML

STATEMENTS OF SHAREHOLDERS' EQUITY - CAD ($) $ in Thousands	Total	SHAREHOLDERS’ CAPITAL	CONVERTIBLE DEBENTURES (EQUITY COMPONENT)	CONTRIBUTED SURPLUS	WARRANTS	RETAINED EARNINGS (DEFICIT)
Equity attributable to owners of parent, beginning of period at Dec. 31, 2016		$ 1,068,084	$ 7,818	$ 54,418	$ 0	$ (266,902)
Issued for property acquisition, net of tax effect		0
Issued on Senior Notes settlements		0				0
Flow through shares issued		0
Share issue costs on equity issue, net of tax effect		4
Share-based compensation awards		289
Share-based compensation expense (note 14)				2,233
Adjustment of share-based compensation expense for forfeitures of unvested share options				(559)
Warrants issued, net of tax (note 7)					0
Net profit (loss)						(91,363)
Equity attributable to owners of parent, end of period at Dec. 31, 2017	$ 774,022	1,068,377	7,818	56,092	0	(358,265)
Issued for property acquisition, net of tax effect		12,053
Issued on Senior Notes settlements		31,306				(1,259)
Flow through shares issued		1,143
Share issue costs on equity issue, net of tax effect		(387)
Share-based compensation awards		127
Share-based compensation expense (note 14)				525
Adjustment of share-based compensation expense for forfeitures of unvested share options				(118)
Warrants issued, net of tax (note 7)					1,652
Net profit (loss)						(146,339)
Equity attributable to owners of parent, end of period at Dec. 31, 2018	$ 672,725	$ 1,112,619	$ 7,818	$ 56,499	$ 1,652	$ (505,863)

XML

STATEMENTS OF CASH FLOWS - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
CASH FLOW FROM (USED IN) OPERATING ACTIVITIES
Net profit (loss)	$ (146,339)	$ (91,363)
Adjustments for:
Depletion, depreciation and impairment (note 9)	107,426	133,802
(Gain) loss on dispositions (note 7)	(8,164)	56,672
Loss on onerous contracts (note 11)	5,362	0
Accretion on decommissioning obligations (note 10)	1,328	1,287
Non-cash financing and accretion	5,035	4,803
Share-based compensation (note 14)	(393)	699
Unrealized (gain) loss on commodity contracts (note 6)	18,082	(45,238)
Unrealized foreign exchange (gain) loss (note 17)	15,195	(18,298)
Loss on marketable securities	0	461
Deferred tax expense (recovery) (note 15)	48,295	15,415
(Gain) loss on Senior Notes settlements	(6,145)	0
Realized foreign exchange on Senior Note Settlements (note 7)	8,343	0
Decommissioning costs incurred (note 10)	(2,242)	(2,758)
Change in non-cash working capital (note 21)	16,692	(272)
Cash flows from (used in) operating activities	62,475	55,210
CASH FLOW FROM (USED IN) FINANCING ACTIVITIES
Issuance of Second Lien Notes (note 7)	39,815	0
Transaction costs on Senior Note exchange	(3,617)	0
Issuance of share capital, net of issue costs (note 12)	615	4
Settlement of share based payments	(457)	(1,246)
Advances from (repayment of) loans and borrowings	(4,303)	32,923
Financing obligations (note 11)	(2,675)	(7,558)
Deferred lease inducements (note 11)	(332)	(366)
Deferred capital obligations (note 11)	(3,795)	(14,693)
Change in non-cash working capital (note 21)	(6,371)	16,353
Cash flows from (used in) financing activities	18,880	25,417
CASH FLOW FROM (USED IN) INVESTING ACTIVITIES
Expenditure on exploration and evaluation assets (note 8)	(577)	(1,664)
Additions to property, plant and equipment (note 9)	(69,515)	(121,586)
Proceeds on sale of property, plant and equipment	1,106	48,370
Proceeds on sale of marketable securities	0	3,861
Change in non-cash working capital (note 21)	(12,369)	(9,608)
Cash flows from (used in) investing activities	(81,355)	(80,627)
Change in cash	0	0
Cash, beginning of year	0	0
Cash, end of year	0	0
Cash paid:
Interest	35,018	33,930
Taxes	$ 0	$ 0

XML

CORPORATE INFORMATION

12 Months Ended

Dec. 31, 2018

General Information About Financial Statements [Abstract]

CORPORATE INFORMATION

CORPORATE INFORMATION

Bellatrix Exploration Ltd. (the “Company” or “Bellatrix”) 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.

Common shares of Bellatrix trade on the Toronto Stock Exchange (“TSX”) under the symbol “BXE”.

Bellatrix was incorporated in Alberta, Canada and the Company’s registered office and principal place of business is located at 1920, 800 – 5th Avenue SW, Calgary, Alberta, Canada, T2P 3T6.

XML

BASIS OF PREPARATION

12 Months Ended

Dec. 31, 2018

Disclosure Of Basis Of Preparation Of Financial Statements [Abstract]

BASIS OF PREPARATION

BASIS OF PREPARATION

a. Statement of compliance

These financial statements (“financial statements”) were authorized by the Board of Directors on March 14, 2019. The Company prepared these financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”).

b. Basis of measurement

The financial statements are presented in Canadian dollars, the Company’s functional currency, and have been prepared on the historical cost basis except for derivative financial instruments and liabilities for cash-settled share-based payment arrangements measured at fair value. The financial statements have, in management’s opinion, been properly prepared using careful judgment and reasonable limits of materiality, and within the framework of the significant policies summarized in note 3. Significant estimates and judgments used in the preparation of the financial statements are detailed in note 4.

c. Basis of presentation

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business.

As previously announced, the revolving period under the Company’s Credit Facilities expires on May 30, 2019, but is extendible annually thereafter at the option of the Company, subject to lender approval. If the revolving period is not extended in May 2019, the Credit Facilities would enter a six-month term-out period to November 30, 2019. The Company has been advancing efforts and evaluating potential alternatives to optimize its capital structure, improve liquidity and enhance long term stakeholder value.  Such efforts include, among other things, Bellatrix’s ongoing discussions with parties across the Company’s capital structure in connection with potential transaction alternatives, including refinancing its outstanding US$145.8 million of 8.50% senior unsecured notes ("Senior Notes") due May 15, 2020 and extending the maturity of the Credit Facilities beyond November 30, 2019. The Company cautions that it can make no assurances as to whether any agreement with respect to a potential transaction may be reached, or the terms or timing of any such potential transaction.

As a result, there is currently significant uncertainty related to these future events and conditions that raise substantial doubt about whether the Company will continue as a going concern, and therefore, whether it will realize its assets and settle its liabilities in the normal course of business and at the amounts stated in the Financial Statements. Readers are cautioned to review note 7 for additional information in this regard. However, management believes that the Company will be successful in obtaining alternative debt financing and extending near term debt maturities as outlined in note 6(d) and note 7 in a timely manner and, accordingly, has prepared these financial statements on a going concern basis. Accordingly, no adjustments have been made to the financial statements relating to the recoverability and classification of the asset carrying amounts or the amount and classification of liabilities that may be necessary should the Company not continue as a going concern. These adjustments could be material.

Bellatrix continues to generate sufficient cash flow to meet its obligations in the ordinary course, including interest payments, capital spending and abandonment and remediation expenses, subject to achieving an extension of debt maturities.

XML

SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2018

Corporate Information And Statement Of IFRS Compliance [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

a. Revenue Recognition

Revenue from the sale of crude oil, natural gas, condensate and natural gas liquids (“NGLs”) is measured based on the consideration specified in contracts with customers and excludes amounts collected on behalf of third parties. Bellatrix recognizes revenue when it transfers control of the product to the buyer. This is generally at the time the customer obtains legal title to the product and when it is physically transferred to the delivery mechanism agreed with the customer, often pipelines or other transportation methods. The amount of revenue recognized is based on the agreed upon transaction price, whereby any variability in revenue is related specifically to the Company's efforts to deliver production. Therefore, the resulting revenue is allocated to the production delivered in the period during which the variability occurs. As a result, none of Bellatrix's variable revenue is considered to be constrained.

Bellatrix evaluates its arrangements with third parties and partners to determine if the Company acts as the principal or as an agent. In making this evaluation, management considers if Bellatrix obtains control of the product delivered, which is indicated by Bellatrix having the primary responsibility for the delivery of the product, having the ability to establish prices or having inventory risk. If Bellatrix acts in the capacity of an agent rather than as a principal in a transaction, then the revenue is recognized on a net basis, only reflecting the fee, if any, realized by the Company from the transaction.

Processing fees charged to other entities for use of pipelines and facilities owned by the Company are evaluated by management to determine if these originate from contracts with customers or from incidental or collaborative arrangements. Processing fees charged to other entities under contracts with customers are recognized in revenue when the related services are provided.

Bellatrix’s revenue transactions do not contain significant financing components and payments are typically due on the 25th day of the month following delivery. The Company does not adjust transaction prices for the effects of a significant financing component when the period between the transfer of the promised goods or services to the customer and payment by the customer is less than one year. The Company does not disclose or quantify information about remaining performance obligations that have an original expected duration of one year or less.

b. Transportation

Costs paid by Bellatrix for the transportation of crude oil, natural gas, condensate and NGLs to the point of control transfer are recognized when the transportation is provided.

c. Joint Interests

A portion of the Company’s exploration and development activities are conducted jointly with others. The joint interests are accounted for on a proportionate consolidation basis and as a result, the financial statements reflect only the Company’s proportionate share of the assets, liabilities, revenues, expenses and cash flows from these activities.

d. Property, Plant and Equipment and Exploration and Evaluation Assets

I. Pre-exploration expenditures

Expenditures made by the Company before acquiring the legal right to explore in a specific area do not meet the definition of an asset and therefore are expensed by the Company as incurred.

II. Exploration and evaluation expenditures

Once the legal right to explore has been acquired, costs incurred are capitalized as intangible exploration and evaluation assets (“E&E"). These costs include, but are not limited to, exploration license expenditures, leasehold property acquisition costs, evaluation costs, including drilling costs directly attributable to an identifiable well and directly attributable general and administrative costs. These costs are accumulated in cost centres by property and are not subject to depletion, until technical feasibility and commercial viability have been determined. 

E&E assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability, or if facts and circumstances suggest that the carrying amount is unlikely to be recovered.

III. Developing and production costs

Items of property, plant and equipment (“PP&E”), which include oil and gas development and production assets, are measured at cost less accumulated depletion, depreciation and accumulated impairment losses net of recoveries.

Subsequent costs

Costs incurred subsequent to the determination of technical feasibility and commercial viability and the costs of replacing parts of PP&E are recognized as oil and natural gas interests only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred. Such capitalized oil and natural gas interests generally represent costs incurred in developing proved and/or probable reserves and bringing in or enhancing production from such reserves, and are accumulated on a well, field or geotechnical area basis. The carrying amount of any replaced or sold component is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.

Depletion and depreciation

Depletion of petroleum and natural gas properties is provided using the unit-of-production method based on production volumes in relation to total estimated proven and probable reserves as determined annually by independent engineers in accordance with National Instrument 51-101, Standards of Disclosure of Oil and Gas Activities. Natural gas reserves and production are converted at the energy equivalent of six thousand cubic feet to one barrel of oil.

Calculations for depletion are based on total capitalized costs plus estimated future development costs of proven and probable undeveloped reserves less the estimated net realizable value of production equipment and facilities after the proved and probable reserves are fully produced.

Depreciation is recognized on significant facilities to expense the cost of significant components of assets less their residual values over their useful lives. Phase 1 of the Alder Flats Plant and associated equipment are depreciated using the straight-line method over estimated useful lives as follows:

• General plant and processing equipment - 40 years

• Other properties and equipment - 10 years

• Turnarounds - 5 years

Depreciation of office furniture and equipment is provided for on a 20% declining balance basis.

Depreciation methods, useful lives and residual values are reviewed at each reporting date and, if necessary, any changes would be accounted for prospectively.

Dispositions

Gains on disposal of an item of PP&E or E&E are determined by comparing the proceeds from disposal with the carrying amount of PP&E or E&E and are recognized separately in the Statements of Profit (Loss) and Comprehensive Income (Loss). Exchanges of properties are measured at fair value, unless the transaction lacks commercial substance or fair value cannot be reasonably measured. Where the exchange is measured at fair value, a gain or loss is recognized in the Statements of Profit (Loss) and Comprehensive Income (Loss).

e. Impairment

I. Financial assets

Impairment of financial assets is determined by measuring the assets' expected credit loss ("ECL"). Accounts receivable are due within one year or less; therefore, these financial assets are not considered to have a significant financing component and a lifetime ECL is measured at the date of initial recognition of the accounts receivable.

The ECL pertaining to accounts receivable is assessed at initial recognition and this provision is re-assessed at each reporting date. ECLs are a probability-weighted estimate of all possible default events related to the financial asset and are measured as the difference between the present value of the cash flows due to Bellatrix and the cash flows the Company expects to receive, including cash flows expected from collateral and other credit enhancements that are a part of contractual terms. In making an assessment as to whether financial assets are credit-impaired, the Company considers historically realized bad debts, counterparty's identity, customers pay practices and the terms of the contract under which the obligation arose. The carrying amounts of financial assets are reduced by the amount of the ECL through an allowance account and losses are recognized within general and administrative ("G&A") expense in the Statements of Profit (Loss) and Comprehensive Income.

Based on industry experience, the Company considers its accounts receivable to be in default when the receivable is more than 90 days past due. Once the Company has pursued collection activities and it has been determined that the incremental cost of pursuing collection outweighs the benefits, Bellatrix derecognizes the gross carrying amount of the financial asset and the associated allowance from the balance sheets.

II. Non-financial assets

Developing and producing assets are assessed for impairment if facts and circumstances suggest that the carrying amount exceeds the recoverable amount. The impairment test is performed at the asset or CGU level.

The recoverable amount of an asset or a cash-generating unit ("CGU") is the greater of its value in use (“VIU”) and its fair value less costs to sell (“FVLCS”). FVLCS is determined to be the amount for which the asset could be sold in an arm’s length transaction. FVLCS can be determined by using an observable market metric or by using discounted future net cash flows of proved and probable reserves using forecasted prices and costs. VIU is determined by estimating the present value of the future net cash flows expected to be derived from the continued use of the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in the Company’s Statement of Profit (Loss) and Comprehensive Income (Loss) in the period in which it occurs.

Impairment losses recognized in prior years are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depletion and depreciation, if no impairment loss had been recognized.

E&E assets are assessed for impairment, both at the time of any triggering facts and circumstances as well as upon their eventual reclassification to producing assets (oil and natural gas interests in PP&E). E&E assets are grouped together with the Company’s CGU’s when they are assessed for impairment.

f. Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are determined by discounting the expected cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability, if the risks have not been incorporated into the estimate of cash flows. The increase in the provision due to the passage of time is recognized within finance expense.

Onerous contract provisions are recognized when the unavoidable costs of meeting the obligation exceed the economic benefit derived from the contract. The provision for onerous contracts is measured at the present value of estimated future cash flows underlying the obligations less any estimated recoveries, discounted at the risk-free rate.

I. Decommissioning liabilities

The Company’s activities give rise to dismantling, decommissioning and site disturbance remediation activities. A provision is made for the estimated cost of site restoration and capitalized in the relevant asset category.

Decommissioning obligations are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance sheet date. Changes in the present value of the estimated expenditure are reflected as an adjustment to the liability and the relevant asset. The accretion or unwinding of the discount on the decommissioning provision is recognized as a finance expense. Actual costs incurred upon settlement of the decommissioning liabilities are charged against the provision to the extent the provision was recognized.

II. Environmental liabilities

The Company records liabilities on an undiscounted basis for environmental remediation efforts that are likely to occur and where the cost can be reasonably estimated. The estimates, including associated legal costs, are based on available information using existing technology and enacted laws and regulations. The estimates are subject to revision in future periods based on actual costs incurred or new circumstances. Any amounts expected to be recovered from other parties, including insurers, are recorded as an asset separate from the associated liability.

g. Share-based Payments

I. Equity-settled transactions

Bellatrix accounts for options issued under the Company’s share option plan by reference to the fair value of the equity instruments granted. The fair value of each share option is estimated on the date of the grant using the Black-Scholes options pricing model and charged to earnings over the vesting period with a corresponding increase to contributed surplus. The Company estimates a forfeiture rate on the grant date and the rate is adjusted to reflect the actual number of options that actually vest. The expected life of the options granted is adjusted, based on the Company’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

II. Cash-settled transactions

The Company’s Deferred Share Unit Plan (the “DSU Plan”) is accounted for as a cash settled share based payment plan in which the fair value of the amount payable under the DSU Plan is recognized as an expense with a corresponding increase in liabilities. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized in profit or loss.

Awards under the Award Incentive Plan ("Award Plan") may be settled in cash, in common shares of the Company, or a combination thereof. The Company’s Restricted and Performance Award Plan is accounted for as a cash settled share based payment plan in which the fair value of the amounts payable under the Award Plan are recognized incrementally as an expense over the vesting period, with a corresponding change in liabilities. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized in profit or loss.

h. Income Taxes

Income tax expense is comprised of current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

I. Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from, or paid, to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted, or substantively enacted, by the date of the statement of financial position.

II. Deferred tax 

Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is not a business combination. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted, or substantively enacted, by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

i. Financial Instruments

All financial assets are initially measured at fair value. Financial assets are subsequently measured at either amortized cost, fair value through other comprehensive income ("FVOCI") or fair value through profit or loss ("FVTPL"), depending on the Company's business model for managing the financial assets, and the contractual cash flow characteristics of the financial assets. Financial assets are not reclassified subsequent to their initial recognition, except if the Company changes its business model for managing financial assets.

A financial asset is subsequently measured at amortized cost if it meets both of the following conditions:

(i). The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and

(ii). The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets that meet condition (ii) above that are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets is subsequently measured at FVOCI.

All other financial assets are subsequently measured at FVTPL, with changes in fair value recognized in profit or loss. Accounts receivable are classified and measured at amortized cost.

Financial liabilities are classified and measured at amortized cost using the effective interest rate method, except for derivatives that are liabilities, deferred share units, restricted awards and performance awards, which are all classified and measured at FVTPL. Accounts payable and accrued liabilities, Credit Facilities, Second Lien Notes, Senior Notes, Convertible Debentures and finance lease obligations are classified and measured at amortized cost.

Financial instruments measured at fair value on the balance sheet require classification into one of the following levels of the fair value hierarchy:

Level 1 – Valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – Valuation based on inputs other than quoted prices included in level 1, that are observable directly or indirectly.

Level 3 – Valuation based on inputs that are not based on observable market data.

The fair value hierarchy level at which a fair value measurement is categorized is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. The Company has categorized its financial instruments that are fair valued on the balance sheet according to the fair value hierarchy.

Transaction costs attributable to financial instruments classified as other than held-for-trading are included in the recognized amount of the related financial instrument and recognized over the life of the resulting financial instrument using the effective interest rate method.

The Company utilizes financial derivatives and commodity sales contracts requiring physical delivery to manage the price risk attributable to anticipated sale of petroleum and natural gas production and foreign exchange exposures. The Company does not enter into derivative financial instruments for trading or speculative purposes. The Company has not designated its financial derivative contracts as effective accounting hedges, and thus has not applied hedge accounting, even though the Company considers all commodity contracts to be economic hedges. As a result, financial derivatives are classified as FVTPL and are recorded on the balance sheet at fair value, with fair value changes recorded in profit or loss.

The derivative financial instruments are initiated within the guidelines of the Company’s corporate hedging policy. This includes linking all derivatives to specific assets and liabilities on the balance sheet, to specific firm commitments, or forecasted transactions.

The Company accounts for its commodity sales and purchase contracts, which were entered into and continue to be held for the purpose of receipt or delivery of non-financial items, in accordance with its expected purchase, sale or usage requirements as executory contracts. As such, physical sales and purchase contracts are not recorded at fair value on the balance sheet. Settlements on these physical sales and purchase contracts are recognized in petroleum and natural gas sales.

j. Compound Financial Instruments

The Company's compound financial instruments are comprised of its Warrants issued with the Second Lien Notes and the Convertible Debentures that can be converted to common shares at the option of the holder. The number of shares to be issued does not vary with changes in fair value. 

The Second Lien Notes and Convertible Debentures liability component are recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially as the difference between the fair value of the Second Lien Notes and Convertible Debenture and the fair value of the liability components. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of the Second Lien Notes and Convertible Debentures is measured at amortized cost using the effective interest method. The Warrants and equity component of the Convertible Debentures are not re-measured subsequent to initial recognition.

k. Lease Obligations

Leases which effectively transfer substantially all of the risks and rewards of ownership to the Company are classified as finance leases and are accounted for as an acquisition of an asset and an assumption of an obligation at the inception of the lease, measured as the present value of minimum lease payments to a maximum of the asset’s fair value. The asset is amortized in accordance with the Company’s depletion and depreciation policy. The obligations recorded under finance lease payments are reduced by the lease payments made.

Assets held under other leases are classified as operating leases and are not recognized in the balance sheet. Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received from landlords are deferred and recognized as an integral part of the total lease expense, over the term of the lease.

l. Basic and Diluted per Share Calculations

Basic per share amounts are calculated using the weighted average number of shares outstanding during the period. The Company uses the treasury share method to determine the dilutive effect of share options. Under the treasury share method, only “in the money” dilutive instruments impact the diluted calculations in computing diluted per share amounts.

m. Finance Income and Expenses

Finance income is recognized as it accrues in profit or loss, using the effective interest method. Finance expense comprises interest expense on borrowings, amortization of financing costs and discounts, and accretion of the discount on provisions.

n. Borrowing Costs

Borrowing costs incurred for the construction of qualifying assets are capitalized during the period of time that is required to complete and prepare the assets for their intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use. All other borrowing costs are recognized in profit or loss using the effective interest method. The capitalization rate used to determine the amount of borrowing costs to be capitalized is the weighted average interest rate applicable to the Company’s outstanding borrowings during the period.

o. Cash and Cash Equivalents

Cash and cash equivalents include cash and short-term investments with original maturities of three months or less.

p. Business Combinations

Business combinations are accounted for using the acquisition method. The identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date. The cost of an acquisition is measured as the aggregate consideration transferred, measured at the acquisition date fair value. If the cost of the acquisition is less than the fair value of the net assets acquired, the difference is recognized immediately in profit or loss. If the cost of the acquisition is more than the fair value of the net assets acquired, the difference is recognized on the balance sheet as goodwill. Acquisition costs incurred are expensed.

q. Foreign Currency Translation

Monetary assets and liabilities denominated in a foreign currency are translated at the rate of exchange in effect at the balance sheet date. Revenues and expenses are translated at the period average rates of exchange. Translation gains and losses are included in earnings in the period in which they arise.

Bellatrix’s functional and presentation currency is Canadian dollars.

XML

CRITICAL JUDGEMENTS AND ACCOUNTING ESTIMATES

12 Months Ended

Dec. 31, 2018

Accounting Policies, Changes In Accounting Estimates And Errors [Abstract]

CRITICAL JUDGEMENTS AND ACCOUNTING ESTIMATES

CRITICAL JUDGMENTS AND ACCOUNTING ESTIMATES

The financial statements of the Company have been prepared by management in accordance with IFRS. The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, and contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period and accompanying notes. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be material. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

a. Critical Accounting Judgments

I. Oil and Gas Reserves

Reserves and resources are used in the units of production calculation for depletion, depreciation and amortization, and the impairment analysis which affect net profit or loss. There are numerous uncertainties inherent in estimating oil and gas reserves. Estimating reserves is very complex, requiring many judgments based on geological, geophysical, engineering and economic data. Changes in these judgments could have a material impact on the estimated reserves. These estimates may change, having either a negative or positive effect on net profit as further information becomes available and as the economic environment changes.

Identification of CGUs

Bellatrix’s assets are aggregated into CGUs, for the purpose of calculating impairment, based on their ability to generate largely independent cash flows, geography, geology, production profile and infrastructure of their assets.

Impairment Indicators and Impairment Reversal 

Judgment is required to assess when impairment indicators exist and impairment testing is required with respect to exploration and evaluation assets and property, plant and equipment.

IV. Joint Arrangements

Judgment is required to determine when the Company has joint control over an arrangement. In establishing joint control, the Company considers whether unanimous consent is required to direct the activities that significantly affect the returns of the arrangement, such as the capital and operating activities of the arrangement. Additionally, the Company assesses the rights and obligations arising from the arrangement by considering its governance structure, legal form, and terms agreed upon by the parties sharing control, including the contractual rights of each partner, dispute resolution procedures, termination provisions, and procedures for subsequent transactions in its determination of joint control.

Once joint control has been established, judgment is also required to classify the joint arrangement. The type of joint arrangement is determined through analysis of the rights and obligations arising from the arrangement by considering its legal structure, legal form and terms agreed upon by the parties sharing control. An arrangement that is not structured through a separate vehicle in which the controlling parties have rights to the assets, revenues and substantially all of the economic benefits generated through the arrangement, in addition to obligations for the liabilities and expenses, is classified as a joint operation. An arrangement in which these criteria are not met is classified as a joint venture.

V. Non-monetary Transactions

Judgment is required to determine whether non-monetary transactions have commercial substance.

b. Critical Estimates and Assumptions

I. Recoverability of asset carrying values

The Company assesses its oil and gas properties, including exploration and evaluation assets, for possible impairment if there are events or changes in circumstances that indicate that carrying values of the assets may not be recoverable, or at least at every reporting date. 

The assessment of any impairment of property, plant and equipment is dependent upon estimates of recoverable amount that take into account factors such as reserves, future estimated commodity prices, royalties and costs, economic and market conditions, timing of cash flows, discount rates, the useful lives of assets and their related salvage values. By their nature, these estimates and assumptions are subject to measurement uncertainty and may impact the carrying value of the Company’s assets in future periods.

Decommissioning obligations

Provisions for decommissioning obligations associated with the Company’s drilling operations are based on current legal and constructive requirements, technology, price levels and expected plans for remediation. Actual costs and cash outflows can differ from estimates because of changes in laws and regulations, public expectations, prices, discovery and analysis of site conditions and changes in clean up technology. 

Income taxes 

Deferred tax assets and liabilities are recognized for the estimated tax consequences between amounts included in the financial statements and their tax base using substantively enacted future income tax rates. Timing of future revenue streams and future capital spending changes can affect the timing of any temporary differences, and accordingly affect the amount of the deferred tax asset or liability calculated at a point in time. Deferred tax assets are recognized when it is considered probable that deductible temporary differences will be recovered in future periods, which requires Management judgment. These differences could materially impact earnings.

XML

CHANGES IN SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2018

Accounting Policies, Changes In Accounting Estimates And Errors [Abstract]

CHANGES IN SIGNIFICANT ACCOUNTING POLICIES

CHANGES IN SIGNIFICANT ACCOUNTING POLICIES

NEWLY ADOPTED ACCOUNTING POLICIES

IFRS 9 Financial Instruments ("IFRS 9")

The Company adopted IFRS 9 effective January 1, 2018. IFRS 9 replaces IAS 39 - Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 introduces new requirements for the classification and measurement of financial assets, amends the requirements related to hedge accounting, and introduces a forward-looking expected loss impairment model.

The adoption of this standard had no impact on the Company’s financial statements on the date of adoption, or for comparative periods. There was no change in the carrying amounts recognized under IAS 39, despite the new measurement categories stipulated under IFRS 9. The adoption of the expected credit loss impairment model for financial assets measured at amortized cost did not result in any additional provision for impairment. The Company has applied IFRS 9 retrospectively, without restatement.

There was no change to the measurement categories for financial liabilities. Financial liability classifications are all unchanged from their classifications under IAS 39. Deferred share units, restricted awards and performance awards continue to be classified as FVTPL. Accounts payable and accrued liabilities, Credit Facilities, Second Lien Notes, Senior Notes, Convertible Debentures (each as defined in Note 7) and finance lease obligations are classified as amortized cost.

A comparison of financial instrument subsequent measurement categories, pre and post adoption of IFRS 9, is as follows:

Financial Assets and Liabilities	IAS 39	IFRS 9
Accounts receivable	Amortized cost	Amortized cost
Commodity risk management contracts	FVTPL	FVTPL
Foreign exchange risk management contracts	FVTPL	FVTPL
Accounts payable and accrued liabilities	Amortized cost	Amortized cost
Deferred share units	FVTPL	FVTPL
Restricted awards	FVTPL	FVTPL
Performance awards	FVTPL	FVTPL
Credit Facilities	Amortized cost	Amortized cost
Second Lien Notes	N/A	Amortized cost
Senior Notes	Amortized cost	Amortized cost
Convertible Debentures	Amortized cost	Amortized cost
Finance lease obligation	Amortized cost	Amortized cost

IFRS 15 Revenue from Contracts with Customers ("IFRS 15")

The Company adopted IFRS 15 with a date of initial application of January 1, 2018. Bellatrix used the cumulative effect method to adopt the new standard. Bellatrix has reviewed its revenue streams and major contracts with customers using the IFRS 15 five-step model and there are no material changes to the timing or amounts of revenue recognized. However, IFRS 15 contains new disclosure requirements. See note 13.

IFRS 3 Business Combinations ("IFRS 3")

The Company early adopted the amended IFRS 3 with a date of initial application of November 1, 2018. The amendment provides clarification on determining whether an acquisition made is of a business or a group of assets and introduces an optional concentration test that permits a simplified assessment. The amendments are applied prospectively to all business combinations and asset acquisitions. These impact the asset acquisitions from two joint venture partners in the fourth quarter of 2018 which management has assessed do not meet the definition of a business combination.

FUTURE ACCOUNTING POLICIES

IFRS 16 Leases ("IFRS 16")

IFRS 16 replaces IAS 17 - "Leases" and the standard will come into effect for annual periods beginning on or after January 1, 2019. For lessees applying IFRS 16, a single recognition and measurement model for leases would apply, with required recognition of right-of-use (“ROU”) assets and lease liabilities for most leases. All contracts that meet the definition of a lease under IFRS 16, including those presently accounted for as operating leases, will be recorded on the balance sheet. The standard may be applied retrospectively or using a modified retrospective approach. The Company has selected to use the modified retrospective approach which does not require restatement of prior period financial information as the cumulative effect of applying the standard to prior periods is recorded as an adjustment to opening retained earnings. On initial adoption, Bellatrix has elected to use the following practical expedients permitted under the standard:

• Certain short-term leases and leases of low value assets that have been identified at January 1, 2019 will not be recognized on the balance sheet.

• At January 1, 2019, Bellatrix will not recognize leases with terms ending within 12 months as short-term leases.

• Leases having similar characteristics will be measured as a portfolio by applying a single discount rate.

• For certain leases having associated initial direct costs, Bellatrix will, at initial measurement on transition, exclude these direct costs from the measurement of the ROU asset.

• At January 1, 2019, any provision for onerous contracts previously recognized will be applied to the associated ROU asset recognized upon transition to IFRS 16, In these cases, there will be no impairment assessment made under IAS 36 - “Impairment of Assets”.

On adoption of IFRS 16, the Company will recognize lease liabilities in relation to leases under the principles of the new standard measured at the present value of the remaining lease payments, discounted using the Company’s incremental borrowing rate as at January 1, 2019. The associated ROU assets will be measured at the amount equal to the lease liability on January 1, 2019 less any amount previously recognized under IAS 37 for onerous contracts with no impact on retained earnings.

Adoption of the new standard will result in the recognition of additional lease liabilities and ROU assets in excess of approximately $80 million. The Company’s leases that will be recognized on its balance sheet at January 1, 2019 include leases of office leases, compressor leases and equipment leases. The impact on the statement of profit (loss) and comprehensive income (loss) will be as follows:

• Lower general and administrative expenses, operating costs and higher other income

• Higher finance expenses due to the interest recognized on the lease obligations; and

• Higher depreciation expense related to the ROU assets.

XML

FINANCIAL RISK MANAGEMENT

12 Months Ended

Dec. 31, 2018

Financial Instruments [Abstract]

FINANCIAL RISK MANAGEMENT

FINANCIAL RISK MANAGEMENT

a. Overview

The Company has exposure to the following risks from its use of financial instruments:

•Credit risk

•Liquidity risk

•Market risk

▪Foreign exchange risk

▪Commodity price risk

▪Interest rate risk

This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. Further quantitative disclosures are included throughout these financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board has implemented and monitors compliance with risk management policies.

The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company’s activities.

b. Capital Management

The Company's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the future development of the business. The Company manages its capital structure and makes adjustments to it based on changes in economic conditions and the risk characteristics of the underlying petroleum and natural gas assets. The Company considers its capital structure to include shareholders’ equity, Credit Facilities, Second Lien Notes, Senior Notes, Convertible Debentures, and working capital. In order to maintain or adjust the capital structure, the Company may from time to time issue common shares, senior notes, convertible debentures or other debt instruments, adjust its capital spending, and/or dispose of certain assets to manage current and forecasted debt levels. Bellatrix does not pay dividends. 

Bellatrix remains highly focused on key business objectives of maintaining financial strength and liquidity, and optimizing capital investments in the current commodity price environment. In order to preserve liquidity and capital resources, in January 2019, Bellatrix’s Board of Directors approved a 2019 net capital budget of between $40 million and $50 million. Bellatrix expects to be able to fund its 2019 capital program by reinvesting cash flow, supplemented by borrowing under its Credit Facilities. Bellatrix continually monitors its capital spending program in light of prevailing commodity prices and the United States/Canadian dollar exchange rate with the aim of ensuring the Company will be able to meet future anticipated obligations incurred from normal ongoing operations with adjusted funds flow and borrowings under its Credit Facilities, as necessary. Please refer to note 7 and ‘Liquidity Risk’ below for further discussion.

The Company monitors its capital structure based on the ratio of total net debt to annualized adjusted funds flow (defined below). This ratio is calculated as total net debt, defined as outstanding Credit Facilities, Second Lien Notes, Senior Notes, Convertible Debentures (liability component), and plus or minus adjusted working capital (defined below), divided by adjusted funds flow (defined below) for the most recent calendar quarter, annualized (multiplied by four). The total net debt to annualized adjusted funds flow ratio may increase at certain times as a result of acquisitions, fluctuations in commodity prices, timing of capital expenditures and other factors. In order to facilitate the management of this ratio, the Company prepares capital expenditure budgets which are reviewed and updated as necessary depending on varying factors including current and forecast prices, successful capital deployment and general industry conditions. The budgets are approved by the Board of Directors.

The Company’s capital structure and its calculation of total net debt and the total net debt to adjusted funds flow ratio as defined by the Company is as follows:

Debt to Adjusted Funds Flow Ratio
	Year ended December 31,
($000s, except where noted)	2018		2017
Shareholders’ equity	672,725		774,022
Credit Facilities	47,763		52,066
Adjusted working capital deficiency (1)	20,740		23,926
Subtotal	68,503		75,992
Second Lien Notes (mature on September 11, 2023)(2)	137,097		—
Senior Notes (mature May 15, 2020) (2)	196,000		305,409
Net debt (1)	401,600		381,401
Convertible Debentures (liability component)	41,732		39,426
Total net debt (1) at year end	443,332		420,827
Debt to adjusted funds flow ratio (annualized)(3) (4)
Adjusted funds flow (4) (annualized)	62,032		62,800
Net debt (1) to periods adjusted funds flow ratio (annualized) (3)	6.5	x	6.1	x
Total net debt to periods adjusted funds flow ratio (annualized) (3)	7.1	x	6.7	x
Debt to adjusted funds flow ratio (4)
Adjusted funds flow for the year (4)	48,025		58,240
Net debt (1) to adjusted funds flow ratio (4) for the year	8.4	x	6.5	x
Total net debt (1) to adjusted funds flow ratio (4) for the year	9.2	x	7.2	x

(1)Net debt and total net debt as presented do not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. The Company’s calculation of total net debt excludes other deferred liabilities, long-term risk management contract liabilities and decommissioning liabilities. Total net debt includes the adjusted working capital deficiency, amounts outstanding under Credit Facilities, Second Lien Notes, Senior Notes and Convertible Debentures (liability component). The adjusted working capital deficiency as presented does not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. The Company calculated adjusted working capital deficiency as net working capital deficiency excluding current risk management contract assets and liabilities, current portion of other deferred liabilities, current portion of Credit Facilities and current portion of decommissioning liability. Net debt excludes the liability component of Convertible Debentures that is included in total net debt.

(2)For the year ended December 31, 2018, Second Lien Notes and Senior Notes includes an unrealized foreign exchange loss of $18.6 million (2017: $22.2 million gain) and does not include an unrealized gain of $3.4 million (2017: $3.9 millionloss) on foreign exchange contracts.

(3)For the years ended December 31, 2018 and 2017, net debt and total net debt to period’s adjusted funds flow ratio (annualized) is calculated based upon fourth quarter adjusted funds flow annualized.

(4)Adjusted funds flow as presented do not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. Adjusted funds flow is calculated as cash flow from operating activities, excluding decommissioning costs incurred, changes in non-cash working capital incurred, and transaction costs.

c. Credit Risk

Credit risk is the risk of financial loss to Bellatrix if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from Bellatrix’s trade receivables from joint venture partners, petroleum and natural gas marketers, and financial derivative counterparties. Credit risk is considered very low for the Company's risk management contracts due to the external credit ratings of its counterparties and Bellatrix's process for selecting and monitoring credit-worthy counterparties.

A substantial portion of Bellatrix’s accounts receivable are with customers and joint interest partners in the petroleum and natural gas industry and are subject to normal industry credit risks. Receivables from petroleum and natural gas marketers are normally collected on the 25th day of the month following production. Bellatrix currently sells substantially all of its production to ten primary purchasers under standard industry sale and payment terms. The most significant 60 day exposure to a single counterparty is approximately $13.9 million. Purchasers of Bellatrix’s natural gas, crude oil and natural gas liquids are subject to a periodic internal credit review to minimize the risk of non-payment. Bellatrix has continued to closely monitor and reassess the creditworthiness of its counterparties, including financial institutions. This has resulted in Bellatrix mitigating its exposures to certain counterparties by obtaining financial assurances or reducing credit where it is deemed warranted and permitted under contractual terms.

Bellatrix may be exposed to third party credit risk through its contractual arrangements with its current or future partners and joint venture partners, marketers of its petroleum and natural gas production, derivative counterparties and other parties.

As at December 31, 2018, accounts receivable was comprised of the following:

Aging ($000s)	Not past due (less than 90 days)		Past due (90 days or more)			Total
Joint venture and other trade accounts receivable	$	6,672	$	8,316		$	14,988
Revenue and other accruals	23,252		297			23,549
Less: Allowance for expected credit loss
Balance, beginning of year	—		(889		)	(889		)
Provision	—		(693		)	(693		)
Balance, end of year	—		(1,582		)	(1,582		)
Total accounts receivable	$	29,924	$	7,031		$	36,955

The carrying amount of accounts receivable and risk management assets represent the maximum credit exposure.

d. Liquidity Risk

Liquidity risk is the risk that Bellatrix will not be able to meet its financial obligations as they become due. Bellatrix actively manages its liquidity through daily and longer-term cash, debt and equity management strategies. Such strategies encompass, among other factors: having adequate sources of financing available through its Credit Facilities, estimating future cash generated from operations based on reasonable production and pricing assumptions, analysis of economic risk management opportunities, and maintaining sufficient cash flows for compliance with the Senior Debt Covenants described in note 7. The Company also mitigates liquidity risk by maintaining an insurance program to minimize exposure to insurable losses.

The Company prepares annual capital expenditure budgets which are regularly monitored and updated as necessary. Further, the Company utilizes authorizations for expenditures on both operated and non-operated projects to further manage capital expenditures. To facilitate the capital expenditure program, the Company has revolving reserve based Credit Facilities, as outlined in note 7, which are reviewed semi-annually by the lenders thereunder. The borrowing base under the Company’s Credit Facilities is $100 million and total commitments were $95 million at December 31, 2018. Amounts outstanding under the Credit Facilities were $47.8 million and total outstanding letters of credit were $13.9 million at December 31, 2018. The term of the Company’s Credit Facilities is to May 30, 2019, and the Credit Facilities are extendible annually thereafter at the option of the Company, subject to lender approval. If not renewed in May 2019, the Credit Facilities would enter a six-month term-out period to November 30, 2019. The Credit Facilities outline limitations based on percentages of the prior quarter’s sale volumes, which may be hedged through financial commodity price risk management contracts.

Bellatrix also has Second Lien Notes, Senior Notes and Convertible Debentures outstanding with fixed interest rates, as outlined in note 7, which mature on September 11, 2023, May 15, 2020 and September 30, 2021, respectively. The maturity date of Second Lien Notes will be accelerated to March 14, 2020 if more than US$25 million principal amount of Senior Notes remains outstanding as at March 14, 2020.

There remains uncertainty and liquidity risk until such time as the Company implements a financing arrangement that addresses the pending maturities under the May 2020 Senior Notes and the Credit Facilities. During 2018, US$104.2 million of Senior Notes were exchanged for Second Lien Notes and common shares. Bellatrix is engaged in ongoing confidential discussions with parties across the Company’s capital structure in connection with potential transaction alternatives, including refinancing the remaining Senior Notes which mature in May 2020 in order to extend the maturity of the Credit Facilities beyond November 30, 2019. There are no assurances that a transaction will be completed and that an extension of the Credit Facilities will be obtained by the Company or on what terms.

Bellatrix is aware that the Company's outstanding Senior Notes have recently been trading at a discount to par value. In order to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, Bellatrix may, from time to time, seek to purchase such debt for cash, in exchange for other debt or equity securities, or for a combination of cash and securities, in each case in open market purchases and/or privately negotiated transactions. Bellatrix will evaluate any such transactions in light of then existing market conditions, taking into account the Company's current liquidity and prospects for future access to capital. In addition, Bellatrix remains in active discussions with existing and potential new lenders with a view to providing additional liquidity to Bellatrix. The amounts involved in any such transactions, individually or in the aggregate, may be material.

As at December 31, 2018 the Company has eliminated net debt associated with its Senior Notes by US$32.1 million (approximately $41.8 million CAD). This included a US$24.1 million reduction through note exchanges for common shares of Bellatrix, as well as a US$8.0 million reduction (approximately $10.5 million CAD) through the Second Lien Refinancing exchange.  In addition, the Second Lien Refinancing exchange benefited the Company’s long term debt maturity profile as it extended the maturity on US$72.1 million of Senior Notes by three years, from 2020 to 2023.

At December 31, 2018 Exchanging Noteholders had subscribed for US$30 million additional Second Lien Notes (see note 7), of which US$9.0 million had been spent and US$21.0 million was committed for use on capital expenditures, development capital, and Senior Notes purchases.

On January 22, 2019, the Company announced that its board of directors had determined to commence procedures for the voluntary delisting of the Company's common shares from the New York Stock Exchange ("NYSE"). Bellatrix has filed a Form 25 with the Securities and Exchange Commission ("SEC") to affect the voluntary delisting of Bellatrix's common shares from the NYSE and the last day of trading was February 11, 2019.

Future liquidity depends primarily on cash flow generated from operations, availability under the Credit Facilities (as noted above) and the ability to access debt and equity markets and the ability to refinance the May 2020 Senior Notes. From time to time, the Company accesses capital markets to meet its additional financing needs and to maintain flexibility in funding its capital programs. As at December 31, 2018, the Company has the ability to issue up to an additional $476.0 million in equity securities under its $500 million Shelf Prospectus, which expires on July 29, 2020.

There can be no assurance that future debt or equity financing, additional credit under the Credit Facilities, or cash generated by operations will be available or sufficient to meet these requirements or for other corporate purposes or, if debt or equity financing is available, that it will be on terms acceptable to Bellatrix.

The following are the contractual maturities of financial liabilities as at December 31, 2018:

Liabilities ($000s)	Total		< 1 Year		1-3 Years		3-5 Years		More than 5 years
Accounts payable and accrued liabilities	$	61,211	$	61,211	$	—	$	—	$	—
Risk management liability	2,569		917		1,652		—		—
Credit Facilities	47,763		47,763		—		—		—
Second Lien Notes (1)(2)	139,331		—		—		139,331		—
Senior Notes (1)	198,904		—		198,904		—		—
Convertible Debentures (1)	50,000		—		50,000		—		—
Finance lease obligation	5,721		475		938		915		3,393
Total	$	505,499	$	110,366	$	251,494	$	140,246	$	3,393

(1) Principal amount of the instruments

(2) Maturity date of Second Lien Notes will be accelerated to March 14, 2020 if more than US$25 million principal amount of Senior Notes remaining outstanding as at March 14, 2020.

e. Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, commodity prices, and interest rates will affect the Company’s net profit or the value of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing returns.

f. Foreign Exchange Risk

Foreign exchange risk is the risk that fluctuations in the Canadian/United States dollar foreign exchange rate may impact the Company’s cash flows and net profit (loss). The Company’s realized commodity prices for crude oil and natural gas are based upon United States dollar denominated commodity prices. Fluctuations in the Canadian/United States dollar foreign exchange rate may thus impact commodity prices received by the Company. In addition, the Company has United States dollar denominated Second Lien Notes, Senior Notes and related interest obligations of which future cash payments are directly impacted by the exchange rate in effect on the payment date.

The Company may utilize foreign exchange derivative contracts to manage foreign exchange risks in order to maintain cash flow stability. Foreign exchange derivative transactions are in accordance with the risk management policy that has been approved by the Board of Directors. The aggregate amount hedged under all foreign exchange derivative contracts is limited to the outstanding principal amount of the Second Lien Notes, Senior Notes or 60% of the Company’s United States dollar revenues over the previous three months. Additionally, the term of foreign exchange contracts is limited to the remaining term of the related Second Lien Notes or Senior Notes or a maximum of three years. See note 17 for the foreign exchange risk management contacts that the Company has entered at December 31, 2018.

For the year ended December 31, 2018, a $0.01 increase or decrease in the CDN$/US$ foreign exchange rate, with all other variables held constant, would impact the profit (loss) before income taxes by approximately $0.6 million.

g. Commodity Price Risk

Commodity price risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in commodity prices. Commodity prices for petroleum and natural gas are impacted by not only the relationship between the Canadian and United States dollar, as outlined above, but also global economic events that dictate the levels of supply and demand.

The Company utilizes both financial derivatives and physical delivery sales contracts to manage commodity price risks. All such transactions are conducted in accordance with the commodity price risk management policy that has been approved by the Board of Directors.

The Company’s formal commodity price risk management policy permits management to use specified price risk management strategies including fixed price contracts, costless collars and the purchase of floor price options, other derivative financial instruments, and physical delivery sales contracts to reduce the impact of price volatility and ensure minimum prices for a maximum of thirty months beyond the current date. The program is designed to provide price protection on a portion of the Company’s future production in the event of adverse commodity price movement, while retaining significant exposure to upside price movements. By doing this, the Company seeks to provide a measure of stability to cash flows from operating activities, as well as, to ensure Bellatrix realizes positive economic returns from its capital developments and acquisition activities.

For the year ended December 31, 2018, if the prices for AECO natural gas had increased or decreased by $0.10/mcf, with all other variables held constant, net loss before tax would have be impacted by $5.5 million. For the year ended December 31, 2018, if prices for WTI crude oil had increased or decreased by $1.00/bbl, with all other variables held constant, net profit would be impacted by $3.7 million.

As at December 31, 2018, the Company has entered into commodity price risk management arrangements as follows:

Natural gas fixed price arrangements

Type		Period	Volume	Price			Index
Natural gas fixed	Financial	January 2019	10,000 GJ/d	$	2.54	CDN	AECO
Natural gas fixed	Financial	February 2019	10,000 GJ/d	$	2.43	CDN	AECO
Natural gas fixed	Financial	April 1, 2019 to October 31, 2019	20,000 GJ/d	$	1.79	CDN	AECO

Natural gas basis differential arrangements

Type		Period	Volume	Price			Index
Natural gas	Financial	April 1, 2019 to October 31, 2020	10,551 GJ/d	$	(1.17	)US	AECO 7A/NYMEX
Natural gas	Financial	January 1, 2019 to October 31, 2020	10,551 GJ/d	$	(1.19	)US	AECO 7A/NGI Chicago
Natural gas	Financial	January 1, 2019 to October 31, 2020	5,275 GJ/d	$	(1.23	)US	AECO/Dawn Gas Daily

Crude oil call option arrangements

Type		Period	Volume	Price			Index
Oil	Financial	January 1, 2019 to December 31, 2019	1,000 bbl/d	$	87.50	CDN	WTI - NYMEX
Oil	Financial	January 1, 2020 to December 31, 2020	1,000 bbl/d	$	77.90	CDN	WTI - NYMEX

The following is a summary of the net risk management asset (liability) as at December 31, 2018 and December 31, 2017:

($000s)	2018			2017
Current portion commodity contract asset	$	9,852		$	31,910
Commodity contract asset (long term)	3,291			1,213
Current portion commodity contract liability	(917		)	(4,468		)
Commodity contract liability (long term)	(1,652		)	—
Foreign exchange contract liability (long term)	—			(3,422		)
Net risk management asset (liability)	$	10,574		$	25,233

Subsequent to December 31, 2018, the Company monetized certain natural gas basis differential arrangements from April 1, 2019 to October 31, 2019 of 26,377 GJ/d for proceeds of $2.4 million. In addition, the Company entered into commodity price risk management arrangements as follows:

Natural gas fixed price arrangements

Type		Period	Volume	Price			Index
Natural gas fixed	Financial	March 2019	40,000 GJ/d	$	2.38	CDN	AECO

h. Interest Rate Risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in the market interest rates. The Company is exposed to interest rate fluctuations on its Credit Facilities which bear a floating rate of interest. As at December 31, 2018, if interest rates had been 1% lower with all other variables held constant, net loss before income tax for the year ended December 31, 2018 would have been approximately $0.5 million lower, due to lower interest expense. An equal and opposite impact would have occurred to net earnings had interest rates been 1% higher.

i. Fair Value

The Company’s financial instruments as at December 31, 2018 include accounts receivable, deposits, risk management assets and liabilities, accounts payable and accrued liabilities, finance lease obligations, Credit Facilities, Second Lien Notes, Senior Notes and Convertible Debentures.

The fair value of accounts receivable, deposits, accounts payable and accrued liabilities approximate their carrying amounts due to their short-terms to maturity.

The Company enters into risk management contracts under master netting arrangements. Under these arrangements, the amounts owed by each counterparty for commodity contracts outstanding in the same commodity are aggregated into a single net amount receivable or payable. If a default occurs, the net amount subject to a master netting arrangement is receivable or payable for settlement purposes. The carrying amounts of commodity and foreign exchange contracts held under master netting arrangements are recorded on a net basis. At December 31, 2018 and 2017, the impact of netting gross amounts is negligible.

The risk management assets and liabilities at December 31, 2018 include commodity contracts. The fair value of commodity contracts is determined by discounting the difference between the contracted price and published forward price curves as at the balance sheet date, using the remaining contracted petroleum and natural gas volumes. The fair value of foreign exchange contracts is determined based on the difference between the contracted forward rate and current forward rates, using the remaining settlement amount.

Credit Facilities bear interest at a floating market rate and the credit and market premiums therein are indicative of current rates; accordingly the fair market value approximates the carrying value.

The fair value of financial assets and liabilities, excluding working capital and Credit Facilities discussed above, is attributable to the following fair value hierarchy levels at December 31, 2018 and December 31, 2017:

($000s)		Fair Value
2018	Carrying Value	Level 1	Level 2	Level 3
Financial assets
Risk management asset	13,143	—	13,143	—
Financial liabilities
Risk management liability	2,569	—	2,569	—
Finance lease obligation	5,721	—	7,494	—
Second Lien Notes (3)	137,097	—	139,337	—
Senior Notes (2)	196,000	—	119,342	—
Convertible Debentures (1)	41,732	—	22,500	—

(1) The fair value of the Convertible Debentures is based on the closing market price on the TSX of $45.00 per Debenture as at December 31, 2018, and represents the market value of the entire instrument.

(2) The fair value of the Senior Notes is based on the closing market price of $60.00 per Senior Note as at December 31, 2018.

(3) The fair value of Second Lien Notes approximates the carrying value given the September 11, 2018 date of issuance and additional notes issued on December 11, 2018 at the same terms.

($000s)		Fair Value
2017	Carrying Value	Level 1	Level 2	Level 3
Financial assets
Risk management asset	33,123	—	33,123	—
Financial liabilities
Risk management liability	7,890	—	7,890	—
Finance lease obligation	6,891	—	8,932	—
Convertible Debentures (1)	39,426	—	46,000	—
Senior Notes (2)	305,409	—	299,258	—

(1) The fair value of the Convertible Debentures is based on the closing market price on the TSX of $92.00per Debenture as at December 31, 2017, and represents the market value of the entire instrument.

(2) The fair value of the Senior Notes is based on the closing market price of $95.63 per Senior Note as at December 31, 2017.

XML

DEBT

12 Months Ended

Dec. 31, 2018

Financial Instruments [Abstract]

DEBT

DEBT

($000s)	2018		2017
Credit Facilities - current	$	47,763	$	—
Credit Facilities - non-current	—		52,066
Second Lien Notes (mature on September 11, 2023 to December 12, 2023)	137,097		—
Senior Notes (mature on May 15, 2020)	196,000		305,409
Convertible Debentures (liability component)	41,732		39,426
Debt	$	422,592	$	396,901

Credit Facilities

At December 31, 2018, the Company had $47.8 million outstanding under its syndicated revolving credit facilities (the “Credit Facilities”) provided by four financial institutions. In connection with the completion of the Second Lien Refinancing (defined below), the agreement governing the Credit Facilities was amended and restated, with the borrowing base reconfirmed at $100 million with total commitments of $95 million. The terms of the Credit Facilities were amended and restated to, among other things, allow for the completion of the transactions comprising the Second Lien Refinancing, amend the interest and fees payable under the Credit Facilities and provide for an additional financial covenant (refer to Covenants below). The term of the Credit Facilities is to May 30, 2019, and the Credit Facilities are extendible annually thereafter at the option of the Company, subject to lender approval. If not renewed in May 2019, the Credit Facilities would enter a six-month term-out period to November 30, 2019. The next semi-annual redetermination is scheduled for May 2019.

The Credit Facilities bear interest at a floating rate. For the year ended December 31, 2018 the weighted average interest rate for amounts borrowed under the Credit Facilities was 4.42%. The Credit Facilities are secured by a $1.0 billion debenture containing a first ranking charge and security interest. The Company has provided a negative pledge and undertaking to provide fixed charges over its properties in certain circumstances.

As at December 31, 2018, total outstanding letters of credit were $13.9 million which reduced the amount otherwise available to be drawn under the Credit Facilities.

Second Lien Notes

During 2018, Bellatrix completed a debt refinancing transaction (the "Second Lien Refinancing") pursuant to a note purchase agreement ("Note Purchase Agreement") with certain holders of the Senior Notes (the “Exchanging Noteholders”) to exchange US$80.1 million of the Company’s Senior Notes for US$72.1 million of second lien notes due 2023 (the “Second Lien Notes”). The Second Lien Notes bear interest at 8.5% per annum, payable quarterly, and are secured by a $250 million demand debenture over all of the Company’s assets, which is subordinated to the security provided under the Credit Facilities. The Note Purchase Agreement provides that the maturity date of Second Lien Notes will be accelerated to March 14, 2020 if more than US$25 million principal amount of Senior Notes remains outstanding as at March 14, 2020.

In addition, the Exchanging Noteholders have agreed to subscribe for between US$30 million and US$40 million of additional Second Lien Notes, with the proceeds to be used for capital expenditures, development capital and Senior Notes purchases. During 2018 Bellatrix issued US$30 million of additional Second Lien Notes to the Exchanging Noteholders.

The Exchanging Noteholders also agreed to allow for up to US$50 million in additional Second Lien Note issuances to be used exclusively for future Senior Note exchanges on or before February 28, 2019. Such availability period has as of March 14, 2019 not been further extended by the parties to the Second Lien Notes Agreement. However, the Company remains in ongoing confidential discussions with parties across its capital structure in connection with potential transaction alternatives. If any of the incremental US$50 million of Second Lien Note capacity is utilized, then the Exchanging Noteholders' commitment to subscribe for additional Second Lien Notes will be limited to US$30 million. The Note Purchase Agreement also provides for the ability to issue additional subordinate secured and unsecured debt in subsequent refinancing and capital raising transactions.

Pursuant to the Note Purchase Agreement, Bellatrix issued warrants to purchase an aggregate of 3,088,205 common shares of Bellatrix to the Exchanging Noteholders at an exercise price of $1.30 per Common Share expiring five years from the issuance date of the warrants. The Warrants will only vest if and when the Company accesses any of the incremental US$50 million of Second Lien Note capacity.

Second Lien Notes
($000s)	Liability Component		Warrants
Balance, December 31, 2017	$	—	$	—
Issuance of Second Lien Notes in exchange for Senior Notes(2)	92,451		1,652
Issuance of additional Second Lien Notes for cash proceeds	39,815		—
Unrealized foreign exchange gain (1)	4,719		—
Amortization of discount	112		—
Balance, December 31, 2018	$	137,097	$	1,652

(1) Exchange rate (CDN$/US$1.00) at December 31, 2018 was 1.3646.

(2) Warrants component of Second Lien Notes is presented net of tax.

Convertible Debentures

At December 31, 2018 Bellatrix had outstanding $50 million of 6.75% convertible unsecured subordinated debentures (the “Convertible Debentures”). The Convertible Debentures bear interest at a rate of 6.75% per annum, payable semiannually in arrears on September 30 and March 31 of each year. The maturity date of the Convertible Debentures is September 30, 2021. As at December 31, 2018, each $1,000 principal amount of Convertible Debenture is convertible at the option of the holder into approximately 123.4568 common shares of Bellatrix (representing a conversion price of $8.10). The Convertible Debentures are not redeemable prior to September 30, 2019, except in limited circumstances following a Change of Control (as defined by the terms of the indenture governing the Convertible Debentures). On and after September 30, 2019 and prior to September 30, 2020, the Convertible Debentures are redeemable at Bellatrix’s option, in whole or in part from time to time, at a redemption price equal to their principal amount plus accrued and unpaid interest thereon, if any, if the weighted average trading price of Bellatrix's common shares specified period is not less than 125% of the conversion price. On or after September 30, 2020, the Convertible Debentures are redeemable at Bellatrix's option, in whole or in part from time to time, at a redemption price equal to the principal amount thereof plus accrued and unpaid interest thereon, if any, up to but excluding the date set for redemption. The Convertible Debentures are direct, subordinated unsecured obligations of the Company, subordinated to the Credit Facilities, the Second Lien Notes, the Senior Notes and any other senior indebtedness.

($000s)	Liability Component		Equity Component
Balance, December 31, 2016	$	37,420	$	7,818
Effective interest on Convertible Debentures	$	2,006	$	—
Balance, December 31, 2017	$	39,426	$	7,818
Effective interest on Convertible Debentures	2,306		—
Balance, December 31, 2018	$	41,732	$	7,818

Senior Notes

At December 31, 2018, the Company had outstanding US$145.8 million (2017: US$250 million) of 8.50% senior unsecured notes due May 15, 2020 (the “Senior Notes”). During the year ended December 31, 2018 Bellatrix reduced the Senior Notes outstanding by $134.1 million (US$104.2 million) through the Second Lien Refinancing, as well as the transactions described below.

Interest is payable on the Senior Notes semi-annually and the Senior Notes are redeemable at the Company's option, in whole or in part at specified redemption prices. The Senior Notes are carried at amortized cost, net of debt issuance costs of $1.3 million, which accrete up to the principal balance at maturity using an effective interest rate of 9.6%. The Senior Notes were initially recognized at fair value, net of debt issue costs, and have subsequently been carried at amortized cost.

($000s)	Amount
Balance, December 31, 2016	$	324,691
Unrealized foreign exchange gain(1) (2)	(22,079		)
Amortization of discount and debt issue costs	2,797
Balance, December 31, 2017	$	305,409
Unrealized foreign exchange gain (3) (4)	22,032
Amortization of discount and debt issue costs	2,617
Settlement of Senior Notes for equity	(30,673		)
Settlement of Senior Notes for Second Lien Notes	(103,385		)
Balance, December 31, 2018	$	196,000

(1) Exchange rate (CDN$/US$1.00) at December 31, 2017 was 1.2518.

(2) Amount does not include unrealized loss on foreign exchange contracts of $3.9 million.

(3) Exchange rate (CDN$/US$1.00) at December 31, 2018 was 1.3646.

(4) Amount does not include unrealized gain on foreign exchange contracts of $3.4 million.

During the year ended December 31, 2018, Bellatrix entered into agreements (the "Exchange Agreements") with third parties to exchange US$24.1 million aggregate principal amount of Senior Notes (the "Surrendered Senior Notes") for an aggregate of 19,900,032 Common Shares (the "Note Exchanges"). The Surrendered Senior Notes were exchanged at a value of US$900 for each US$1,000 principal amount of Senior Notes (the "Repurchase Value"). Pursuant to the terms of the Exchange Agreements, the Repurchase Value was applied towards the purchase of the Common Shares at a deemed price per Common Share, which was based on a 5% discount to the volume average trading price on the TSX for a period not less than five trading days preceding the effective date of the applicable Exchange Agreement. Bellatrix recorded a gain of $6.1 million on settlement.

Covenants

The agreement governing the Credit Facilities includes two financial covenants that must be met quarterly. The covenants require that the Company maintain a ratio of outstanding Senior Debt (defined below) to consolidated earnings before interest, taxes, depletion, depreciation and amortization (“EBITDA”), as defined by the terms of the agreement governing the Credit Facilities and adjusted for non-cash charges, for a trailing twelve month period of not more than 5.0 times until December 31, 2020, 4.5 times during the fiscal year ended December 31, 2021 and 4.0 times thereafter (the “Senior Debt Covenant”) and a First Lien Debt (defined below) to EBITDA ratio of not more than 3.0 times (the "First Lien Covenant").

As at December 31, 2018, the Company was in compliance with the Senior Debt Covenant and First Lien Covenant with a Senior Debt to EBITDA ratio of 2.88 times and a First Lien Debt to EBITDA ratio of 1.15 times.

The agreement governing the Second Lien Notes contains one financial covenant which requires the Company to maintain a ratio of outstanding Senior Debt to EBITDA for a trailing twelve month period of not more than 5.0 times until December 31, 2020, 4.5 times during the fiscal year ended December 31, 2021 and 4.0 times thereafter (the “Second Lien Covenant”). The calculations for the financial covenants are based on specific definitions that are not in accordance with IFRS and the calculations cannot be readily replicated by referring to the financial statements.

The following table lists the covenant under the Credit Facilities and Second Lien Notes and the Company’s compliance therewith as at December 31, 2018.

	Covenant as at		Position at
	December 31, 2018		December 31, 2018
Credit Facilities – Covenants	Maximum Ratio
Senior Debt (1) to EBITDA (2) for the last four fiscal quarters	5.00	x	2.88	x
First Lien Debt (3) to EBITDA (2) for the last four fiscal quarters	3.00	x	1.15	x
Second Lien Notes - Covenant
Senior Debt (1) to EBITDA (2) for the last four fiscal quarters	5.00	x	2.88	x

(1)“Senior Debt” is defined as Consolidated Total Debt, excluding any unsecured or subordinated debt (Senior Notes and Convertible Debentures (liability component)). “Consolidated Total Debt” is defined as determined on a consolidated basis in accordance with GAAP and without duplication, all Debt of the Borrower. The Company’s calculation of Consolidated Total Debt excludes decommissioning liabilities, onerous contracts and deferred tax liability. The calculation includes outstanding letters of credit, Credit Facilities, finance lease obligations, deferred lease inducements, deferred capital obligations, deferred financing obligations and net working capital deficiency (excess), calculated as working capital deficiency excluding current risk management contract assets and liabilities, current decommissioning liabilities and current onerous contracts. Senior Debt at December 31, 2018 was $224.4 million.

(2)EBITDA is calculated based on terms and definitions set out in the agreements governing the Credit Facilities and Second Lien Notes which adjusts net income for financing costs, income taxes, depletion and depreciation, certain specific unrealized and non-cash transactions, and acquisition and disposition activity and is calculated based on a trailing twelve month basis. EBITDA for the trailing twelve months ended December 31, 2018 was $77.9 million.

(3) "First Lien Debt" is defined as Consolidated Total Debt, excluding any unsecured, second lien or subordinated debt (Second Lien Notes, Senior Notes and Convertible Debentures (liability component)). First Lien Debt at December 31, 2018 was $89.8 million.

The Senior Notes do not contain any maintenance financial covenants, but do contain covenants limiting the Company’s ability to incur additional indebtedness, including borrowings under the Credit Facilities, unless one of two alternative tests are satisfied. The first test applies to all future indebtedness and requires that, after giving effect to the incurrence of additional indebtedness, the Company’s fixed charge coverage ratio (which is the ratio of cash flow to fixed charges (both as defined in the Note Indenture) over the trailing four fiscal quarters) will be at least 2.25 to 1.0.

The second test allows the Company to incur additional indebtedness, irrespective of the fixed charge coverage ratio test, as long as the additional indebtedness, is not more than, subject to certain exceptions, the lesser of (i) the greater of (1) $675 million, and (2) 35% of adjusted consolidated net tangible assets ("ACNTA"), plus $150 million and (ii) 50% of the discounted future net revenues from proved oil and natural gas reserves included in the calculation of ACNTA. ACNTA is defined in the Note Indenture and is determined primarily by the value of discounted future net revenues from proved oil and natural gas reserves plus the capitalized cost attributable to the Company’s unevaluated properties. As a result, the Company can currently incur up to $525 million under bank facilities (which include the Credit Facilities) subject to the maximum borrowing base of the Credit Facilities, without reference to limitations that would otherwise apply due to the fixed charge coverage ratio test.

The following table lists the covenant under Second Lien Notes and Senior Notes and the Company’s position therewith as at December 31, 2018:

	Covenant as at		Position at
	December 31, 2018		December 31, 2018
Second Lien Notes and Senior Notes – Incurrence Test	Minimum Ratio
Fixed charge coverage (1)	2.25	x	2.00	x

(1)Fixed charge coverage is computed as the ratio of fixed charges (as defined in the Note Indenture, fixed charges generally includes interest expense plus paid or accrued dividends, if any) to trailing twelve month cash flow (as defined in the Note Indenture, cash flow includes the net profit (loss) and adds back provision for taxes, fixed charges, depletion, and various other non-recurring expenses and charges). For the trailing twelve months ended December 31, 2018, fixed charges were $39.8 million and cash flow was $79.7 million.

XML

EXPLORATION AND EVALUATION ASSETS

12 Months Ended

Dec. 31, 2018

Exploration For And Evaluation Of Mineral Resources [Abstract]

EXPLORATION AND EVALUATION ASSETS

EXPLORATION AND EVALUATION ASSETS

($000s)
Cost
Balance, December 31, 2016	$	29,246
Additions	1,664
Dispositions	(7,843		)
Transfer to oil and natural gas properties	(336		)
Balance, December 31, 2017	22,731
Additions	577
Transfer to oil and natural gas properties	(5,601		)
Balance, December 31, 2018	$	17,707

Exploration and evaluation ("E&E") assets consist of Bellatrix's exploration projects which are pending the determination of proved or probable reserves and production.

Bellatrix performed an assessment of possible indicators of impairment or impairment reversal on E&E assets. At December 31, 2018, impairment indicators were identified for E&E assets, primarily as a result of sustained low natural gas prices. No impairment was recognized on E&E assets as the estimated recoverable amount of the assets exceeded their carrying value. The estimated recoverable amount was based on a fair value less costs of disposal calculation determined principally on recent and relevant land sales.

XML

PROPERTY, PLANT AND EQUIPMENT

12 Months Ended

Dec. 31, 2018

Property, plant and equipment [abstract]

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT

($000s)	Oil and Natural  Gas Properties			Operated Facilities		Office Furniture and Equipment		Total
Cost
Balance, December 31, 2016	$	2,034,954		$	56,060	$	26,420	$	2,117,434
Additions	111,485			12,058		1,888		125,431
Transfer from exploration and evaluation assets	336			—		—		336
Disposals	(298,102		)	—		—		(298,102		)
Balance, December 31, 2017	1,848,673			68,118		28,308		1,945,099
Additions	77,837			3,102		1,311		82,250
Transfer from exploration and evaluation assets	5,601			—		—		5,601
Disposals	(7,736		)	—		—		(7,736		)
Balance, December 31, 2018	$	1,924,375		$	71,220	$	29,619	$	2,025,214
Accumulated depletion, depreciation and impairment losses
Balance, December 31, 2016	$	806,656		$	1,987	$	12,219	$	820,862
Charge for the year	116,693			1,122		2,837		120,652
Disposals	(196,955		)	—		—		(196,955		)
Impairment (reversal)	13,150			—		—		13,150
Balance, December 31, 2017	739,544			3,109		15,056		757,709
Charge for the year	100,840			1,854		2,592		105,286
Disposals	(4,343		)	—		—		(4,343		)
Impairment	$	2,140		$	—	$	—	$	2,140
Balance, December 31, 2018	$	838,181		$	4,963	$	17,648	$	860,792
Carrying amounts
Balance, December 31, 2017	$	1,109,129		$	65,009	$	13,252	$	1,187,390
Balance, December 31, 2018	$	1,086,194		$	66,257	$	11,971	$	1,164,422

Bellatrix has included $863 million (2017: $832 million) for future development costs and excluded $41.4 million (2017: $46.6 million) for estimated salvage from the depletion and depreciation calculation for the three months ended December 31, 2018.

For the year ended December 31, 2018, the Company capitalized $7.0 million (2017: $7.6 million) of general and administrative expenses and $0.1 million (2017: $0.8 million) of share-based compensation costs directly related to exploration and development activities.

Acquisitions

Bellatrix completed an acquisition of assets within its core Ferrier area of west central Alberta that includes approximately 2,200 boe/d (79% natural gas, 21% liquids) of low decline production. The acquisition was funded through a combination of the issuance of 4.00 million common shares of Bellatrix, $7.66 million in cash and $9.1 million in purchase price adjustments.

Bellatrix completed an acquisition of assets within its core Ferrier area of west central Alberta that includes approximately 1,250 boe/d (65% of natural gas, 35% liquids) of low decline (<15%) production. The acquisition was funded through a combination of the issuance of 6.75 million common shares of Bellatrix and $1.75 million in cash.

Dispositions

Bellatrix recognized a deferred financing obligation and a deferred gain pursuant to the sale of a 35% working interest in the Alder Flats Plant in 2016. The Phase 2 expansion project of the Alder Flats Plant was fully commissioned and began selling volumes mid-March 2018. During the year ended December 31, 2018 Bellatrix recognized a gain of $14.0 million related to the realized deferred gain and unspent portion of the deferred financing obligation.

During the fourth quarter of 2018, Bellatrix completed the renegotiation of processing agreements for facilities in Bellatrix's core area of west central Alberta, which resulted in a reduction of take-or-pay fees effective July 1, 2018. As part of the transaction, Bellatrix divested a non-controlling working interest ownership in an inactive raw gas gathering pipeline. The disposition of the pipeline resulted in a loss on disposition of $3.4 million.

During the third quarter of 2017, Bellatrix completed the sale of certain non-core oil and gas properties in the West Pembina area of Alberta for gross proceeds of $16.0 million, effective July 1, 2017. Bellatrix recorded a loss of $18.6 million on the sale.

During the second quarter of 2017, Bellatrix completed the sale of certain non-core oil and gas properties in the Strachan area of Alberta for gross proceeds of $34.5 million, effective April 1, 2017. Bellatrix recorded a loss of $37.0 million on the sale. Additionally, in the second quarter, Bellatrix transferred certain production facilities and infrastructure to a third party midstream company in exchange for proceeds of $20 million. Under the terms of the agreement, Bellatrix will have exclusive access to, and operatorship of, the infrastructure.

Impairment Loss

Bellatrix performed an assessment of possible indicators of impairment or impairment reversal on all of the Company’s CGUs. At December 31, 2018, impairment indicators were identified for the Company’s core Central Alberta CGU, non-core North Alberta CGU and non-core South Alberta CGU, primarily as a result of sustained low natural gas prices.

The recoverable amount of the Central Alberta, North Alberta and South Alberta CGUs as at December 31, 2018 was determined using a VIU approach, as Bellatrix determined that VIU was greater than FVLCS. VIU was calculated as the net present value of the before-tax cash flows from proved plus probable oil and gas reserves of each CGU based on reserves estimated by Bellatrix’s independent reserve evaluator at December 31, 2018, adjusted for the net present value of the before-tax abandonment and reclamation costs on proved plus probable undeveloped oil and gas reserves.

No impairment was recognized in the Company's core Central Alberta CGU as the estimated recoverable amount of the CGU exceeded its carrying value for the year ended December 31, 2018. The VIU of the Central Alberta CGU was based on before-tax discount rates ranging from 12-15%.

For the year ended December 31, 2018, a non-cash impairment loss of $0.8 million was recognized in the Company’s non-core North Alberta CGU. The estimated recoverable amount after decommissioning liabilities of the North Alberta CGU as at December 31, 2018 was negative $5.2 million. A non-cash impairment loss of $1.3 million was recognized in the Company’s non-core South Alberta CGU. The estimated recoverable amount after decommissioning liabilities of the South Alberta CGU was negative $18.9 million. The VIU of the North Alberta and South Alberta CGU was based on before-tax discount rates ranging from 15-20%.

The VIU of each CGU was based on the following forward commodity price estimates:

Year	EdmontonCrude Ref Oil ($/bbl) (1)	AECO NaturalGas ($/MMBtu) (1)	Butane ($/bbl) (1)	Propane  ($/bbl) (1)	Condensate($/bbl) (1)	CDN$/US$ Exchange Rates(1)
2019	63.50	1.90	20.96	28.58	67.95	1.32
2020	75.55	2.29	37.02	33.24	78.95	1.28
2021	80.50	2.71	45.89	37.03	83.72	1.25
2022	83.25	3.03	54.95	38.30	86.58	1.25
2023	85.60	3.21	58.21	41.52	88.60	1.25
2024	87.62	3.33	61.33	42.93	90.68	1.25
2025	90.01	3.44	62.10	44.10	93.16	1.25
2026	92.68	3.50	63.95	45.41	95.92	1.25
2027	94.53	3.57	65.22	46.32	97.84	1.25
2028	96.42	3.65	66.53	47.25	99.79	1.25
Thereafter	+2% per year	+2% per year	+2% per year	+2% per year	+2% per year	—

(1)The InSite price forecasts, effective January 1, 2019.

A 1% increase to the discount rates applied in the impairment calculation for the North Alberta CGU and South Alberta CGU would result in an increase in impairment loss of approximately $0.2 million and nil, respectively for the year ended December 31, 2018, whereas a 1% decrease to the discount rates applied would result in a corresponding decrease to the impairment loss recognized.

Bellatrix performed an assessment of possible indicators of impairment or impairment reversal on all of the Company’s CGUs at December 31, 2017. At December 31, 2017, impairment indicators were identified for the Company’s non-core North Alberta CGU and non-core South Alberta CGU, primarily as a result of a lack of active development plans in the CGUs. No impairment indicators were identified in the Company’s core Central Alberta CGU in 2017.

For the year ended December 31, 2017, a non-cash impairment loss of $12.2 million was recognized in the Company’s non-core North Alberta CGU. The estimated recoverable amount after decommissioning liabilities of the North Alberta CGU as at December 31, 2017 was negative $4.7 million. A non-cash impairment loss of $1.0 million was recognized in the Company's non-core South Alberta CGU. The estimated recoverable amount after decommissioning liabilities of the South Alberta CGU was negative $18.3 million. The VIU determination of estimated recoverable amounts of each CGU was based on before-tax discount rates ranging from 15-20% and the following forward commodity price estimates:

Year	EdmontonCrude Ref Oil ($/bbl) (1)	AECO Gas ($/MMBtu)(1)	Butane ($/bbl)(1)	Propane($/bbl)(1)	Condensate($/bbl) (1)	CDN$/US$ Exchange Rates(1)
2018	71.36	2.52	51.38	35.68	74.93	1.27
2019	73.44	2.93	52.88	36.72	77.12	1.25
2020	75.47	3.22	54.34	35.85	79.25	1.23
2021	80.49	3.51	57.96	36.22	84.52	1.22
2022	82.38	3.75	59.31	37.07	86.50	1.20
2023	84.22	3.85	60.64	37.90	88.43	1.19
2024	86.01	3.95	61.93	38.70	90.31	1.18
2025	88.85	4.11	63.97	39.98	93.29	1.18
2026	90.62	4.27	65.25	40.78	95.15	1.18
2027	92.43	4.35	66.55	41.60	97.06	1.18
Thereafter	+2% per year	+2% per year	+2% per year	+2% per year	+2% per year	1.18

(1)The InSite price forecasts, effective January 1, 2018.

XML

DECOMMISSIONING LIABILITIES

12 Months Ended

Dec. 31, 2018

Other Provisions, Contingent Liabilities And Contingent Assets [Abstract]

DECOMMISSIONING LIABILITIES

DECOMMISSIONING LIABILITIES

The Company’s decommissioning liabilities result from net ownership interests in petroleum and natural gas assets including well sites, gathering systems and processing facilities. At December 31, 2018, the Company estimated the total undiscounted amount of cash flows required to settle its decommissioning liabilities to be approximately $98.5 million (2017: $94.6 million) which will be incurred between 2018 and 2066. A risk-free rate between 1.91% and 2.15% (2017: 1.66% and 2.20%) and an inflation rate of 2.0% (2017: 2.0%) were used to calculate the fair value of the decommissioning liabilities as at December 31, 2018.

($000s)	2018			2017
Balance, beginning of year	$	60,611		$	62,844
Incurred on development activities	678			1,501
Acquired through asset acquisitions	3,462			—
Revisions on estimates	37			3,210
Decommissioning costs incurred	(2,242		)	(2,758		)
Reversed on dispositions	—			(5,473		)
Accretion expense	1,328			1,287
Balance, end of year	$	63,874		$	60,611

XML

OTHER DEFERRED LIABILITIES

12 Months Ended

Dec. 31, 2018

Subclassifications of assets, liabilities and equities [abstract]

OTHER DEFERRED LIABILITIES

OTHER DEFERRED LIABILITIES

($000s)	Finance lease obligation			Deferred lease inducements			Onerous Contracts		Deferred financing obligations(1)			Deferred gain(1)			Deferred Capital Obligation(1)			Total
Balance, December 31, 2017	$	6,891		$	2,021		$	—	$	1,505		$	13,020		$	4,755		$	28,192
Deferred lease inducements	—			(332		)	—		—			—			—			(332		)
Payments on finance lease	(1,170		)	—			—		—			—			—			(1,170		)
Loss on onerous contracts	—			—			5,362		—			—			—			5,362
Drawdown deferred financing obligations	—			—			—		(1,505		)	—			—			(1,505		)
Drawdown deferred capital obligations	—			—			—		—			—			(4,755		)	(4,755		)
Realized deferred gain	$	—		$	—		$	—	$	—		$	(13,020	)	$	—		$	(13,020	)
Balance, December 31, 2018	$	5,721		$	1,689		$	5,362	$	—		$	—		$	—		$	12,772
Current portion of other deferred liabilities	$	476		$	340		$	1,093	$	—		$	—		$	—		$	1,909
Long term portion of other deferred liabilities	$	5,245		$	1,349		$	4,269	$	—		$	—		$	—		$	10,863

(1) Bellatrix recognized a deferred financing obligation and a deferred gain pursuant to the sale of a 35% working interest in the Alder Flats Plant in 2016. The Phase 2 expansion project of the Alder Flats Plant was fully commissioned and began selling volumes mid-March 2018.

Onerous contracts result from unfavourable leases in which the unavoidable costs of meeting the obligations under the contracts exceed the economic benefits expected to be received. As at December 31, 2018, the Company recorded a provision of $5.4 million related to unoccupied office lease premises representing the minimum future payments that the Company is required to make. The onerous contract provision is expected to be settled in periods up to and including the year 2024.

Finance Lease Obligations

Finance leases are for the use of certain constructed facilities. The agreements expire in years 2030 to 2032, or earlier if certain circumstances are met. At the end of the term of each agreement, the ownership of the facilities is transferred to the Company. Assets under these finance leases at December 31, 2018 totaled $15.3 million (2017: $15.3 million) with accumulated depreciation of $5.0 million (2017: $4.4 million).

The following is a schedule of future minimum lease payments under the finance lease obligations:

Year ending December 31,	($000s)
2019	$	1,317
2020	1,240
2021	1,164
2022	1,088
2023	1,011
Thereafter	5,514
Total lease payments	11,334
Amount representing implicit interest at 15.28%	(5,613		)
Total lease obligation at December 31, 2018	$	5,721

XML

SHAREHOLDERS' CAPITAL

12 Months Ended

Dec. 31, 2018

Disclosure of share capital, reserves and other equity interest [Abstract]

SHAREHOLDERS' CAPITAL

SHAREHOLDERS’ CAPITAL

During the year ended December 31, 2018, as described in note 7, Bellatrix acquired and canceled US$24.1 million of the Senior Notes, issuing 19,900,032 common shares of Bellatrix in exchange.

Effective July 1, 2017, the Company consolidated its common shares on the basis of 1 new common share for every 5 old common shares outstanding. All figures in the financial statements have been adjusted to reflect the 5:1 consolidation. The number of outstanding share options, Deferred Share Units, Restricted Awards and Performance Awards have also been adjusted proportionately. The corresponding exercise prices have increased by the same ratio. The conversion price and ratio on the Convertible Debentures have also been adjusted proportionately.

Bellatrix is authorized to issue an unlimited number of common shares and 95,978,621 preferred shares. At December 31, 2018, no preferred shares have been issued. All shares issued are fully paid and have no par value. The common shareholders are entitled to dividends as may be declared by the Board of Directors from time to time; no dividends were declared by the Board of Directors during the years ended December 31, 2018 or 2017.

	2018				2017
	Number	Amount ($000s)			Number	Amount ($000s)
Common shares, opening balance	49,378,026	$	1,068,377		49,317,166	$	1,068,084
Shares issued on settlement of Senior Notes (note 7)	19,900,032	31,306			—	—
Shares issued on settlement of share-based compensation	87,516	127			60,860	289
Shares issued on property acquisition, net of tax effect (note 9)	10,750,000	12,053			—	—
Flow through shares issued	793,651	1,143			—	—
Share issue costs on equity issue, net of tax effect	—	(387		)	—	4
Balance, end of year	80,909,225	$	1,112,619		49,378,026	$	1,068,377

XML

REVENUE

12 Months Ended

Dec. 31, 2018

Revenue From Contracts With Customers [Abstract]

REVENUE

REVENUE

Bellatrix sells its production pursuant to fixed and variable price contracts. The transaction price for variable priced contracts is based on the commodity price, adjusted for quality, location or other factors, whereby each component of the pricing formula can be either fixed or variable, depending on the contract terms. Under the contracts, the Company is required to deliver a fixed or variable volume of crude oil, natural gas, condensate and NGLs to the contract counterparty. Revenue is recognized when a unit of production is delivered to the contract counterparty. The amount of revenue recognized is based on the agreed transaction price.

The majority of crude oil and natural gas is sold under contracts of varying terms of up to one year. The majority of Bellatrix’s NGLs are sold pursuant to one multi-year contract. Revenues are typically collected on the 25th day of the month following production. Processing fees charged to third parties are generally earned under multi-year contracts at fixed fees that vary by volume.

The following table provides a summary of the Company’s revenue disaggregated by revenue source:

($000s)	2018		2017
Crude oil and condensate	$	51,761	$	51,448
NGLs (excluding condensate)	70,970		54,602
Crude oil, condensate and NGLs	122,731		106,050
Natural gas	100,405		137,775
Petroleum and natural gas sales	223,136		243,825
Other income (1)	5,576		5,574
Total revenue	$	228,712	$	249,399

(1)Other income primarily consists of processing and other third party income.

At December 31, 2018, receivables from contracts with customers, which are included in accounts receivable, were $20.9 million (December 31, 2017: $25.3 million).

At December 31, 2018, the Company had the following contracts with customers for the sale of future production:

Commodity	Period	Volume	Price
NGL product mix	January 1, 2019 - March 31, 2026	10,000 bbl/d	Varying indices for the relative components of the product mix
Natural gas	January 1, 2019 - October 31, 2020	20,000 MMBtu/d	Chicago
Natural gas	January 1, 2019 - October 31, 2020	25,000 MMBtu/d	Dawn
Natural gas	January 1, 2019 - October 31, 2020	15,000 MMBtu/d	Malin

XML

SHARE-BASED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2018

Share-Based Payment Arrangements [Abstract]

SHARE-BASED COMPENSATION PLANS

SHARE-BASED COMPENSATION PLANS

The following tables provide a summary of the Company’s share-based compensation expense (recovery) for the years ended December 31, 2018 and December 31, 2017:

($000s)	2018			2017
Share options expense	$	334		$	1,074
Deferred share units expense (recovery)	(669		)	(583		)
Restricted awards expense (recovery)	(80		)	178
Performance awards expense (recovery)	(88		)	(137		)
Share-based compensation expense (recovery) included in general and administrative expense	$	(503	)	$	532
Share-based compensation expense included in operating expense	$	110		$	167
Total share-based compensation expense (recovery)	$	(393	)	$	699

The following tables provide a summary of the Company’s share options expense for the years ended December 31, 2018 and December 31, 2017:

($000s)	2018		2017
Share options expense	$	334	$	1,074
Share options expense capitalized	73		600
Gross share option expense	$	407	$	1,674

The following table provides a summary of the Company’s share-based compensation liability balances within accounts payable and accrued liabilities:

($000s)	Deferred Share Units		Restricted Awards		Performance Awards		Total
Liability balance, December 31, 2018	$	543	$	321	$	212	$	1,076
Liability balance, December 31, 2017	$	1,212	$	754	$	457	$	2,423

a. Share Option Plan

Bellatrix has a share option plan whereby the Company may grant share options to its officers, employees, consultants, and other service providers. Under this plan, the exercise price of each share option is not less than the volume weighted average trading price of the Company’s share price for the five trading days immediately preceding the date of grant. The maximum term of an option grant is five years. Option grants are non-transferable or assignable except in accordance with the share option plan and the holding of share options shall not entitle a holder to any rights as a shareholder of Bellatrix. Share options, entitling the holder to purchase common shares of the Company, have been granted to officers, employees, consultants, and other service providers of Bellatrix. One third of the initial grant of share options normally vests on each of the first, second, and third anniversary from the date of grant.

The fair values of all share options granted are estimated on the date of grant using the Black-Scholes option-pricing model. The weighted average fair market value of share options granted during the years ended December 31, 2018 and 2017, and the weighted average assumptions used in their determination are as noted below:

	2018		2017
Inputs:
Share price	$	1.48	$	4.27
Exercise price	$	1.48	$	4.55
Risk free interest rate (%)	2.0		0.9
Option life (years)	2.8		2.8
Option volatility (%)	65		71
Results:
Weighted average fair value of each share option granted	$	0.64	$	1.87

Bellatrix calculates volatility based on historical share price. Bellatrix incorporates an estimated forfeiture rate between 3% and 10% (2017: 3% to 10%) for stock options that will not vest, and adjusts for actual forfeitures as they occur.

The following tables summarize information regarding Bellatrix’s Share Option Plan:

Share Options Continuity
	Weighted Average Exercise Price		Number
Balance, December 31, 2016	$	23.22	2,573,024
Granted	$	4.55	185,000
Forfeited	$	35.10	(877,956	)
Expired	$	17.12	(257,936	)
Balance, December 31, 2017	$	15.62	1,622,132
Granted	$	1.48	95,000
Forfeited	$	21.99	(722,800	)
Expired	$	36.00	(41,800	)
Balance, December 31, 2018	$	8.49	952,532

As of December 31, 2018, a total of 6,472,738 common shares were reserved for issuance on exercise of share options, leaving an additional 5,520,206 available for future share option grants.

Share Options Outstanding, December 31, 2018

				Outstanding				Exercisable
Exercise Price				At December 31, 2018	Weighted  Average Exercise Price		Weighted Average Remaining Contractual Life	At December 31, 2018	Weighted Average Exercise Price
	$1.48	-	$2.67	95,000		$1.48	4.4	—	—
	$2.68	-	$4.47	119,000		$3.85	3.5	39,665		$3.85
	$4.48	-	$5.55	446,532		$5.10	2.6	332,688		$5.10
	$5.56	-	$10.68	60,000		$6.00	3.3	20,000		$6.00
	$10.69	-	$17.38	1,600		$15.68	1.2	1,600		$15.68
	$17.39	-	$19.52	204,000		$18.75	1.4	204,000		$18.75
	$19.53	-	$46.53	17,400		$33.10	0.7	17,400		$33.10
	$46.54	-	$46.90	9,000		$46.89	0.5	9,000		$46.89
	$1.48	-	$46.90	952,532		$8.49	2.6	624,353		$10.92

b. Deferred Share Unit Plan

Under Bellatrix’s Deferred Share Unit Plan, the Company may grant to non-employee directors, deferred share units (“DSUs”). Each DSU is a right to receive, on a deferred payment basis, a cash payment equivalent to the volume weighted average trading price of the Company’s common shares for the five trading days immediately preceding the redemption date of such DSU. Participants of the DSU Plan may also elect to receive their annual remuneration in the form of DSUs. Subject to TSX and shareholder approval, Bellatrix may elect to deliver common shares from treasury in satisfaction, in whole or in part, of any payment to be made upon the redemption of the DSUs. The DSUs vest immediately and must be redeemed by December 1st of the calendar year immediately following the year in which the participant ceases to hold all positions with Bellatrix or earlier if the participant elects to have the DSUs redeemed at an earlier date (provided that the DSUs may not be redeemed prior to the date that the participant ceases to hold all positions with Bellatrix).

DSU Continuity
	Number
Balance, December 31, 2016	377,667
Granted	260,381
Exercised	(120,150	)
Balance, December 31, 2017	517,898
Granted	304,056
Balance, December 31, 2018	821,954

c. Award Plan

Bellatrix has an Award Incentive Plan (“Award Plan”) where the Company may grant Restricted Awards (“RAs”) and Performance Awards (“PAs”) to officers, employees, and other service providers. During 2016, the shareholders and the TSX approved the issuance of common shares on settlement of RAs and PAs under the Award Plan. As a result, awards under the Award Plan may be settled in cash, in common shares of the Company, or a combination thereof. In the case of PAs, settlement is subject to a “payout multiplier” (the payout multiplier shall be based on such corporate performance measures as determined by the Board of Directors (or the Compensation Committee) of the Company) and may range between zero and two times.

RAs granted to employees vest in equal annual amounts over the course of three years. Each RA entitles its holder to receive a cash payment equal to the weighted average trading price of the Company’s shares trading on the TSX for the five trading days preceding its vesting date. Unvested RAs are forfeited at the time the holder’s employment with the Company ends, except on death in which case they vest immediately. Bellatrix incorporates an estimated forfeiture rate between 3% and 10% for RAs that will not vest, and adjusts for actual forfeitures as they occur. Outstanding RAs are revalued at each financial reporting date to their fair market value at that time, determined by the weighted average trading price of the Company’s shares on the TSX for the five trading days preceding period end.

RA Continuity
	Number of RAs
Balance, December 31, 2016	426,395
Granted	652,740
Exercised	(175,833	)
Forfeited	(79,815	)
Balance, December 31, 2017	823,487
Granted	880,200
Exercised	(317,840	)
Forfeited	(202,846	)
Balance, December 31, 2018	1,183,001

PAs vest on the third anniversary date of their issuance. Each PA entitles its holder to receive a cash payment equal to the weighted average trading price of the Company’s shares trading on the TSX for the five trading days preceding its vesting date, multiplied by a payout multiplier determined by the Company’s Board of Directors based on determined corporate performance measures. Unvested PAs are forfeited at the time the holder’s employment with the Company ends. Bellatrix incorporates an estimated forfeiture rate of 5% for PAs that will not vest, and adjusts for actual forfeitures as they occur. Outstanding PAs are revalued at each financial reporting date to their fair market value at that time, determined by the weighted average trading price of the Company’s shares on the TSX for the 5 trading days preceding period end.

PA Continuity
	Number of PAs
Balance, December 31, 2016	303,335
Granted	370,000
Exercised	(61,920	)
Forfeited	(38,360	)
Balance, December 31, 2017	573,055
Granted	335,800
Exercised	(77,870	)
Forfeited	(67,910	)
Balance, December 31, 2018	763,075

XML

INCOME TAXES

12 Months Ended

Dec. 31, 2018

Income Taxes [Abstract]

INCOME TAXES

INCOME TAXES

Bellatrix is a corporation as defined under the Income Tax Act (Canada) and is subject to Canadian federal and provincial taxes. Bellatrix is subject to provincial taxes in Alberta, British Columbia, and Saskatchewan as the Company operates in those jurisdictions.

The provision for income taxes differs from the expected amount calculated by applying the combined 2018 federal and provincial corporate income tax rate of 27.0% (2017: 27.0%) to net profit (loss) before taxes. This difference results from the following items:

($000s)	2018			2017
Expected income tax expense (recovery)	$	(26,471	)	$	(20,506	)
Change in unrecognized deferred tax asset	69,805			44,114
Non-taxable portion of unrealized foreign exchange (gain) loss	3,972			(4,947		)
Share based compensation expense	86			610
Flow through share issuance	309			108
Other	594			(3,964		)
Deferred tax expense (recovery)	$	48,295		$	15,415

The change in the unrecognized deferred tax asset in 2017 was a result of the completion of the non-core property disposition in the second quarter of 2017.

The components of the net deferred tax asset at December 31, 2018 are as follows:

($000s)	2018			2017
Deferred tax liabilities:
Risk management contract asset	(3,549		)	(8,943		)
Convertible Debentures	(2,122		)	(2,616		)
Deferred tax assets:
Property, plant and equipment and exploration and evaluation assets	$	5,280		$	(6,845	)
Senior Notes	—			756
Finance lease obligation	—			1,860
Onerous lease	—			—
Deferred financing obligation	—			406
Deferred gain on sale	—			3,515
Risk management contract liability	—			1,206
Decommissioning liabilities	—			16,365
Share issue costs	391			840
Non-capital losses	—			40,850
Other	—			904
Deferred tax asset (liability)	$	—		$	48,298

Deferred income tax expense (recovery) is a non-cash item relating to temporary differences between the accounting and tax basis of Bellatrix's assets and liabilities. As at December 31, 2018, Bellatrix was in a net unrecognized deferred tax asset position due to uncertainty of Bellatrix's ability to realize the tax assets in future years (refer to note 2 (c)). This resulted in a non-cash deferred tax expense of $70.2 million during the year ended December 31, 2018 related to the unrecognized benefit of deductible temporary differences in excess of taxable temporary differences of approximately $165 million and non-capital loss carry forwards of $133 million. As at December 31, 2018, Bellatrix had approximately $1.40 billion in tax pools available for deduction against future income. Included in this tax basis are estimated non-capital loss carry forwards of approximately $133 million that expire in years 2025 through 2036.

A continuity of the net deferred income tax asset (liability) for 2018 and 2017 is provided below:

($000s)	Balance, January 1, 2018			Recognized in profit (loss)			Recognized in equity			Balance, December 31, 2018
Property, plant and equipment and exploration and evaluation assets	$	(6,845	)	$	6,845		$	—		$	—
Decommissioning liabilities	16,365			(16,365		)	—			—
Risk management contract asset	(8,943		)	8,943			—			—
Risk management contract liability	1,206			(1,206		)	—			—
Share issue costs	840			(983		)	143			—
Non-capital losses	38,915			(38,915		)	—			—
Finance lease obligation	1,860			(1,860		)	—			—
Onerous lease	—			—			—			—
Deferred financing obligation	406			(406		)	—			—
Deferred gain on sale	3,515			(3,515		)	—			—
Alberta non-capital losses greater than Federal non-capital losses	1,935			(1,935		)	—			—
Senior Notes	756			(756		)	—			—
Convertible Debentures	(2,616		)	2,616			—			—
Other	904			(758		)	(146		)	—
Total	$	48,298		$	(48,295	)	$	(3	)	$	—

($000s)	Balance, January 1, 2017			Recognized in profit (loss)			Recognized in equity		Balance, December 31, 2017
Property, plant and equipment and exploration and evaluation assets	$	(12,555	)	$	5,710		$	—	$	(6,845	)
Decommissioning liabilities	16,967			(602		)	—		16,365
Risk management contract asset	—			(8,943		)	—		(8,943		)
Risk management contract liability	4,477			(3,271		)	—		1,206
Share issue costs	1,950			(1,110		)	—		840
Non-capital losses	38,895			20			—		38,915
Finance lease obligation	2,276			(416		)	—		1,860
Deferred capital obligation	5,910			(5,910		)	—		—
Deferred financing obligation	2,032			(1,626		)	—		406
Deferred gain on sale	2,890			625			—		3,515
Alberta non-capital losses greater than Federal non-capital losses	1,935			—			—		1,935
Senior Notes	418			338			—		756
Convertible Debentures	(3,028		)	412			—		(2,616		)
Other	1,546			(642		)	—		904
Total	$	63,713		$	(15,415	)	$	—	$	48,298

XML

FINANCE INCOME AND EXPENSES

12 Months Ended

Dec. 31, 2018

Borrowing costs [abstract]

FINANCE INCOME AND EXPENSES

FINANCE INCOME AND EXPENSES

($000s)	2018		2017
Interest on Credit Facilities (1)	$	4,302	$	2,194
Interest on Second Lien Notes (2)	3,224		—
Interest on Senior Notes (2)	26,219		30,378
Interest on Convertible Debentures (2)	5,681		5,381
Accretion on decommissioning liabilities (non-cash)	1,328		1,287
Finance expense	$	40,754	$	39,240

(1) Includes interest at a floating rate, for the year ended December 31, 2018. The weighted average interest rates for amounts borrowed under the Credit Facilities was 4.42%.

(2) Includes amortized costs related to the issuance of the Second Lien Notes, Senior Notes and Convertible Debentures (detailed in note 7).

XML

FOREIGN EXCHANGE

12 Months Ended

Dec. 31, 2018

Effect Of Changes In Foreign Exchange Rates [Abstract]

FOREIGN EXCHANGE

FOREIGN EXCHANGE

Bellatrix incurs gains and losses in relation to the foreign currency translation of its Second Lien Notes and Senior Notes. The Second Lien Notes and Senior Notes are translated from United States dollars to Canadian dollars using the closing foreign exchange rate for the period with an unrealized foreign exchange gain or loss included in earnings in the period. Realized and unrealized foreign exchange gains and losses are recognized as Second Lien Notes and Senior Notes and other minor foreign currency based transactions are translated and settled during the period.

During the second quarter of 2018 Bellatrix terminated, at no cost, $62.5 million of United States dollar foreign exchange forward purchase contracts which had a maturity date in May 2020.

($000s)	2018			2017
Unrealized gain (loss) on foreign exchange	(18,617		)	22,165
Unrealized gain (loss) on foreign exchange contracts	3,422			(3,867		)
Total Unrealized gain (loss) on foreign exchange	$	(15,195	)	$	18,298
Realized gain (loss) on foreign exchange	$	(8,296	)	$	(797	)
Gain (loss) on foreign exchange	$	(23,491	)	$	17,501

XML

PER SHARE AMOUNTS

12 Months Ended

Dec. 31, 2018

Earnings per share [abstract]

PER SHARE AMOUNTS

PER SHARE AMOUNTS

The calculation of basic earnings per share for the year ended December 31, 2018 was based on a net loss of $146.3 million (2017: net loss of $91.4 million). 

	2018			2017
Basic common shares outstanding	80,909,225			49,378,026
Fully dilutive effect of:
Share options outstanding	952,532			1,622,132
Shares issuable on conversion of Convertible Debentures	6,172,840			6,172,840
Warrants outstanding	3,088,205			—
Fully diluted common shares outstanding	91,122,802			57,172,998
Weighted average shares outstanding	59,734,872			49,351,848
Dilutive effect of share options, Convertible Debentures and Warrants (1)	—			—
Diluted weighted average shares outstanding	59,734,872			49,351,848
Net (loss) profit per share - basic	$	(2.45	)	$	(1.85	)
Net (loss) profit per share - diluted	$	(2.45	)	$	(1.85	)

(1) For the year ended December 31, 2018, a total of 952,532 (2017: 1,622,132) share options, 6,172,840 (2017: 6,172,840) shares issuable on conversion of Convertible Debentures and 3,088,205 Warrants (2017: nil) were excluded from the calculation as they were anti-dilutive.

XML

COMMITMENTS

12 Months Ended

Dec. 31, 2018

Other Provisions, Contingent Liabilities And Contingent Assets [Abstract]

COMMITMENTS

COMMITMENTS

The following is a summary of Bellatrix’s commitments as at December 31, 2018:

($000s)	1 Year		2-3 Years		4-5 Years		More than 5 years		Total
Operating leases (1)	$	22,433	$	41,107	$	33,782	$	14,745	$	112,067
Transportation and processing agreements (2)	$	53,943	$	92,147	$	66,161	$	101,882	$	314,133

(1) Operating leases is comprised of the Company’s commitment for office space, net of recoveries and gross operating leases for field equipment. The Company is committed to payments under fixed term operating leases for office space which do not currently provide for early termination.

(2) Transportation agreements is comprised of commitments to third parties to transport natural gas. Processing agreements is comprised of commitments to process natural gas and natural gas liquids through processing facilities.

Bellatrix has commitments of 60,000 MMbtu/d under its physical market diversification contracts, refer to note 13.

Bellatrix is involved in litigation and claims arising in the normal course of operations. Such claims are not expected to have a material impact on Bellatrix’s results of operations or cash flows.

Bellatrix and Keyera Partnership ("Keyera") have entered into a midstream services and governance agreement pursuant to which Bellatrix will have exclusive access to the purchased capacity (approximately 80.5 MMcf/d post commissioning of Phase 2) for a term of 10 years, and will remain the operator of the Alder Flats Plant.  In exchange for exclusive access to the purchased capacity during the term, Keyera will be entitled to receive, on an annual basis, a guaranteed fee calculated with reference to the capital fees that Keyera will otherwise receive in accordance with the terms of the construction, ownership and operation agreement governing the Alder Flats Plant.

XML

RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2018

Related Party [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

Key Management Compensation

Key management includes officers and directors (executive and non-executive) of the Company. The compensation paid or payable to key management for employee services is shown below:

($000s)	2018			2017
Short-term employee benefits (1)	$	4,805		$	4,901
Share-based compensation (2)	(431		)	452
Total key management compensation	$	4,374		$	5,353

(1) Includes termination benefits for the year ended December 31, 2018 of nil (2017: $1.3 million)

(2) Share-based compensation includes share options, RAs, PAs, and DSUs.

Bellatrix retained one of its directors, Steven J. Pully, who has substantial expertise in debt refinancing transactions, to act as special advisor to a special committee of independent directors (the "Special Committee") that was formed to facilitate and lead the Company's refinancing efforts. As a result of the significant increase in the amount of time Mr. Pully was expected to spend performing in this new role, the Company and Mr. Pully entered into an agreement (the “Advisor Agreement”) pursuant to which Mr. Pully would earn a monthly retainer of $35,000 per month for his services, and could earn additional fees upon the completion of pre-established refinancing milestones. As a result of the successful completion of the Second Lien Refinancing, Mr. Pully earned fees of $1.1 million pursuant to the Advisor Agreement through December 31, 2018.

XML

SUPPLEMENTAL DISCLOSURES

12 Months Ended

Dec. 31, 2018

Disclosure Of Supplemental Disclosures [Abstract]

SUPPLEMENTAL DISCLOSURES

SUPPLEMENTAL DISCLOSURES

($000s)	2018			2017
Changes in non-cash working capital items:
Accounts receivable	$	8,717		$	(6,445	)
Loans receivable	—			15,000
Deposits and prepaid expenses	193			1,496
Accounts payable and accrued liabilities	(10,958		)	(3,578		)
Total	$	(2,048	)	$	6,473
Changes related to:
Operating activities	$	16,692		$	(272	)
Financing activities	(6,371		)	16,353
Investing activities	(12,369		)	(9,608		)
Total	$	(2,048	)	$	6,473

Statement of Profit (Loss) and Comprehensive Income (Loss) Presentation

A mixed presentation of nature and function was used for the Company’s presentation of operating expenses in the Statement of Profit (Loss) and Comprehensive Income (Loss) for the current and comparative years. General and administrative expenses are presented by their function. Other expenses, including production, transportation, depletion and gain (loss) on dispositions are presented by their nature. Such presentation is in accordance with industry practice.

Total employee compensation costs included in total production and general administrative expenses in the Statements of Profit (Loss) and Comprehensive Income (Loss) for the years ended December 31, 2018 and 2017 are detailed in the following table:

($000s)	2018		2017
Production	$	7,169	$	7,860
General and administrative (1)	13,399		19,274
Employee compensation	$	20,568	$	27,134

(1) Amount shown is net of capitalization.

XML

SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2018

Corporate Information And Statement Of IFRS Compliance [Abstract]

Statement of compliance

Statement of compliance

These financial statements (“financial statements”) were authorized by the Board of Directors on March 14, 2019. The Company prepared these financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”).

Basis of measurement

Basis of measurement

The financial statements are presented in Canadian dollars, the Company’s functional currency, and have been prepared on the historical cost basis except for derivative financial instruments and liabilities for cash-settled share-based payment arrangements measured at fair value. The financial statements have, in management’s opinion, been properly prepared using careful judgment and reasonable limits of materiality, and within the framework of the significant policies summarized in note 3. Significant estimates and judgments used in the preparation of the financial statements are detailed in note 4.

Basis of presentation

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business.

Revenue Recognition

Revenue Recognition

Revenue from the sale of crude oil, natural gas, condensate and natural gas liquids (“NGLs”) is measured based on the consideration specified in contracts with customers and excludes amounts collected on behalf of third parties. Bellatrix recognizes revenue when it transfers control of the product to the buyer. This is generally at the time the customer obtains legal title to the product and when it is physically transferred to the delivery mechanism agreed with the customer, often pipelines or other transportation methods. The amount of revenue recognized is based on the agreed upon transaction price, whereby any variability in revenue is related specifically to the Company's efforts to deliver production. Therefore, the resulting revenue is allocated to the production delivered in the period during which the variability occurs. As a result, none of Bellatrix's variable revenue is considered to be constrained.

Bellatrix evaluates its arrangements with third parties and partners to determine if the Company acts as the principal or as an agent. In making this evaluation, management considers if Bellatrix obtains control of the product delivered, which is indicated by Bellatrix having the primary responsibility for the delivery of the product, having the ability to establish prices or having inventory risk. If Bellatrix acts in the capacity of an agent rather than as a principal in a transaction, then the revenue is recognized on a net basis, only reflecting the fee, if any, realized by the Company from the transaction.

Processing fees charged to other entities for use of pipelines and facilities owned by the Company are evaluated by management to determine if these originate from contracts with customers or from incidental or collaborative arrangements. Processing fees charged to other entities under contracts with customers are recognized in revenue when the related services are provided.

Bellatrix’s revenue transactions do not contain significant financing components and payments are typically due on the 25th day of the month following delivery. The Company does not adjust transaction prices for the effects of a significant financing component when the period between the transfer of the promised goods or services to the customer and payment by the customer is less than one year. The Company does not disclose or quantify information about remaining performance obligations that have an original expected duration of one year or less.

Transportation

Transportation

Costs paid by Bellatrix for the transportation of crude oil, natural gas, condensate and NGLs to the point of control transfer are recognized when the transportation is provided.

Joint Interests

Joint Interests

A portion of the Company’s exploration and development activities are conducted jointly with others. The joint interests are accounted for on a proportionate consolidation basis and as a result, the financial statements reflect only the Company’s proportionate share of the assets, liabilities, revenues, expenses and cash flows from these activities.

Joint Arrangements

Judgment is required to determine when the Company has joint control over an arrangement. In establishing joint control, the Company considers whether unanimous consent is required to direct the activities that significantly affect the returns of the arrangement, such as the capital and operating activities of the arrangement. Additionally, the Company assesses the rights and obligations arising from the arrangement by considering its governance structure, legal form, and terms agreed upon by the parties sharing control, including the contractual rights of each partner, dispute resolution procedures, termination provisions, and procedures for subsequent transactions in its determination of joint control.

Once joint control has been established, judgment is also required to classify the joint arrangement. The type of joint arrangement is determined through analysis of the rights and obligations arising from the arrangement by considering its legal structure, legal form and terms agreed upon by the parties sharing control. An arrangement that is not structured through a separate vehicle in which the controlling parties have rights to the assets, revenues and substantially all of the economic benefits generated through the arrangement, in addition to obligations for the liabilities and expenses, is classified as a joint operation. An arrangement in which these criteria are not met is classified as a joint venture.

Property, Plant and Equipment

Property, Plant and Equipment and Exploration and Evaluation Assets

Pre-exploration expenditures

Expenditures made by the Company before acquiring the legal right to explore in a specific area do not meet the definition of an asset and therefore are expensed by the Company as incurred.

Exploration and evaluation expenditures

Once the legal right to explore has been acquired, costs incurred are capitalized as intangible exploration and evaluation assets (“E&E"). These costs include, but are not limited to, exploration license expenditures, leasehold property acquisition costs, evaluation costs, including drilling costs directly attributable to an identifiable well and directly attributable general and administrative costs. These costs are accumulated in cost centres by property and are not subject to depletion, until technical feasibility and commercial viability have been determined. 

E&E assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability, or if facts and circumstances suggest that the carrying amount is unlikely to be recovered.

Developing and production costs

Items of property, plant and equipment (“PP&E”), which include oil and gas development and production assets, are measured at cost less accumulated depletion, depreciation and accumulated impairment losses net of recoveries.

Subsequent costs

Costs incurred subsequent to the determination of technical feasibility and commercial viability and the costs of replacing parts of PP&E are recognized as oil and natural gas interests only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred. Such capitalized oil and natural gas interests generally represent costs incurred in developing proved and/or probable reserves and bringing in or enhancing production from such reserves, and are accumulated on a well, field or geotechnical area basis. The carrying amount of any replaced or sold component is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.

Depletion and depreciation

Depletion of petroleum and natural gas properties is provided using the unit-of-production method based on production volumes in relation to total estimated proven and probable reserves as determined annually by independent engineers in accordance with National Instrument 51-101, Standards of Disclosure of Oil and Gas Activities. Natural gas reserves and production are converted at the energy equivalent of six thousand cubic feet to one barrel of oil.

Calculations for depletion are based on total capitalized costs plus estimated future development costs of proven and probable undeveloped reserves less the estimated net realizable value of production equipment and facilities after the proved and probable reserves are fully produced.

Depreciation is recognized on significant facilities to expense the cost of significant components of assets less their residual values over their useful lives. Phase 1 of the Alder Flats Plant and associated equipment are depreciated using the straight-line method over estimated useful lives as follows:

• General plant and processing equipment - 40 years

• Other properties and equipment - 10 years

• Turnarounds - 5 years

Depreciation of office furniture and equipment is provided for on a 20% declining balance basis.

Depreciation methods, useful lives and residual values are reviewed at each reporting date and, if necessary, any changes would be accounted for prospectively.

Dispositions

Gains on disposal of an item of PP&E or E&E are determined by comparing the proceeds from disposal with the carrying amount of PP&E or E&E and are recognized separately in the Statements of Profit (Loss) and Comprehensive Income (Loss). Exchanges of properties are measured at fair value, unless the transaction lacks commercial substance or fair value cannot be reasonably measured. Where the exchange is measured at fair value, a gain or loss is recognized in the Statements of Profit (Loss) and Comprehensive Income (Loss).

Exploration and Evaluation Assets

Property, Plant and Equipment and Exploration and Evaluation Assets

Pre-exploration expenditures

Expenditures made by the Company before acquiring the legal right to explore in a specific area do not meet the definition of an asset and therefore are expensed by the Company as incurred.

Exploration and evaluation expenditures

Once the legal right to explore has been acquired, costs incurred are capitalized as intangible exploration and evaluation assets (“E&E"). These costs include, but are not limited to, exploration license expenditures, leasehold property acquisition costs, evaluation costs, including drilling costs directly attributable to an identifiable well and directly attributable general and administrative costs. These costs are accumulated in cost centres by property and are not subject to depletion, until technical feasibility and commercial viability have been determined. 

E&E assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability, or if facts and circumstances suggest that the carrying amount is unlikely to be recovered. 

Developing and production costs

Items of property, plant and equipment (“PP&E”), which include oil and gas development and production assets, are measured at cost less accumulated depletion, depreciation and accumulated impairment losses net of recoveries.

Subsequent costs

Costs incurred subsequent to the determination of technical feasibility and commercial viability and the costs of replacing parts of PP&E are recognized as oil and natural gas interests only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred. Such capitalized oil and natural gas interests generally represent costs incurred in developing proved and/or probable reserves and bringing in or enhancing production from such reserves, and are accumulated on a well, field or geotechnical area basis. The carrying amount of any replaced or sold component is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.

Depletion and depreciation

Depletion of petroleum and natural gas properties is provided using the unit-of-production method based on production volumes in relation to total estimated proven and probable reserves as determined annually by independent engineers in accordance with National Instrument 51-101, Standards of Disclosure of Oil and Gas Activities. Natural gas reserves and production are converted at the energy equivalent of six thousand cubic feet to one barrel of oil.

Calculations for depletion are based on total capitalized costs plus estimated future development costs of proven and probable undeveloped reserves less the estimated net realizable value of production equipment and facilities after the proved and probable reserves are fully produced.

Depreciation is recognized on significant facilities to expense the cost of significant components of assets less their residual values over their useful lives. Phase 1 of the Alder Flats Plant and associated equipment are depreciated using the straight-line method over estimated useful lives as follows:

• General plant and processing equipment - 40 years

• Other properties and equipment - 10 years

• Turnarounds - 5 years

Depreciation of office furniture and equipment is provided for on a 20% declining balance basis.

Depreciation methods, useful lives and residual values are reviewed at each reporting date and, if necessary, any changes would be accounted for prospectively.

Dispositions

Gains on disposal of an item of PP&E or E&E are determined by comparing the proceeds from disposal with the carrying amount of PP&E or E&E and are recognized separately in the Statements of Profit (Loss) and Comprehensive Income (Loss). Exchanges of properties are measured at fair value, unless the transaction lacks commercial substance or fair value cannot be reasonably measured. Where the exchange is measured at fair value, a gain or loss is recognized in the Statements of Profit (Loss) and Comprehensive Income (Loss).

Impairment

Impairment

Financial assets

Impairment of financial assets is determined by measuring the assets' expected credit loss ("ECL"). Accounts receivable are due within one year or less; therefore, these financial assets are not considered to have a significant financing component and a lifetime ECL is measured at the date of initial recognition of the accounts receivable.

The ECL pertaining to accounts receivable is assessed at initial recognition and this provision is re-assessed at each reporting date. ECLs are a probability-weighted estimate of all possible default events related to the financial asset and are measured as the difference between the present value of the cash flows due to Bellatrix and the cash flows the Company expects to receive, including cash flows expected from collateral and other credit enhancements that are a part of contractual terms. In making an assessment as to whether financial assets are credit-impaired, the Company considers historically realized bad debts, counterparty's identity, customers pay practices and the terms of the contract under which the obligation arose. The carrying amounts of financial assets are reduced by the amount of the ECL through an allowance account and losses are recognized within general and administrative ("G&A") expense in the Statements of Profit (Loss) and Comprehensive Income.

Based on industry experience, the Company considers its accounts receivable to be in default when the receivable is more than 90 days past due. Once the Company has pursued collection activities and it has been determined that the incremental cost of pursuing collection outweighs the benefits, Bellatrix derecognizes the gross carrying amount of the financial asset and the associated allowance from the balance sheets.

Non-financial assets

Developing and producing assets are assessed for impairment if facts and circumstances suggest that the carrying amount exceeds the recoverable amount. The impairment test is performed at the asset or CGU level.

The recoverable amount of an asset or a cash-generating unit ("CGU") is the greater of its value in use (“VIU”) and its fair value less costs to sell (“FVLCS”). FVLCS is determined to be the amount for which the asset could be sold in an arm’s length transaction. FVLCS can be determined by using an observable market metric or by using discounted future net cash flows of proved and probable reserves using forecasted prices and costs. VIU is determined by estimating the present value of the future net cash flows expected to be derived from the continued use of the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in the Company’s Statement of Profit (Loss) and Comprehensive Income (Loss) in the period in which it occurs.

Impairment losses recognized in prior years are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depletion and depreciation, if no impairment loss had been recognized.

E&E assets are assessed for impairment, both at the time of any triggering facts and circumstances as well as upon their eventual reclassification to producing assets (oil and natural gas interests in PP&E). E&E assets are grouped together with the Company’s CGU’s when they are assessed for impairment.

II. Identification of CGUs

Bellatrix’s assets are aggregated into CGUs, for the purpose of calculating impairment, based on their ability to generate largely independent cash flows, geography, geology, production profile and infrastructure of their assets.

III. Impairment Indicators and Impairment Reversal 

Judgment is required to assess when impairment indicators exist and impairment testing is required with respect to exploration and evaluation assets and property, plant and equipment.

Recoverability of asset carrying values

The Company assesses its oil and gas properties, including exploration and evaluation assets, for possible impairment if there are events or changes in circumstances that indicate that carrying values of the assets may not be recoverable, or at least at every reporting date. 

The assessment of any impairment of property, plant and equipment is dependent upon estimates of recoverable amount that take into account factors such as reserves, future estimated commodity prices, royalties and costs, economic and market conditions, timing of cash flows, discount rates, the useful lives of assets and their related salvage values. By their nature, these estimates and assumptions are subject to measurement uncertainty and may impact the carrying value of the Company’s assets in future periods.

Provisions

Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are determined by discounting the expected cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability, if the risks have not been incorporated into the estimate of cash flows. The increase in the provision due to the passage of time is recognized within finance expense.

Onerous contract provisions are recognized when the unavoidable costs of meeting the obligation exceed the economic benefit derived from the contract. The provision for onerous contracts is measured at the present value of estimated future cash flows underlying the obligations less any estimated recoveries, discounted at the risk-free rate.

Decommissioning liabilities

The Company’s activities give rise to dismantling, decommissioning and site disturbance remediation activities. A provision is made for the estimated cost of site restoration and capitalized in the relevant asset category.

Decommissioning obligations are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance sheet date. Changes in the present value of the estimated expenditure are reflected as an adjustment to the liability and the relevant asset. The accretion or unwinding of the discount on the decommissioning provision is recognized as a finance expense. Actual costs incurred upon settlement of the decommissioning liabilities are charged against the provision to the extent the provision was recognized.

Environmental liabilities

The Company records liabilities on an undiscounted basis for environmental remediation efforts that are likely to occur and where the cost can be reasonably estimated. The estimates, including associated legal costs, are based on available information using existing technology and enacted laws and regulations. The estimates are subject to revision in future periods based on actual costs incurred or new circumstances. Any amounts expected to be recovered from other parties, including insurers, are recorded as an asset separate from the associated liability.

Share-based Payments

Share-based Payments

Equity-settled transactions

Bellatrix accounts for options issued under the Company’s share option plan by reference to the fair value of the equity instruments granted. The fair value of each share option is estimated on the date of the grant using the Black-Scholes options pricing model and charged to earnings over the vesting period with a corresponding increase to contributed surplus. The Company estimates a forfeiture rate on the grant date and the rate is adjusted to reflect the actual number of options that actually vest. The expected life of the options granted is adjusted, based on the Company’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

Cash-settled transactions

The Company’s Deferred Share Unit Plan (the “DSU Plan”) is accounted for as a cash settled share based payment plan in which the fair value of the amount payable under the DSU Plan is recognized as an expense with a corresponding increase in liabilities. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized in profit or loss.

Awards under the Award Incentive Plan ("Award Plan") may be settled in cash, in common shares of the Company, or a combination thereof. The Company’s Restricted and Performance Award Plan is accounted for as a cash settled share based payment plan in which the fair value of the amounts payable under the Award Plan are recognized incrementally as an expense over the vesting period, with a corresponding change in liabilities. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized in profit or loss.

Income Taxes

Income Taxes

Income tax expense is comprised of current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from, or paid, to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted, or substantively enacted, by the date of the statement of financial position.

Deferred tax 

Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is not a business combination. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted, or substantively enacted, by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Financial Instruments

Financial Instruments

All financial assets are initially measured at fair value. Financial assets are subsequently measured at either amortized cost, fair value through other comprehensive income ("FVOCI") or fair value through profit or loss ("FVTPL"), depending on the Company's business model for managing the financial assets, and the contractual cash flow characteristics of the financial assets. Financial assets are not reclassified subsequent to their initial recognition, except if the Company changes its business model for managing financial assets.

A financial asset is subsequently measured at amortized cost if it meets both of the following conditions:

(i). The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and

(ii). The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets that meet condition (ii) above that are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets is subsequently measured at FVOCI.

All other financial assets are subsequently measured at FVTPL, with changes in fair value recognized in profit or loss. Accounts receivable are classified and measured at amortized cost.

Financial liabilities are classified and measured at amortized cost using the effective interest rate method, except for derivatives that are liabilities, deferred share units, restricted awards and performance awards, which are all classified and measured at FVTPL. Accounts payable and accrued liabilities, Credit Facilities, Second Lien Notes, Senior Notes, Convertible Debentures and finance lease obligations are classified and measured at amortized cost.

Financial instruments measured at fair value on the balance sheet require classification into one of the following levels of the fair value hierarchy:

Level 1 – Valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – Valuation based on inputs other than quoted prices included in level 1, that are observable directly or indirectly.

Level 3 – Valuation based on inputs that are not based on observable market data.

The fair value hierarchy level at which a fair value measurement is categorized is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. The Company has categorized its financial instruments that are fair valued on the balance sheet according to the fair value hierarchy.

Transaction costs attributable to financial instruments classified as other than held-for-trading are included in the recognized amount of the related financial instrument and recognized over the life of the resulting financial instrument using the effective interest rate method.

The Company utilizes financial derivatives and commodity sales contracts requiring physical delivery to manage the price risk attributable to anticipated sale of petroleum and natural gas production and foreign exchange exposures. The Company does not enter into derivative financial instruments for trading or speculative purposes. The Company has not designated its financial derivative contracts as effective accounting hedges, and thus has not applied hedge accounting, even though the Company considers all commodity contracts to be economic hedges. As a result, financial derivatives are classified as FVTPL and are recorded on the balance sheet at fair value, with fair value changes recorded in profit or loss.

The derivative financial instruments are initiated within the guidelines of the Company’s corporate hedging policy. This includes linking all derivatives to specific assets and liabilities on the balance sheet, to specific firm commitments, or forecasted transactions.

The Company accounts for its commodity sales and purchase contracts, which were entered into and continue to be held for the purpose of receipt or delivery of non-financial items, in accordance with its expected purchase, sale or usage requirements as executory contracts. As such, physical sales and purchase contracts are not recorded at fair value on the balance sheet. Settlements on these physical sales and purchase contracts are recognized in petroleum and natural gas sales.

Compound financial Instruments

Compound Financial Instruments

The Company's compound financial instruments are comprised of its Warrants issued with the Second Lien Notes and the Convertible Debentures that can be converted to common shares at the option of the holder. The number of shares to be issued does not vary with changes in fair value. 

The Second Lien Notes and Convertible Debentures liability component are recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially as the difference between the fair value of the Second Lien Notes and Convertible Debenture and the fair value of the liability components. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of the Second Lien Notes and Convertible Debentures is measured at amortized cost using the effective interest method. The Warrants and equity component of the Convertible Debentures are not re-measured subsequent to initial recognition.

Lease Obligations

Lease Obligations

Leases which effectively transfer substantially all of the risks and rewards of ownership to the Company are classified as finance leases and are accounted for as an acquisition of an asset and an assumption of an obligation at the inception of the lease, measured as the present value of minimum lease payments to a maximum of the asset’s fair value. The asset is amortized in accordance with the Company’s depletion and depreciation policy. The obligations recorded under finance lease payments are reduced by the lease payments made.

Assets held under other leases are classified as operating leases and are not recognized in the balance sheet. Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received from landlords are deferred and recognized as an integral part of the total lease expense, over the term of the lease.

Basic and Diluted per Share Calculations

Basic and Diluted per Share Calculations

Basic per share amounts are calculated using the weighted average number of shares outstanding during the period. The Company uses the treasury share method to determine the dilutive effect of share options. Under the treasury share method, only “in the money” dilutive instruments impact the diluted calculations in computing diluted per share amounts.

Finance Income and Expense

Finance Income and Expenses

Finance income is recognized as it accrues in profit or loss, using the effective interest method. Finance expense comprises interest expense on borrowings, amortization of financing costs and discounts, and accretion of the discount on provisions.

Borrowing Costs

Borrowing Costs

Borrowing costs incurred for the construction of qualifying assets are capitalized during the period of time that is required to complete and prepare the assets for their intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use. All other borrowing costs are recognized in profit or loss using the effective interest method. The capitalization rate used to determine the amount of borrowing costs to be capitalized is the weighted average interest rate applicable to the Company’s outstanding borrowings during the period.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include cash and short-term investments with original maturities of three months or less.

Business Combinations

Business Combinations

Business combinations are accounted for using the acquisition method. The identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair values at the acquisition date. The cost of an acquisition is measured as the aggregate consideration transferred, measured at the acquisition date fair value. If the cost of the acquisition is less than the fair value of the net assets acquired, the difference is recognized immediately in profit or loss. If the cost of the acquisition is more than the fair value of the net assets acquired, the difference is recognized on the balance sheet as goodwill. Acquisition costs incurred are expensed.

Foreign Currency Translation

Foreign Currency Translation

Monetary assets and liabilities denominated in a foreign currency are translated at the rate of exchange in effect at the balance sheet date. Revenues and expenses are translated at the period average rates of exchange. Translation gains and losses are included in earnings in the period in which they arise.

Bellatrix’s functional and presentation currency is Canadian dollars.

Oil and Gas reserves

Oil and Gas Reserves

Reserves and resources are used in the units of production calculation for depletion, depreciation and amortization, and the impairment analysis which affect net profit or loss. There are numerous uncertainties inherent in estimating oil and gas reserves. Estimating reserves is very complex, requiring many judgments based on geological, geophysical, engineering and economic data. Changes in these judgments could have a material impact on the estimated reserves. These estimates may change, having either a negative or positive effect on net profit as further information becomes available and as the economic environment changes.

Decommissioning obligations

II. Decommissioning obligations

Provisions for decommissioning obligations associated with the Company’s drilling operations are based on current legal and constructive requirements, technology, price levels and expected plans for remediation. Actual costs and cash outflows can differ from estimates because of changes in laws and regulations, public expectations, prices, discovery and analysis of site conditions and changes in clean up technology.

Income taxes

III. Income taxes 

Deferred tax assets and liabilities are recognized for the estimated tax consequences between amounts included in the financial statements and their tax base using substantively enacted future income tax rates. Timing of future revenue streams and future capital spending changes can affect the timing of any temporary differences, and accordingly affect the amount of the deferred tax asset or liability calculated at a point in time. Deferred tax assets are recognized when it is considered probable that deductible temporary differences will be recovered in future periods, which requires Management judgment. These differences could materially impact earnings.

Non-monetary Transactions

Non-monetary Transactions

Judgment is required to determine whether non-monetary transactions have commercial substance.

XML

CHANGES IN SIGNIFICANT ACCOUNTING POLICIES CHANGES IN SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2018

Accounting Policies, Changes In Accounting Estimates And Errors [Abstract]

Disclosure of financial liabilities at date of initial application of IFRS 9

A comparison of financial instrument subsequent measurement categories, pre and post adoption of IFRS 9, is as follows:

Financial Assets and Liabilities	IAS 39	IFRS 9
Accounts receivable	Amortized cost	Amortized cost
Commodity risk management contracts	FVTPL	FVTPL
Foreign exchange risk management contracts	FVTPL	FVTPL
Accounts payable and accrued liabilities	Amortized cost	Amortized cost
Deferred share units	FVTPL	FVTPL
Restricted awards	FVTPL	FVTPL
Performance awards	FVTPL	FVTPL
Credit Facilities	Amortized cost	Amortized cost
Second Lien Notes	N/A	Amortized cost
Senior Notes	Amortized cost	Amortized cost
Convertible Debentures	Amortized cost	Amortized cost
Finance lease obligation	Amortized cost	Amortized cost

Disclosure of financial assets at date of initial application of IFRS 9

A comparison of financial instrument subsequent measurement categories, pre and post adoption of IFRS 9, is as follows:

Financial Assets and Liabilities	IAS 39	IFRS 9
Accounts receivable	Amortized cost	Amortized cost
Commodity risk management contracts	FVTPL	FVTPL
Foreign exchange risk management contracts	FVTPL	FVTPL
Accounts payable and accrued liabilities	Amortized cost	Amortized cost
Deferred share units	FVTPL	FVTPL
Restricted awards	FVTPL	FVTPL
Performance awards	FVTPL	FVTPL
Credit Facilities	Amortized cost	Amortized cost
Second Lien Notes	N/A	Amortized cost
Senior Notes	Amortized cost	Amortized cost
Convertible Debentures	Amortized cost	Amortized cost
Finance lease obligation	Amortized cost	Amortized cost

XML

FINANCIAL RISK MANAGEMENT (Tables)

12 Months Ended

Dec. 31, 2018

Financial Instruments [Abstract]

Disclosure of capital structure

The Company’s capital structure and its calculation of total net debt and the total net debt to adjusted funds flow ratio as defined by the Company is as follows:

Debt to Adjusted Funds Flow Ratio
	Year ended December 31,
($000s, except where noted)	2018		2017
Shareholders’ equity	672,725		774,022
Credit Facilities	47,763		52,066
Adjusted working capital deficiency (1)	20,740		23,926
Subtotal	68,503		75,992
Second Lien Notes (mature on September 11, 2023)(2)	137,097		—
Senior Notes (mature May 15, 2020) (2)	196,000		305,409
Net debt (1)	401,600		381,401
Convertible Debentures (liability component)	41,732		39,426
Total net debt (1) at year end	443,332		420,827
Debt to adjusted funds flow ratio (annualized)(3) (4)
Adjusted funds flow (4) (annualized)	62,032		62,800
Net debt (1) to periods adjusted funds flow ratio (annualized) (3)	6.5	x	6.1	x
Total net debt to periods adjusted funds flow ratio (annualized) (3)	7.1	x	6.7	x
Debt to adjusted funds flow ratio (4)
Adjusted funds flow for the year (4)	48,025		58,240
Net debt (1) to adjusted funds flow ratio (4) for the year	8.4	x	6.5	x
Total net debt (1) to adjusted funds flow ratio (4) for the year	9.2	x	7.2	x

(1)Net debt and total net debt as presented do not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. The Company’s calculation of total net debt excludes other deferred liabilities, long-term risk management contract liabilities and decommissioning liabilities. Total net debt includes the adjusted working capital deficiency, amounts outstanding under Credit Facilities, Second Lien Notes, Senior Notes and Convertible Debentures (liability component). The adjusted working capital deficiency as presented does not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. The Company calculated adjusted working capital deficiency as net working capital deficiency excluding current risk management contract assets and liabilities, current portion of other deferred liabilities, current portion of Credit Facilities and current portion of decommissioning liability. Net debt excludes the liability component of Convertible Debentures that is included in total net debt.

(2)For the year ended December 31, 2018, Second Lien Notes and Senior Notes includes an unrealized foreign exchange loss of $18.6 million (2017: $22.2 million gain) and does not include an unrealized gain of $3.4 million (2017: $3.9 millionloss) on foreign exchange contracts.

(3)For the years ended December 31, 2018 and 2017, net debt and total net debt to period’s adjusted funds flow ratio (annualized) is calculated based upon fourth quarter adjusted funds flow annualized.

(4)Adjusted funds flow as presented do not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. Adjusted funds flow is calculated as cash flow from operating activities, excluding decommissioning costs incurred, changes in non-cash working capital incurred, and transaction costs.

Disclosure of credit risk exposure

As at December 31, 2018, accounts receivable was comprised of the following:

Aging ($000s)	Not past due (less than 90 days)		Past due (90 days or more)			Total
Joint venture and other trade accounts receivable	$	6,672	$	8,316		$	14,988
Revenue and other accruals	23,252		297			23,549
Less: Allowance for expected credit loss
Balance, beginning of year	—		(889		)	(889		)
Provision	—		(693		)	(693		)
Balance, end of year	—		(1,582		)	(1,582		)
Total accounts receivable	$	29,924	$	7,031		$	36,955

Disclosure of maturity analysis for non-derivative financial liabilities

The following are the contractual maturities of financial liabilities as at December 31, 2018:

Liabilities ($000s)	Total		< 1 Year		1-3 Years		3-5 Years		More than 5 years
Accounts payable and accrued liabilities	$	61,211	$	61,211	$	—	$	—	$	—
Risk management liability	2,569		917		1,652		—		—
Credit Facilities	47,763		47,763		—		—		—
Second Lien Notes (1)(2)	139,331		—		—		139,331		—
Senior Notes (1)	198,904		—		198,904		—		—
Convertible Debentures (1)	50,000		—		50,000		—		—
Finance lease obligation	5,721		475		938		915		3,393
Total	$	505,499	$	110,366	$	251,494	$	140,246	$	3,393

(1) Principal amount of the instruments

(2) Maturity date of Second Lien Notes will be accelerated to March 14, 2020 if more than US$25 million principal amount of Senior Notes remaining outstanding as at March 14, 2020.

Disclosure of commodity price risk management

As at December 31, 2018, the Company has entered into commodity price risk management arrangements as follows:

Natural gas fixed price arrangements

Type		Period	Volume	Price			Index
Natural gas fixed	Financial	January 2019	10,000 GJ/d	$	2.54	CDN	AECO
Natural gas fixed	Financial	February 2019	10,000 GJ/d	$	2.43	CDN	AECO
Natural gas fixed	Financial	April 1, 2019 to October 31, 2019	20,000 GJ/d	$	1.79	CDN	AECO

Natural gas basis differential arrangements

Type		Period	Volume	Price			Index
Natural gas	Financial	April 1, 2019 to October 31, 2020	10,551 GJ/d	$	(1.17	)US	AECO 7A/NYMEX
Natural gas	Financial	January 1, 2019 to October 31, 2020	10,551 GJ/d	$	(1.19	)US	AECO 7A/NGI Chicago
Natural gas	Financial	January 1, 2019 to October 31, 2020	5,275 GJ/d	$	(1.23	)US	AECO/Dawn Gas Daily

Crude oil call option arrangements

Type		Period	Volume	Price			Index
Oil	Financial	January 1, 2019 to December 31, 2019	1,000 bbl/d	$	87.50	CDN	WTI - NYMEX
Oil	Financial	January 1, 2020 to December 31, 2020	1,000 bbl/d	$	77.90	CDN	WTI - NYMEX

At December 31, 2018, the Company had the following contracts with customers for the sale of future production:

Commodity	Period	Volume	Price
NGL product mix	January 1, 2019 - March 31, 2026	10,000 bbl/d	Varying indices for the relative components of the product mix
Natural gas	January 1, 2019 - October 31, 2020	20,000 MMBtu/d	Chicago
Natural gas	January 1, 2019 - October 31, 2020	25,000 MMBtu/d	Dawn
Natural gas	January 1, 2019 - October 31, 2020	15,000 MMBtu/d	Malin

Disclosure of fair value measurement of assets

The following is a summary of the net risk management asset (liability) as at December 31, 2018 and December 31, 2017:

($000s)	2018			2017
Current portion commodity contract asset	$	9,852		$	31,910
Commodity contract asset (long term)	3,291			1,213
Current portion commodity contract liability	(917		)	(4,468		)
Commodity contract liability (long term)	(1,652		)	—
Foreign exchange contract liability (long term)	—			(3,422		)
Net risk management asset (liability)	$	10,574		$	25,233

The fair value of financial assets and liabilities, excluding working capital and Credit Facilities discussed above, is attributable to the following fair value hierarchy levels at December 31, 2018 and December 31, 2017:

($000s)		Fair Value
2018	Carrying Value	Level 1	Level 2	Level 3
Financial assets
Risk management asset	13,143	—	13,143	—
Financial liabilities
Risk management liability	2,569	—	2,569	—
Finance lease obligation	5,721	—	7,494	—
Second Lien Notes (3)	137,097	—	139,337	—
Senior Notes (2)	196,000	—	119,342	—
Convertible Debentures (1)	41,732	—	22,500	—

(1) The fair value of the Convertible Debentures is based on the closing market price on the TSX of $45.00 per Debenture as at December 31, 2018, and represents the market value of the entire instrument.

(2) The fair value of the Senior Notes is based on the closing market price of $60.00 per Senior Note as at December 31, 2018.

(3) The fair value of Second Lien Notes approximates the carrying value given the September 11, 2018 date of issuance and additional notes issued on December 11, 2018 at the same terms.

($000s)		Fair Value
2017	Carrying Value	Level 1	Level 2	Level 3
Financial assets
Risk management asset	33,123	—	33,123	—
Financial liabilities
Risk management liability	7,890	—	7,890	—
Finance lease obligation	6,891	—	8,932	—
Convertible Debentures (1)	39,426	—	46,000	—
Senior Notes (2)	305,409	—	299,258	—

(1) The fair value of the Convertible Debentures is based on the closing market price on the TSX of $92.00per Debenture as at December 31, 2017, and represents the market value of the entire instrument.

(2) The fair value of the Senior Notes is based on the closing market price of $95.63 per Senior Note as at December 31, 2017.

Disclosure of fair value measurement of liabilities

The fair value of financial assets and liabilities, excluding working capital and Credit Facilities discussed above, is attributable to the following fair value hierarchy levels at December 31, 2018 and December 31, 2017:

($000s)		Fair Value
2018	Carrying Value	Level 1	Level 2	Level 3
Financial assets
Risk management asset	13,143	—	13,143	—
Financial liabilities
Risk management liability	2,569	—	2,569	—
Finance lease obligation	5,721	—	7,494	—
Second Lien Notes (3)	137,097	—	139,337	—
Senior Notes (2)	196,000	—	119,342	—
Convertible Debentures (1)	41,732	—	22,500	—

(1) The fair value of the Convertible Debentures is based on the closing market price on the TSX of $45.00 per Debenture as at December 31, 2018, and represents the market value of the entire instrument.

(2) The fair value of the Senior Notes is based on the closing market price of $60.00 per Senior Note as at December 31, 2018.

(3) The fair value of Second Lien Notes approximates the carrying value given the September 11, 2018 date of issuance and additional notes issued on December 11, 2018 at the same terms.

($000s)		Fair Value
2017	Carrying Value	Level 1	Level 2	Level 3
Financial assets
Risk management asset	33,123	—	33,123	—
Financial liabilities
Risk management liability	7,890	—	7,890	—
Finance lease obligation	6,891	—	8,932	—
Convertible Debentures (1)	39,426	—	46,000	—
Senior Notes (2)	305,409	—	299,258	—

(1) The fair value of the Convertible Debentures is based on the closing market price on the TSX of $92.00per Debenture as at December 31, 2017, and represents the market value of the entire instrument.

(2) The fair value of the Senior Notes is based on the closing market price of $95.63 per Senior Note as at December 31, 2017.

XML

DEBT (Tables)

12 Months Ended

Dec. 31, 2018

Financial Instruments [Abstract]

Disclosure of detailed information about borrowings

($000s)	Liability Component		Equity Component
Balance, December 31, 2016	$	37,420	$	7,818
Effective interest on Convertible Debentures	$	2,006	$	—
Balance, December 31, 2017	$	39,426	$	7,818
Effective interest on Convertible Debentures	2,306		—
Balance, December 31, 2018	$	41,732	$	7,818

The following table lists the covenant under Second Lien Notes and Senior Notes and the Company’s position therewith as at December 31, 2018:

	Covenant as at		Position at
	December 31, 2018		December 31, 2018
Second Lien Notes and Senior Notes – Incurrence Test	Minimum Ratio
Fixed charge coverage (1)	2.25	x	2.00	x

(1)Fixed charge coverage is computed as the ratio of fixed charges (as defined in the Note Indenture, fixed charges generally includes interest expense plus paid or accrued dividends, if any) to trailing twelve month cash flow (as defined in the Note Indenture, cash flow includes the net profit (loss) and adds back provision for taxes, fixed charges, depletion, and various other non-recurring expenses and charges). For the trailing twelve months ended December 31, 2018, fixed charges were $39.8 million and cash flow was $79.7 million.

The following table lists the covenant under the Credit Facilities and Second Lien Notes and the Company’s compliance therewith as at December 31, 2018.

	Covenant as at		Position at
	December 31, 2018		December 31, 2018
Credit Facilities – Covenants	Maximum Ratio
Senior Debt (1) to EBITDA (2) for the last four fiscal quarters	5.00	x	2.88	x
First Lien Debt (3) to EBITDA (2) for the last four fiscal quarters	3.00	x	1.15	x
Second Lien Notes - Covenant
Senior Debt (1) to EBITDA (2) for the last four fiscal quarters	5.00	x	2.88	x

(1)“Senior Debt” is defined as Consolidated Total Debt, excluding any unsecured or subordinated debt (Senior Notes and Convertible Debentures (liability component)). “Consolidated Total Debt” is defined as determined on a consolidated basis in accordance with GAAP and without duplication, all Debt of the Borrower. The Company’s calculation of Consolidated Total Debt excludes decommissioning liabilities, onerous contracts and deferred tax liability. The calculation includes outstanding letters of credit, Credit Facilities, finance lease obligations, deferred lease inducements, deferred capital obligations, deferred financing obligations and net working capital deficiency (excess), calculated as working capital deficiency excluding current risk management contract assets and liabilities, current decommissioning liabilities and current onerous contracts. Senior Debt at December 31, 2018 was $224.4 million.

(2)EBITDA is calculated based on terms and definitions set out in the agreements governing the Credit Facilities and Second Lien Notes which adjusts net income for financing costs, income taxes, depletion and depreciation, certain specific unrealized and non-cash transactions, and acquisition and disposition activity and is calculated based on a trailing twelve month basis. EBITDA for the trailing twelve months ended December 31, 2018 was $77.9 million.

(3) "First Lien Debt" is defined as Consolidated Total Debt, excluding any unsecured, second lien or subordinated debt (Second Lien Notes, Senior Notes and Convertible Debentures (liability component)). First Lien Debt at December 31, 2018 was $89.8 million.

($000s)	Amount
Balance, December 31, 2016	$	324,691
Unrealized foreign exchange gain(1) (2)	(22,079		)
Amortization of discount and debt issue costs	2,797
Balance, December 31, 2017	$	305,409
Unrealized foreign exchange gain (3) (4)	22,032
Amortization of discount and debt issue costs	2,617
Settlement of Senior Notes for equity	(30,673		)
Settlement of Senior Notes for Second Lien Notes	(103,385		)
Balance, December 31, 2018	$	196,000

(1) Exchange rate (CDN$/US$1.00) at December 31, 2017 was 1.2518.

(2) Amount does not include unrealized loss on foreign exchange contracts of $3.9 million.

(3) Exchange rate (CDN$/US$1.00) at December 31, 2018 was 1.3646.

(4) Amount does not include unrealized gain on foreign exchange contracts of $3.4 million.

($000s)	2018		2017
Credit Facilities - current	$	47,763	$	—
Credit Facilities - non-current	—		52,066
Second Lien Notes (mature on September 11, 2023 to December 12, 2023)	137,097		—
Senior Notes (mature on May 15, 2020)	196,000		305,409
Convertible Debentures (liability component)	41,732		39,426
Debt	$	422,592	$	396,901

Second Lien Notes
($000s)	Liability Component		Warrants
Balance, December 31, 2017	$	—	$	—
Issuance of Second Lien Notes in exchange for Senior Notes(2)	92,451		1,652
Issuance of additional Second Lien Notes for cash proceeds	39,815		—
Unrealized foreign exchange gain (1)	4,719		—
Amortization of discount	112		—
Balance, December 31, 2018	$	137,097	$	1,652

(1) Exchange rate (CDN$/US$1.00) at December 31, 2018 was 1.3646.

(2) Warrants component of Second Lien Notes is presented net of tax.

XML

EXPLORATION AND EVALUATION ASSETS (Tables)

12 Months Ended

Dec. 31, 2018

Exploration For And Evaluation Of Mineral Resources [Abstract]

Disclosure of detailed information about exploration and evaluation assets

($000s)
Cost
Balance, December 31, 2016	$	29,246
Additions	1,664
Dispositions	(7,843		)
Transfer to oil and natural gas properties	(336		)
Balance, December 31, 2017	22,731
Additions	577
Transfer to oil and natural gas properties	(5,601		)
Balance, December 31, 2018	$	17,707

XML

PROPERTY, PLANT AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2018

Property, plant and equipment [abstract]

Disclosure of detailed information about property, plant and equipment

($000s)	Oil and Natural  Gas Properties			Operated Facilities		Office Furniture and Equipment		Total
Cost
Balance, December 31, 2016	$	2,034,954		$	56,060	$	26,420	$	2,117,434
Additions	111,485			12,058		1,888		125,431
Transfer from exploration and evaluation assets	336			—		—		336
Disposals	(298,102		)	—		—		(298,102		)
Balance, December 31, 2017	1,848,673			68,118		28,308		1,945,099
Additions	77,837			3,102		1,311		82,250
Transfer from exploration and evaluation assets	5,601			—		—		5,601
Disposals	(7,736		)	—		—		(7,736		)
Balance, December 31, 2018	$	1,924,375		$	71,220	$	29,619	$	2,025,214
Accumulated depletion, depreciation and impairment losses
Balance, December 31, 2016	$	806,656		$	1,987	$	12,219	$	820,862
Charge for the year	116,693			1,122		2,837		120,652
Disposals	(196,955		)	—		—		(196,955		)
Impairment (reversal)	13,150			—		—		13,150
Balance, December 31, 2017	739,544			3,109		15,056		757,709
Charge for the year	100,840			1,854		2,592		105,286
Disposals	(4,343		)	—		—		(4,343		)
Impairment	$	2,140		$	—	$	—	$	2,140
Balance, December 31, 2018	$	838,181		$	4,963	$	17,648	$	860,792
Carrying amounts
Balance, December 31, 2017	$	1,109,129		$	65,009	$	13,252	$	1,187,390
Balance, December 31, 2018	$	1,086,194		$	66,257	$	11,971	$	1,164,422

Disclosure of information for VIU and FVLCS cash-generating units

The VIU of each CGU was based on the following forward commodity price estimates:

Year	EdmontonCrude Ref Oil ($/bbl) (1)	AECO NaturalGas ($/MMBtu) (1)	Butane ($/bbl) (1)	Propane  ($/bbl) (1)	Condensate($/bbl) (1)	CDN$/US$ Exchange Rates(1)
2019	63.50	1.90	20.96	28.58	67.95	1.32
2020	75.55	2.29	37.02	33.24	78.95	1.28
2021	80.50	2.71	45.89	37.03	83.72	1.25
2022	83.25	3.03	54.95	38.30	86.58	1.25
2023	85.60	3.21	58.21	41.52	88.60	1.25
2024	87.62	3.33	61.33	42.93	90.68	1.25
2025	90.01	3.44	62.10	44.10	93.16	1.25
2026	92.68	3.50	63.95	45.41	95.92	1.25
2027	94.53	3.57	65.22	46.32	97.84	1.25
2028	96.42	3.65	66.53	47.25	99.79	1.25
Thereafter	+2% per year	+2% per year	+2% per year	+2% per year	+2% per year	—

(1)The InSite price forecasts, effective January 1, 2019.

The VIU determination of estimated recoverable amounts of each CGU was based on before-tax discount rates ranging from 15-20% and the following forward commodity price estimates:

Year	EdmontonCrude Ref Oil ($/bbl) (1)	AECO Gas ($/MMBtu)(1)	Butane ($/bbl)(1)	Propane($/bbl)(1)	Condensate($/bbl) (1)	CDN$/US$ Exchange Rates(1)
2018	71.36	2.52	51.38	35.68	74.93	1.27
2019	73.44	2.93	52.88	36.72	77.12	1.25
2020	75.47	3.22	54.34	35.85	79.25	1.23
2021	80.49	3.51	57.96	36.22	84.52	1.22
2022	82.38	3.75	59.31	37.07	86.50	1.20
2023	84.22	3.85	60.64	37.90	88.43	1.19
2024	86.01	3.95	61.93	38.70	90.31	1.18
2025	88.85	4.11	63.97	39.98	93.29	1.18
2026	90.62	4.27	65.25	40.78	95.15	1.18
2027	92.43	4.35	66.55	41.60	97.06	1.18
Thereafter	+2% per year	+2% per year	+2% per year	+2% per year	+2% per year	1.18

(1)The InSite price forecasts, effective January 1, 2018.

XML

DECOMMISSIONING LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2018

Other Provisions, Contingent Liabilities And Contingent Assets [Abstract]

Disclosure of decommissioning liabilities

($000s)	2018			2017
Balance, beginning of year	$	60,611		$	62,844
Incurred on development activities	678			1,501
Acquired through asset acquisitions	3,462			—
Revisions on estimates	37			3,210
Decommissioning costs incurred	(2,242		)	(2,758		)
Reversed on dispositions	—			(5,473		)
Accretion expense	1,328			1,287
Balance, end of year	$	63,874		$	60,611

XML

OTHER DEFERRED LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2018

Subclassifications of assets, liabilities and equities [abstract]

Disclosure of summary of other liabilities

OTHER DEFERRED LIABILITIES

($000s)	Finance lease obligation			Deferred lease inducements			Onerous Contracts		Deferred financing obligations(1)			Deferred gain(1)			Deferred Capital Obligation(1)			Total
Balance, December 31, 2017	$	6,891		$	2,021		$	—	$	1,505		$	13,020		$	4,755		$	28,192
Deferred lease inducements	—			(332		)	—		—			—			—			(332		)
Payments on finance lease	(1,170		)	—			—		—			—			—			(1,170		)
Loss on onerous contracts	—			—			5,362		—			—			—			5,362
Drawdown deferred financing obligations	—			—			—		(1,505		)	—			—			(1,505		)
Drawdown deferred capital obligations	—			—			—		—			—			(4,755		)	(4,755		)
Realized deferred gain	$	—		$	—		$	—	$	—		$	(13,020	)	$	—		$	(13,020	)
Balance, December 31, 2018	$	5,721		$	1,689		$	5,362	$	—		$	—		$	—		$	12,772
Current portion of other deferred liabilities	$	476		$	340		$	1,093	$	—		$	—		$	—		$	1,909
Long term portion of other deferred liabilities	$	5,245		$	1,349		$	4,269	$	—		$	—		$	—		$	10,863

(1) Bellatrix recognized a deferred financing obligation and a deferred gain pursuant to the sale of a 35% working interest in the Alder Flats Plant in 2016. The Phase 2 expansion project of the Alder Flats Plant was fully commissioned and began selling volumes mid-March 2018.

Disclosure of maturity analysis of finance lease payments receivable

The following is a schedule of future minimum lease payments under the finance lease obligations:

Year ending December 31,	($000s)
2019	$	1,317
2020	1,240
2021	1,164
2022	1,088
2023	1,011
Thereafter	5,514
Total lease payments	11,334
Amount representing implicit interest at 15.28%	(5,613		)
Total lease obligation at December 31, 2018	$	5,721

XML

SHAREHOLDERS' CAPITAL (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure of share capital, reserves and other equity interest [Abstract]

Disclosure of classes of share capital

	2018				2017
	Number	Amount ($000s)			Number	Amount ($000s)
Common shares, opening balance	49,378,026	$	1,068,377		49,317,166	$	1,068,084
Shares issued on settlement of Senior Notes (note 7)	19,900,032	31,306			—	—
Shares issued on settlement of share-based compensation	87,516	127			60,860	289
Shares issued on property acquisition, net of tax effect (note 9)	10,750,000	12,053			—	—
Flow through shares issued	793,651	1,143			—	—
Share issue costs on equity issue, net of tax effect	—	(387		)	—	4
Balance, end of year	80,909,225	$	1,112,619		49,378,026	$	1,068,377

XML

REVENUE (Tables)

12 Months Ended

Dec. 31, 2018

Revenue From Contracts With Customers [Abstract]

Disclosure of disaggregation of revenue from contracts with customers

The following table provides a summary of the Company’s revenue disaggregated by revenue source:

($000s)	2018		2017
Crude oil and condensate	$	51,761	$	51,448
NGLs (excluding condensate)	70,970		54,602
Crude oil, condensate and NGLs	122,731		106,050
Natural gas	100,405		137,775
Petroleum and natural gas sales	223,136		243,825
Other income (1)	5,576		5,574
Total revenue	$	228,712	$	249,399

(1)Other income primarily consists of processing and other third party income.

Disclosure of commodity price risk management

As at December 31, 2018, the Company has entered into commodity price risk management arrangements as follows:

Natural gas fixed price arrangements

Type		Period	Volume	Price			Index
Natural gas fixed	Financial	January 2019	10,000 GJ/d	$	2.54	CDN	AECO
Natural gas fixed	Financial	February 2019	10,000 GJ/d	$	2.43	CDN	AECO
Natural gas fixed	Financial	April 1, 2019 to October 31, 2019	20,000 GJ/d	$	1.79	CDN	AECO

Natural gas basis differential arrangements

Type		Period	Volume	Price			Index
Natural gas	Financial	April 1, 2019 to October 31, 2020	10,551 GJ/d	$	(1.17	)US	AECO 7A/NYMEX
Natural gas	Financial	January 1, 2019 to October 31, 2020	10,551 GJ/d	$	(1.19	)US	AECO 7A/NGI Chicago
Natural gas	Financial	January 1, 2019 to October 31, 2020	5,275 GJ/d	$	(1.23	)US	AECO/Dawn Gas Daily

Crude oil call option arrangements

Type		Period	Volume	Price			Index
Oil	Financial	January 1, 2019 to December 31, 2019	1,000 bbl/d	$	87.50	CDN	WTI - NYMEX
Oil	Financial	January 1, 2020 to December 31, 2020	1,000 bbl/d	$	77.90	CDN	WTI - NYMEX

At December 31, 2018, the Company had the following contracts with customers for the sale of future production:

Commodity	Period	Volume	Price
NGL product mix	January 1, 2019 - March 31, 2026	10,000 bbl/d	Varying indices for the relative components of the product mix
Natural gas	January 1, 2019 - October 31, 2020	20,000 MMBtu/d	Chicago
Natural gas	January 1, 2019 - October 31, 2020	25,000 MMBtu/d	Dawn
Natural gas	January 1, 2019 - October 31, 2020	15,000 MMBtu/d	Malin

XML

SHARE-BASED COMPENSATION PLANS (Tables)

12 Months Ended

Dec. 31, 2018

Share-Based Payment Arrangements [Abstract]

Summary of Share-Based Compensation Expense (Recovery)

The following tables provide a summary of the Company’s share-based compensation expense (recovery) for the years ended December 31, 2018 and December 31, 2017:

($000s)	2018			2017
Share options expense	$	334		$	1,074
Deferred share units expense (recovery)	(669		)	(583		)
Restricted awards expense (recovery)	(80		)	178
Performance awards expense (recovery)	(88		)	(137		)
Share-based compensation expense (recovery) included in general and administrative expense	$	(503	)	$	532
Share-based compensation expense included in operating expense	$	110		$	167
Total share-based compensation expense (recovery)	$	(393	)	$	699

The following tables provide a summary of the Company’s share options expense for the years ended December 31, 2018 and December 31, 2017:

($000s)	2018		2017
Share options expense	$	334	$	1,074
Share options expense capitalized	73		600
Gross share option expense	$	407	$	1,674

Summary of Company's Share-Based Compensation Liability Balances

The following table provides a summary of the Company’s share-based compensation liability balances within accounts payable and accrued liabilities:

($000s)	Deferred Share Units		Restricted Awards		Performance Awards		Total
Liability balance, December 31, 2018	$	543	$	321	$	212	$	1,076
Liability balance, December 31, 2017	$	1,212	$	754	$	457	$	2,423

Disclosure of Share Options Weighted Average Assumptions Used

The weighted average fair market value of share options granted during the years ended December 31, 2018 and 2017, and the weighted average assumptions used in their determination are as noted below:

	2018		2017
Inputs:
Share price	$	1.48	$	4.27
Exercise price	$	1.48	$	4.55
Risk free interest rate (%)	2.0		0.9
Option life (years)	2.8		2.8
Option volatility (%)	65		71
Results:
Weighted average fair value of each share option granted	$	0.64	$	1.87

Disclosure of Share Options Continuity

The following tables summarize information regarding Bellatrix’s Share Option Plan:

Share Options Continuity
	Weighted Average Exercise Price		Number
Balance, December 31, 2016	$	23.22	2,573,024
Granted	$	4.55	185,000
Forfeited	$	35.10	(877,956	)
Expired	$	17.12	(257,936	)
Balance, December 31, 2017	$	15.62	1,622,132
Granted	$	1.48	95,000
Forfeited	$	21.99	(722,800	)
Expired	$	36.00	(41,800	)
Balance, December 31, 2018	$	8.49	952,532

DSU Continuity
	Number
Balance, December 31, 2016	377,667
Granted	260,381
Exercised	(120,150	)
Balance, December 31, 2017	517,898
Granted	304,056
Balance, December 31, 2018	821,954

PA Continuity
	Number of PAs
Balance, December 31, 2016	303,335
Granted	370,000
Exercised	(61,920	)
Forfeited	(38,360	)
Balance, December 31, 2017	573,055
Granted	335,800
Exercised	(77,870	)
Forfeited	(67,910	)
Balance, December 31, 2018	763,075

RA Continuity
	Number of RAs
Balance, December 31, 2016	426,395
Granted	652,740
Exercised	(175,833	)
Forfeited	(79,815	)
Balance, December 31, 2017	823,487
Granted	880,200
Exercised	(317,840	)
Forfeited	(202,846	)
Balance, December 31, 2018	1,183,001

Disclosure of Range of Exercise Prices of Outstanding Share Options

Share Options Outstanding, December 31, 2018

				Outstanding				Exercisable
Exercise Price				At December 31, 2018	Weighted  Average Exercise Price		Weighted Average Remaining Contractual Life	At December 31, 2018	Weighted Average Exercise Price
	$1.48	-	$2.67	95,000		$1.48	4.4	—	—
	$2.68	-	$4.47	119,000		$3.85	3.5	39,665		$3.85
	$4.48	-	$5.55	446,532		$5.10	2.6	332,688		$5.10
	$5.56	-	$10.68	60,000		$6.00	3.3	20,000		$6.00
	$10.69	-	$17.38	1,600		$15.68	1.2	1,600		$15.68
	$17.39	-	$19.52	204,000		$18.75	1.4	204,000		$18.75
	$19.53	-	$46.53	17,400		$33.10	0.7	17,400		$33.10
	$46.54	-	$46.90	9,000		$46.89	0.5	9,000		$46.89
	$1.48	-	$46.90	952,532		$8.49	2.6	624,353		$10.92

Disclosure of Number and Weighted Average Remaining Contractual Life of Outstanding Share Options

Share Options Outstanding, December 31, 2018

				Outstanding				Exercisable
Exercise Price				At December 31, 2018	Weighted  Average Exercise Price		Weighted Average Remaining Contractual Life	At December 31, 2018	Weighted Average Exercise Price
	$1.48	-	$2.67	95,000		$1.48	4.4	—	—
	$2.68	-	$4.47	119,000		$3.85	3.5	39,665		$3.85
	$4.48	-	$5.55	446,532		$5.10	2.6	332,688		$5.10
	$5.56	-	$10.68	60,000		$6.00	3.3	20,000		$6.00
	$10.69	-	$17.38	1,600		$15.68	1.2	1,600		$15.68
	$17.39	-	$19.52	204,000		$18.75	1.4	204,000		$18.75
	$19.53	-	$46.53	17,400		$33.10	0.7	17,400		$33.10
	$46.54	-	$46.90	9,000		$46.89	0.5	9,000		$46.89
	$1.48	-	$46.90	952,532		$8.49	2.6	624,353		$10.92

XML

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2018

Income Taxes [Abstract]

Disclosure of provision for income taxes

This difference results from the following items:

($000s)	2018			2017
Expected income tax expense (recovery)	$	(26,471	)	$	(20,506	)
Change in unrecognized deferred tax asset	69,805			44,114
Non-taxable portion of unrealized foreign exchange (gain) loss	3,972			(4,947		)
Share based compensation expense	86			610
Flow through share issuance	309			108
Other	594			(3,964		)
Deferred tax expense (recovery)	$	48,295		$	15,415

Disclosure of net deferred income tax expense (income)

The components of the net deferred tax asset at December 31, 2018 are as follows:

($000s)	2018			2017
Deferred tax liabilities:
Risk management contract asset	(3,549		)	(8,943		)
Convertible Debentures	(2,122		)	(2,616		)
Deferred tax assets:
Property, plant and equipment and exploration and evaluation assets	$	5,280		$	(6,845	)
Senior Notes	—			756
Finance lease obligation	—			1,860
Onerous lease	—			—
Deferred financing obligation	—			406
Deferred gain on sale	—			3,515
Risk management contract liability	—			1,206
Decommissioning liabilities	—			16,365
Share issue costs	391			840
Non-capital losses	—			40,850
Other	—			904
Deferred tax asset (liability)	$	—		$	48,298

A continuity of the net deferred income tax asset (liability) for 2018 and 2017 is provided below:

($000s)	Balance, January 1, 2018			Recognized in profit (loss)			Recognized in equity			Balance, December 31, 2018
Property, plant and equipment and exploration and evaluation assets	$	(6,845	)	$	6,845		$	—		$	—
Decommissioning liabilities	16,365			(16,365		)	—			—
Risk management contract asset	(8,943		)	8,943			—			—
Risk management contract liability	1,206			(1,206		)	—			—
Share issue costs	840			(983		)	143			—
Non-capital losses	38,915			(38,915		)	—			—
Finance lease obligation	1,860			(1,860		)	—			—
Onerous lease	—			—			—			—
Deferred financing obligation	406			(406		)	—			—
Deferred gain on sale	3,515			(3,515		)	—			—
Alberta non-capital losses greater than Federal non-capital losses	1,935			(1,935		)	—			—
Senior Notes	756			(756		)	—			—
Convertible Debentures	(2,616		)	2,616			—			—
Other	904			(758		)	(146		)	—
Total	$	48,298		$	(48,295	)	$	(3	)	$	—

($000s)	Balance, January 1, 2017			Recognized in profit (loss)			Recognized in equity		Balance, December 31, 2017
Property, plant and equipment and exploration and evaluation assets	$	(12,555	)	$	5,710		$	—	$	(6,845	)
Decommissioning liabilities	16,967			(602		)	—		16,365
Risk management contract asset	—			(8,943		)	—		(8,943		)
Risk management contract liability	4,477			(3,271		)	—		1,206
Share issue costs	1,950			(1,110		)	—		840
Non-capital losses	38,895			20			—		38,915
Finance lease obligation	2,276			(416		)	—		1,860
Deferred capital obligation	5,910			(5,910		)	—		—
Deferred financing obligation	2,032			(1,626		)	—		406
Deferred gain on sale	2,890			625			—		3,515
Alberta non-capital losses greater than Federal non-capital losses	1,935			—			—		1,935
Senior Notes	418			338			—		756
Convertible Debentures	(3,028		)	412			—		(2,616		)
Other	1,546			(642		)	—		904
Total	$	63,713		$	(15,415	)	$	—	$	48,298

XML

FINANCE INCOME AND EXPENSES (Tables)

12 Months Ended

Dec. 31, 2018

Borrowing costs [abstract]

Disclosure Of Finance Costs

($000s)	2018		2017
Interest on Credit Facilities (1)	$	4,302	$	2,194
Interest on Second Lien Notes (2)	3,224		—
Interest on Senior Notes (2)	26,219		30,378
Interest on Convertible Debentures (2)	5,681		5,381
Accretion on decommissioning liabilities (non-cash)	1,328		1,287
Finance expense	$	40,754	$	39,240

(1) Includes interest at a floating rate, for the year ended December 31, 2018. The weighted average interest rates for amounts borrowed under the Credit Facilities was 4.42%.

(2) Includes amortized costs related to the issuance of the Second Lien Notes, Senior Notes and Convertible Debentures (detailed in note 7).

XML

FOREIGN EXCHANGE (Tables)

12 Months Ended

Dec. 31, 2018

Effect Of Changes In Foreign Exchange Rates [Abstract]

Disclosure of effect of changes in foreign exchange rate on profit (loss)

($000s)	2018			2017
Unrealized gain (loss) on foreign exchange	(18,617		)	22,165
Unrealized gain (loss) on foreign exchange contracts	3,422			(3,867		)
Total Unrealized gain (loss) on foreign exchange	$	(15,195	)	$	18,298
Realized gain (loss) on foreign exchange	$	(8,296	)	$	(797	)
Gain (loss) on foreign exchange	$	(23,491	)	$	17,501

XML

PER SHARE AMOUNTS (Tables)

12 Months Ended

Dec. 31, 2018

Earnings per share [abstract]

Earnings per share

The calculation of basic earnings per share for the year ended December 31, 2018 was based on a net loss of $146.3 million (2017: net loss of $91.4 million). 

	2018			2017
Basic common shares outstanding	80,909,225			49,378,026
Fully dilutive effect of:
Share options outstanding	952,532			1,622,132
Shares issuable on conversion of Convertible Debentures	6,172,840			6,172,840
Warrants outstanding	3,088,205			—
Fully diluted common shares outstanding	91,122,802			57,172,998
Weighted average shares outstanding	59,734,872			49,351,848
Dilutive effect of share options, Convertible Debentures and Warrants (1)	—			—
Diluted weighted average shares outstanding	59,734,872			49,351,848
Net (loss) profit per share - basic	$	(2.45	)	$	(1.85	)
Net (loss) profit per share - diluted	$	(2.45	)	$	(1.85	)

(1) For the year ended December 31, 2018, a total of 952,532 (2017: 1,622,132) share options, 6,172,840 (2017: 6,172,840) shares issuable on conversion of Convertible Debentures and 3,088,205 Warrants (2017: nil) were excluded from the calculation as they were anti-dilutive.

XML

COMMITMENTS (Tables)

12 Months Ended

Dec. 31, 2018

Other Provisions, Contingent Liabilities And Contingent Assets [Abstract]

Disclosure of maturity analysis of operating lease payments

The following is a summary of Bellatrix’s commitments as at December 31, 2018:

($000s)	1 Year		2-3 Years		4-5 Years		More than 5 years		Total
Operating leases (1)	$	22,433	$	41,107	$	33,782	$	14,745	$	112,067
Transportation and processing agreements (2)	$	53,943	$	92,147	$	66,161	$	101,882	$	314,133

(1) Operating leases is comprised of the Company’s commitment for office space, net of recoveries and gross operating leases for field equipment. The Company is committed to payments under fixed term operating leases for office space which do not currently provide for early termination.

(2) Transportation agreements is comprised of commitments to third parties to transport natural gas. Processing agreements is comprised of commitments to process natural gas and natural gas liquids through processing facilities.

XML

RELATED PARTY TRANSACTIONS (Tables)

12 Months Ended

Dec. 31, 2018

Related Party [Abstract]

Compensation paid or payable to key management for employee services

The compensation paid or payable to key management for employee services is shown below:

($000s)	2018			2017
Short-term employee benefits (1)	$	4,805		$	4,901
Share-based compensation (2)	(431		)	452
Total key management compensation	$	4,374		$	5,353

(1) Includes termination benefits for the year ended December 31, 2018 of nil (2017: $1.3 million)

(2) Share-based compensation includes share options, RAs, PAs, and DSUs.

XML

SUPPLEMENTAL DISCLOSURES (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure Of Supplemental Disclosures [Abstract]

Disclosure of detailed information about changes in non-cash working capital

($000s)	2018			2017
Changes in non-cash working capital items:
Accounts receivable	$	8,717		$	(6,445	)
Loans receivable	—			15,000
Deposits and prepaid expenses	193			1,496
Accounts payable and accrued liabilities	(10,958		)	(3,578		)
Total	$	(2,048	)	$	6,473
Changes related to:
Operating activities	$	16,692		$	(272	)
Financing activities	(6,371		)	16,353
Investing activities	(12,369		)	(9,608		)
Total	$	(2,048	)	$	6,473

Disclosure of detailed information for employee compensation costs

Total employee compensation costs included in total production and general administrative expenses in the Statements of Profit (Loss) and Comprehensive Income (Loss) for the years ended December 31, 2018 and 2017 are detailed in the following table:

($000s)	2018		2017
Production	$	7,169	$	7,860
General and administrative (1)	13,399		19,274
Employee compensation	$	20,568	$	27,134

(1) Amount shown is net of capitalization.

XML

BASIS OF PREPARATION Narrative (Details) $ in Millions, $ in Millions	Dec. 31, 2018 USD ($)	Dec. 31, 2018 CAD ($)	Dec. 31, 2017 USD ($)
Senior Notes
Disclosure of detailed information about borrowings [line items]
Notional amount	$ 145.8		$ 250.0
Second Lien Note, Second Lien Refinancing
Disclosure of detailed information about borrowings [line items]
Notional amount	$ 104.2	$ 134.1
Stated interest rate | Senior Notes
Disclosure of detailed information about borrowings [line items]
Interest rate	8.50%	8.50%

XML

SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment and Exploration and Evaluation Assets (Details)	12 Months Ended
	Dec. 31, 2018
Disclosure of detailed information about property, plant and equipment [line items]
Declining balance basis	20.00%
General plant and processing equipment
Disclosure of detailed information about property, plant and equipment [line items]
Useful lives	40 years
Other properties and equipment
Disclosure of detailed information about property, plant and equipment [line items]
Useful lives	10 years
Turnarounds
Disclosure of detailed information about property, plant and equipment [line items]
Useful lives	5 years

XML

CHANGES IN SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) - Scenario Forecast - In accordance with IFRS 16 $ in Millions	Jan. 01, 2019 CAD ($)
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Lease liability	$ 80
Right-of-use assets	$ 80

XML

FINANCIAL RISK MANAGEMENT - Capital Management (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 CAD ($)	Dec. 31, 2018 CAD ($)	Dec. 31, 2017 CAD ($)
Disclosure of nature and extent of risks arising from financial instruments [line items]
Shareholders’ equity		$ 672,725	$ 774,022
Credit Facilities		47,763	52,066
Adjusted working capital deficiency		20,740	23,926
Subtotal		68,503	75,992
Second Lien Notes		137,097	0
Senior notes		196,000	305,409
Net debt		401,600	381,401
Convertible Debentures (liability component)		41,732	39,426
Total net debt at year end		443,332	420,827
Unrealized gain (loss) on foreign exchange		(18,617)	22,165
Unrealized gain (loss) on foreign exchange contracts		3,422	(3,867)
Capital Risk
Disclosure of nature and extent of risks arising from financial instruments [line items]
Adjusted funds flow (annualized)		$ 62,032	$ 62,800
Net debt to periods adjusted funds flow ratio (annualized)		6.5	6.1
Total net debt to periods adjusted funds flow ratio (annualized)		7.1	6.7
Adjusted funds flow for the year		$ 48,025	$ 58,240
Net debt to adjusted funds flow ratio for the year		8.4	6.5
Total net debt to adjusted funds flow ratio for the year		9.2	7.2
Scenario Forecast | Bottom of range
Disclosure of nature and extent of risks arising from financial instruments [line items]
Net capital budget	$ 40,000
Scenario Forecast | Top of range
Disclosure of nature and extent of risks arising from financial instruments [line items]
Net capital budget	$ 50,000

XML

FINANCIAL RISK MANAGEMENT - Credit Risk (Details) - Credit risk $ in Thousands	12 Months Ended
	Dec. 31, 2018 CAD ($) customer
Disclosure of detailed information about borrowings [line items]
Number of primary purchasers | customer	10
Joint venture and other trade accounts receivable | Gross
Disclosure of detailed information about borrowings [line items]
Accounts receivable	$ 14,988
Revenue and other accruals | Gross
Disclosure of detailed information about borrowings [line items]
Accounts receivable	23,549
Accounts receivable
Disclosure of detailed information about borrowings [line items]
Accounts receivable	36,955
Accounts receivable | Provision
Disclosure of detailed information about borrowings [line items]
Accounts receivable	(889)
Provision	(693)
Accounts receivable	(1,582)
60 days | Accounts receivable
Disclosure of detailed information about borrowings [line items]
Accounts receivable	13,900
Not past due (less than 90 days) | Joint venture and other trade accounts receivable | Gross
Disclosure of detailed information about borrowings [line items]
Accounts receivable	6,672
Not past due (less than 90 days) | Revenue and other accruals | Gross
Disclosure of detailed information about borrowings [line items]
Accounts receivable	23,252
Not past due (less than 90 days) | Accounts receivable
Disclosure of detailed information about borrowings [line items]
Accounts receivable	29,924
Not past due (less than 90 days) | Accounts receivable | Provision
Disclosure of detailed information about borrowings [line items]
Accounts receivable	0
Provision	0
Accounts receivable	0
Past due (90 days or more) | Joint venture and other trade accounts receivable | Gross
Disclosure of detailed information about borrowings [line items]
Accounts receivable	8,316
Past due (90 days or more) | Revenue and other accruals | Gross
Disclosure of detailed information about borrowings [line items]
Accounts receivable	297
Past due (90 days or more) | Accounts receivable
Disclosure of detailed information about borrowings [line items]
Accounts receivable	7,031
Past due (90 days or more) | Accounts receivable | Provision
Disclosure of detailed information about borrowings [line items]
Accounts receivable	(889)
Provision	(693)
Accounts receivable	$ (1,582)

XML

FINANCIAL RISK MANAGEMENT - Liquidity Risk, Narrative (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($)	Dec. 31, 2018 CAD ($)	Dec. 31, 2018 CAD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CAD ($)	Dec. 31, 2016 CAD ($)
Disclosure of detailed information about borrowings [line items]
Line of credit facility, maximum borrowing capacity			$ 95,000
Borrowings			422,592		$ 396,901
Shares available for sale under prospectus			476,000
Shares authorised under prospectus			500,000
Second Lien Notes
Disclosure of detailed information about borrowings [line items]
Borrowings	$ 72,100,000		137,097		0
Borrowing, accelerated maturity, principal amount remaining	25,000,000
Senior Notes
Disclosure of detailed information about borrowings [line items]
Notional amount	145,800,000			$ 250,000,000
Borrowings			196,000		305,409	$ 324,691
Repayments of borrowings, note exchanges for common shares	24,100,000
Repayments of borrowings	32,100,000	$ 41,800
Second Lien Note, Second Lien Refinancing
Disclosure of detailed information about borrowings [line items]
Notional amount	104,200,000		134,100
Repayments of borrowings, through refinancing exchange	8,000,000	$ 10,500
Second Lien Notes, Additional
Disclosure of detailed information about borrowings [line items]
Borrowings	30,000,000
Debt instrument, borrowings spent	9,000,000
Debt instrument, borrowing capacity committed for capital expenditures, development capital, and senior notes	21,000,000
Credit Facilities
Disclosure of detailed information about borrowings [line items]
Line of credit facility, maximum borrowing capacity			95,000
Borrowings			47,800
Credit Facilities - current
Disclosure of detailed information about borrowings [line items]
Borrowings			47,763		$ 0
Letters of credit
Disclosure of detailed information about borrowings [line items]
Borrowings			13,900
Top of range | Second Lien Notes, Additional
Disclosure of detailed information about borrowings [line items]
Notional amount	$ 40,000,000
Top of range | Credit Facilities
Disclosure of detailed information about borrowings [line items]
Notional amount			100,000
Liquidity risk | Second Lien Notes
Disclosure of detailed information about borrowings [line items]
Borrowings			139,331
Liquidity risk | Senior Notes
Disclosure of detailed information about borrowings [line items]
Borrowings			198,904
Liquidity risk | Credit Facilities - current
Disclosure of detailed information about borrowings [line items]
Borrowings			$ 47,763

XML

FINANCIAL RISK MANAGEMENT - Liquidity Risk (Details) $ in Thousands, $ in Millions	12 Months Ended
	Dec. 31, 2018 USD ($)	Dec. 31, 2018 CAD ($)	Dec. 31, 2017 CAD ($)	Dec. 31, 2016 CAD ($)
Disclosure of detailed information about borrowings [line items]
Borrowings		$ 422,592	$ 396,901
Liquidity risk
Disclosure of detailed information about borrowings [line items]
Accounts payable and accrued liabilities		61,211
Risk management liability		2,569
Finance lease obligation		5,721
Total		505,499
1 Year | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Accounts payable and accrued liabilities		61,211
Risk management liability		917
Finance lease obligation		475
Total		110,366
1-3 Years | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Accounts payable and accrued liabilities		0
Risk management liability		1,652
Finance lease obligation		938
Total		251,494
3-5 Years | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Accounts payable and accrued liabilities		0
Risk management liability		0
Finance lease obligation		915
Total		140,246
More than 5 years | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Accounts payable and accrued liabilities		0
Risk management liability		0
Finance lease obligation		3,393
Total		3,393
Credit Facilities - current
Disclosure of detailed information about borrowings [line items]
Borrowings		47,763	0
Credit Facilities - current | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		47,763
Credit Facilities - current | 1 Year | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		47,763
Credit Facilities - current | 1-3 Years | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		0
Credit Facilities - current | 3-5 Years | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		0
Credit Facilities - current | More than 5 years | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		0
Second Lien Notes
Disclosure of detailed information about borrowings [line items]
Borrowings	$ 72.1	137,097	0
Extended maturity period	3 years
Second Lien Notes | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		139,331
Second Lien Notes | 1 Year | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		0
Second Lien Notes | 1-3 Years | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		0
Second Lien Notes | 3-5 Years | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		139,331
Second Lien Notes | More than 5 years | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		0
Senior Notes
Disclosure of detailed information about borrowings [line items]
Borrowings		196,000	305,409	$ 324,691
Senior Notes | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		198,904
Senior Notes | 1 Year | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		0
Senior Notes | 1-3 Years | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		198,904
Senior Notes | 3-5 Years | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		0
Senior Notes | More than 5 years | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		0
Convertible debentures
Disclosure of detailed information about borrowings [line items]
Borrowings		41,732	$ 39,426	$ 37,420
Convertible debentures | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		50,000
Convertible debentures | 1 Year | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		0
Convertible debentures | 1-3 Years | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		50,000
Convertible debentures | 3-5 Years | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		0
Convertible debentures | More than 5 years | Liquidity risk
Disclosure of detailed information about borrowings [line items]
Borrowings		$ 0

XML

FINANCIAL RISK MANAGEMENT - Foreign Exchange Risk (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2018 CAD ($)	Dec. 31, 2017 CAD ($)
Disclosure of nature and extent of risks arising from financial instruments [line items]
Foreign exchange contract, term	3 years
Change in foreign exchange rate	0.01
Foreign exchange gain (loss)	$ (23,491)	$ 17,501
Foreign Exchange Risk
Disclosure of nature and extent of risks arising from financial instruments [line items]
Percentage of anticipated commodity transaction exposures that are hedged	60.00%
Foreign exchange gain (loss)	$ 600

XML

FINANCIAL RISK MANAGEMENT - Commodity Price Risk (Details) - Commodity price risk	2 Months Ended	12 Months Ended
	Mar. 14, 2019 CAD ($) gigajoule	Dec. 31, 2018 CAD ($) gigajoule barrel_thermal_unit
Natural Gas Fixed Price | Less Than One Year, One
Disclosure of nature and extent of risks arising from financial instruments [line items]
Underlying derivative volume		10,000
Underlying derivative conversion rate		2.54
Natural Gas Fixed Price | Less Than One Year, Two
Disclosure of nature and extent of risks arising from financial instruments [line items]
Underlying derivative volume		10,000
Underlying derivative conversion rate		2.43
Natural Gas Fixed Price | Less Than One Year, Three
Disclosure of nature and extent of risks arising from financial instruments [line items]
Underlying derivative volume		20,000
Underlying derivative conversion rate		1.79
Natural gas
Disclosure of nature and extent of risks arising from financial instruments [line items]
Reasonably possible change in risk variable amount | $		$ 0.10
Reasonably possible change in risk variable impact on operating profit | $		$ 5,500,000
Natural gas | Later Than One Year And Not Later Than Two Years, One
Disclosure of nature and extent of risks arising from financial instruments [line items]
Underlying derivative volume		10,551
Underlying derivative conversion rate		1.17
Natural gas | Later Than One Year And Not Later Than Two Years, Two
Disclosure of nature and extent of risks arising from financial instruments [line items]
Underlying derivative volume		10,551
Underlying derivative conversion rate		1.19
Natural gas | Later Than One Year And Not Later Than Two Years, Three
Disclosure of nature and extent of risks arising from financial instruments [line items]
Underlying derivative volume		5,275
Underlying derivative conversion rate		1.23
Crude Oil
Disclosure of nature and extent of risks arising from financial instruments [line items]
Reasonably possible change in risk variable amount | $		$ 1.00
Reasonably possible change in risk variable impact on operating profit | $		$ 3,700,000
Crude Oil | Later Than One Year Not Later Than Two Years
Disclosure of nature and extent of risks arising from financial instruments [line items]
Underlying derivative volume | barrel_thermal_unit		1,000
Underlying derivative conversion rate		87.50
Crude Oil | Later Than Two Years And Not Later Than Three Years
Disclosure of nature and extent of risks arising from financial instruments [line items]
Underlying derivative volume | barrel_thermal_unit		1,000
Underlying derivative conversion rate		77.90
Subsequent Event | Natural Gas Fixed Price | Later than one year
Disclosure of nature and extent of risks arising from financial instruments [line items]
Underlying derivative volume	40,000
Underlying derivative conversion rate	2.38
Subsequent Event | Natural gas | Later Than One Year Not Later Than Two Years
Disclosure of nature and extent of risks arising from financial instruments [line items]
Underlying derivative volume	26,377
Proceeds from sales or maturity of financial instruments, classified as investing activities | $	$ 2,400,000

XML

FINANCIAL RISK MANAGEMENT - Commodity Price Risk, Summary of Net Risk Management Asset (Liability) (Details) - CAD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Disclosure of nature and extent of risks arising from financial instruments [line items]
Risk management asset	$ 3,291	$ 1,213
Current portion commodity contract liability	(917)	(4,468)
Commodity contract liability (long term)	(1,652)	(3,422)
Net risk management asset (liability)	10,574	25,233
Commodity contract
Disclosure of nature and extent of risks arising from financial instruments [line items]
Current portion commodity contract asset	9,852	31,910
Risk management asset	3,291	1,213
Current portion commodity contract liability	(917)	(4,468)
Commodity contract liability (long term)	(1,652)	0
Foreign exchange contract
Disclosure of nature and extent of risks arising from financial instruments [line items]
Commodity contract liability (long term)	$ 0	$ (3,422)

XML

FINANCIAL RISK MANAGEMENT - Interest Rate Risk (Details) $ in Millions	12 Months Ended
	Dec. 31, 2018 CAD ($)
Disclosure of nature and extent of risks arising from financial instruments [line items]
Reasonably possible increase in risk variable, impact to net income/loss	$ 0.5
Floating interest rate | Interest Rate Risk
Disclosure of nature and extent of risks arising from financial instruments [line items]
Reasonably possible decrease in risk variable, percent	1.00%
Reasonably possible decrease in risk variable, impact to net income/loss	$ 0.5
Reasonably possible increase in risk variable, percent	1.00%

XML

FINANCIAL RISK MANAGEMENT - Fair Value Hierachy Levels (Details) - CAD ($)	Dec. 31, 2018	Dec. 31, 2017
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial assets	$ 1,235,743,000	$ 1,340,923,000
Financial liabilities	563,018,000	566,901,000
Risk management
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	2,569,000	7,890,000
Risk management | Level 1
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	0	0
Risk management | Level 2
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	2,569,000	7,890,000
Risk management | Level 3
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	0	0
Finance lease obligation
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	5,721,000	6,891,000
Finance lease obligation | Level 1
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	0	0
Finance lease obligation | Level 2
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	7,494,000	8,932,000
Finance lease obligation | Level 3
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	0	0
Second Lien Notes
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	137,097,000
Second Lien Notes | Level 1
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	0
Second Lien Notes | Level 2
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	139,337,000
Second Lien Notes | Level 3
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	0
Senior Notes
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	196,000,000	305,409,000
Closing market price per liability	60.00	95.63
Senior Notes | Level 1
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	0	0
Senior Notes | Level 2
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	119,342,000	299,258,000
Senior Notes | Level 3
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	0	0
Convertible debentures
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	41,732,000	39,426,000
Closing market price per liability	45.00	92.00
Convertible debentures | Level 1
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	0	0
Convertible debentures | Level 2
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	22,500,000	46,000,000
Convertible debentures | Level 3
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial liabilities	0	0
Risk management
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial assets	13,143,000	33,123,000
Risk management | Level 1
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial assets	0	0
Risk management | Level 2
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial assets	13,143,000	33,123,000
Risk management | Level 3
Disclosure Of Fair Value Measurement Of Assets And Liabilities [Line Items]
Financial assets	$ 0	$ 0

XML

DEBT - Schedule of Debt (Details) $ in Thousands, $ in Millions	Dec. 31, 2018 USD ($)	Dec. 31, 2018 CAD ($)	Dec. 31, 2017 CAD ($)	Dec. 31, 2016 CAD ($)
Disclosure of detailed information about borrowings [line items]
Debt		$ 422,592	$ 396,901
Credit Facilities - current
Disclosure of detailed information about borrowings [line items]
Debt		47,763	0
Credit Facilities - non-current
Disclosure of detailed information about borrowings [line items]
Debt		0	52,066
Second Lien Notes (mature on September 11, 2023 to December 12, 2023)
Disclosure of detailed information about borrowings [line items]
Debt	$ 72.1	137,097	0
Senior Notes (mature on May 15, 2020)
Disclosure of detailed information about borrowings [line items]
Debt		196,000	305,409	$ 324,691
Convertible Debentures (liability component)
Disclosure of detailed information about borrowings [line items]
Debt		$ 41,732	$ 39,426	$ 37,420

XML

DEBT - Credit Facilities Narrative (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2018 CAD ($) financial_institutions	Dec. 31, 2017 CAD ($)
Disclosure of detailed information about borrowings [line items]
Borrowings	$ 422,592	$ 396,901
Line of credit facility, maximum borrowing capacity	95,000
Credit Facilities
Disclosure of detailed information about borrowings [line items]
Borrowings	$ 47,800
Number of financial institutions | financial_institutions	4
Line of credit facility, maximum borrowing capacity	$ 95,000
Length of term-out period	6 years
Debenture securing debt	$ 1,000,000
Letters of credit
Disclosure of detailed information about borrowings [line items]
Borrowings	13,900
Top of range | Credit Facilities
Disclosure of detailed information about borrowings [line items]
Notional amount	$ 100,000
Weighted average | Floating interest rate | Credit Facilities
Disclosure of detailed information about borrowings [line items]
Interest rate	4.42%

XML

DEBT - Second Lien Notes Narrative (Details) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($) shares	Dec. 31, 2018 CAD ($) $ / shares shares	Dec. 31, 2017 CAD ($)
Disclosure of detailed information about borrowings [line items]
Borrowings		$ 422,592	$ 396,901
Warrants outstanding (In shares) | shares	3,088,205	3,088,205
Warrants outstanding, exercise price per share (In CAD per share) | $ / shares		$ 1.30
Warrants outstanding, expiration period	5 years
Senior Notes Due May 15, 2020, Note Purchase Agreement
Disclosure of detailed information about borrowings [line items]
Repayments of borrowings	$ 80,100,000
Second Lien Notes
Disclosure of detailed information about borrowings [line items]
Borrowings	72,100,000	$ 137,097	$ 0
Debenture securing debt		$ 250,000
Borrowing, accelerated maturity, principal amount remaining	25,000,000
Second Lien Notes, Additional
Disclosure of detailed information about borrowings [line items]
Borrowings	30,000,000
Second Lien Notes, Additional, Future Senior Note Exchanges
Disclosure of detailed information about borrowings [line items]
Notional amount	$ 50,000,000
Stated interest rate | Second Lien Notes
Disclosure of detailed information about borrowings [line items]
Interest rate	8.50%	8.50%
Top of range | Second Lien Notes, Additional
Disclosure of detailed information about borrowings [line items]
Notional amount	$ 40,000,000
Bottom of range | Second Lien Notes, Additional
Disclosure of detailed information about borrowings [line items]
Notional amount	$ 30,000,000

XML

DEBT - Schedule of Second Lien Notes (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($) $ / $	Dec. 31, 2018 CAD ($) $ / $	Dec. 31, 2017 CAD ($)
Liability Component [Roll Forward]
Beginning balance		$ 396,901
Unrealized foreign exchange gain		(18,617)	$ 22,165
Ending balance		422,592	396,901
Equity Component [Roll Forward]
Warrants, beginning of period		0
Warrants, end of period		1,652	0
Second Lien Notes
Liability Component [Roll Forward]
Beginning balance		0
Issuance of notes		92,451
Unrealized foreign exchange gain		4,719
Amortization of discount		112
Ending balance	$ 72,100,000	137,097	0
Equity Component [Roll Forward]
Warrants, beginning of period		0
Issuance of Second Lien Notes in exchange for Senior Notes		1,652
Warrants, end of period		$ 1,652	$ 0
Closing foreign exchange rate | $ / $	1.3646	1.3646
Second Lien Notes, Additional
Liability Component [Roll Forward]
Issuance of notes		$ 39,815
Ending balance	$ 30,000,000

XML

DEBT - Convertible Debentures Narrative (Details) - Convertible debentures	Dec. 31, 2018 CAD ($) $ / shares shares
Disclosure of detailed information about borrowings [line items]
Notional amount | $	$ 50,000,000
Shares converted per $1,000 of debt | shares	123.4568
Conversion price (in dollars per share) | $ / shares	$ 8.10
Stated interest rate
Disclosure of detailed information about borrowings [line items]
Interest rate	6.75%
Borrowings, Redemption, Period One | Bottom of range
Disclosure of detailed information about borrowings [line items]
Threshold percentage of stock price trigger	125.00%

XML

DEBT - Rollforward of Convertible Debentures (Details) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Liability Component
Beginning balance	$ 396,901
Ending balance	422,592	$ 396,901
Equity Component
Beginning balance	7,818
Ending balance	7,818	7,818
Convertible debentures
Liability Component
Beginning balance	39,426	37,420
Effective interest on Convertible Debentures	2,306	2,006
Ending balance	41,732	39,426
Equity Component
Beginning balance	7,818	7,818
Ending balance	$ 7,818	$ 7,818

XML

DEBT - Senior Notes Narrative (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2018 CAD ($) shares	Dec. 31, 2017 CAD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2018 CAD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CAD ($)	Dec. 31, 2016 CAD ($)
Disclosure of detailed information about borrowings [line items]
Borrowings				$ 422,592		$ 396,901
Borrowings, exchange ratio	90.00%
Settlement of senior notes, net of tax effect	$ 6,145	$ 0
Senior Notes
Disclosure of detailed information about borrowings [line items]
Notional amount			$ 145,800,000		$ 250,000,000
Borrowings				196,000		$ 305,409	$ 324,691
Settlement of senior notes, net of tax effect	$ 6,100
Second Lien Note, Second Lien Refinancing
Disclosure of detailed information about borrowings [line items]
Notional amount			104,200,000	$ 134,100
Surrendered Senior Notes
Disclosure of detailed information about borrowings [line items]
Notional amount			$ 24,100,000.0
Note Exchanges [Member]
Disclosure of detailed information about borrowings [line items]
Number of shares issued for settlement of senior notes | shares	19,900,032
Borrowings, senior notes, discount rate			5.00%	5.00%
Stated interest rate | Senior Notes
Disclosure of detailed information about borrowings [line items]
Interest rate			8.50%	8.50%
Effective interest rate | Senior Notes
Disclosure of detailed information about borrowings [line items]
Interest rate			9.60%	9.60%
Debt issue costs | Senior Notes
Disclosure of detailed information about borrowings [line items]
Borrowings				$ 1,300

XML

DEBT - Rollforward of Senior Notes (Details) $ in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($) $ / $	Dec. 31, 2018 CAD ($) $ / $	Dec. 31, 2017 CAD ($) $ / $
Disclosure of detailed information about borrowings [line items]
Beginning balance		$ 396,901
Unrealized gain (loss) on foreign exchange		(15,195)	$ 18,298
Ending balance		422,592	396,901
Unrealized gain (loss) on foreign exchange contracts		3,422	(3,867)
Second Lien Notes
Disclosure of detailed information about borrowings [line items]
Beginning balance		0
Amortization of discount and debt issue costs		112
Ending balance	$ 72,100	$ 137,097	0
Closing foreign exchange rate | $ / $	1.3646	1.3646
Senior Notes
Disclosure of detailed information about borrowings [line items]
Beginning balance		$ 305,409	324,691
Unrealized gain (loss) on foreign exchange		22,032	(22,079)
Amortization of discount and debt issue costs		2,617	2,797
Settlement of Senior Notes for equity	$ (30,673)
Settlement of Senior Notes for Second Lien Notes	$ (103,385)
Ending balance		196,000	$ 305,409
Closing foreign exchange rate | $ / $			1.2518
Unrealized gain (loss) on foreign exchange contracts		$ 3,400	$ (3,900)

XML

DEBT - Covenants Narrative (Details)	12 Months Ended
	Dec. 31, 2018 CAD ($) covenants
Disclosure of detailed information about borrowings [line items]
Shares available for sale under prospectus	$ 476,000,000
Shares authorised under prospectus	$ 500,000,000
Credit Facilities
Disclosure of detailed information about borrowings [line items]
Number of financial covenants | covenants	2
Fixed charge coverage ratio	2.25
Additional indebtedness, maximum amount	$ 675,000,000
Percentage of adjusted net tangible assets	35.00%
Borrowing amount above ACNTA	$ 150,000,000
Borrowings, covenant, percentage of discounted future net revenues from proved oil and natural gas reserves	50.00%
Current maximum borrowing amount	$ 525,000,000
Credit Facilities, Senior Debt
Disclosure of detailed information about borrowings [line items]
Covenant, maximum	5.00
Position	2.88
Credit Facilities, First Lien Debt
Disclosure of detailed information about borrowings [line items]
Covenant, maximum	3.0
Position	1.15
Second Lien Notes
Disclosure of detailed information about borrowings [line items]
Covenant, maximum	5.00
Position	2.88
2020 | Credit Facilities, Senior Debt
Disclosure of detailed information about borrowings [line items]
Covenant, maximum	5.0
2020 | Second Lien Notes
Disclosure of detailed information about borrowings [line items]
Covenant, maximum	5.0
2021 | Credit Facilities, Senior Debt
Disclosure of detailed information about borrowings [line items]
Covenant, maximum	4.5
2021 | Second Lien Notes
Disclosure of detailed information about borrowings [line items]
Covenant, maximum	4.5
Thereafter | Credit Facilities, Senior Debt
Disclosure of detailed information about borrowings [line items]
Covenant, maximum	4.0
Thereafter | Second Lien Notes
Disclosure of detailed information about borrowings [line items]
Covenant, maximum	4.0

XML

DEBT - Summary of Covenants Under Credit Facilities and Second Lien Notes (Details) $ in Millions	12 Months Ended
	Dec. 31, 2018 CAD ($)
Disclosure of detailed information about borrowings [line items]
EBITDA	$ 77.9
Credit Facilities, Senior Debt
Disclosure of detailed information about borrowings [line items]
Covenant, maximum	5.00
Position	2.88
Consolidated total debt	$ 224.4
Credit Facilities, First Lien Debt
Disclosure of detailed information about borrowings [line items]
Covenant, maximum	3.0
Position	1.15
Consolidated total debt	$ 89.8
Second Lien Notes
Disclosure of detailed information about borrowings [line items]
Covenant, maximum	5.00
Position	2.88

XML

DEBT - Summary of Covenants Under Second Lien Notes and Senior Notes (Details) $ in Millions	12 Months Ended
	Dec. 31, 2018 CAD ($)
Disclosure of detailed information about borrowings [line items]
Interest expense and dividends paid or accrued	$ 39.8
Profit (loss) before interest expense, dividends paid or accrued, depletion and other non-recurring charges	$ 79.7
Senior Notes
Disclosure of detailed information about borrowings [line items]
Covenant maximum	2.25
Position	2.00

XML

EXPLORATION AND EVALUATION ASSETS - Summary of Exploration and Evaluation Assets (Details) - Exploration and evaluation assets - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Reconciliation of changes in property, plant and equipment [abstract]
Balance at beginning of period	$ 22,731	$ 29,246
Additions	577	1,664
Dispositions		(7,843)
Transfer to oil and natural gas properties	(5,601)	(336)
Balance at end of period	$ 17,707	$ 22,731

XML

PROPERTY, PLANT AND EQUIPMENT - Summary of Property, Plant and Equipment (Details) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Reconciliation of changes in property, plant and equipment [abstract]
Balance at beginning of period	$ 1,187,390
Balance at end of period	1,164,422	$ 1,187,390
Future development costs	863,000	832,000
Salvage costs	41,400	46,600
Capitalized general and administrative expenses	7,000	7,600
Capitalized share-based compensation expense	100	800
Cost
Reconciliation of changes in property, plant and equipment [abstract]
Balance at beginning of period	1,945,099	2,117,434
Additions	82,250	125,431
Transfer from exploration and evaluation assets	5,601	336
Disposals	(7,736)	(298,102)
Balance at end of period	2,025,214	1,945,099
Accumulated depletion, depreciation and impairment losses
Reconciliation of changes in property, plant and equipment [abstract]
Balance at beginning of period	(757,709)	(820,862)
Charge for the year	105,286	120,652
Disposals	4,343	196,955
Impairment (reversal)	2,140	13,150
Balance at end of period	(860,792)	(757,709)
Oil and Natural Gas Properties
Reconciliation of changes in property, plant and equipment [abstract]
Balance at beginning of period	1,109,129
Balance at end of period	1,086,194	1,109,129
Oil and Natural Gas Properties | Cost
Reconciliation of changes in property, plant and equipment [abstract]
Balance at beginning of period	1,848,673	2,034,954
Additions	77,837	111,485
Transfer from exploration and evaluation assets	5,601	336
Disposals	(7,736)	(298,102)
Balance at end of period	1,924,375	1,848,673
Oil and Natural Gas Properties | Accumulated depletion, depreciation and impairment losses
Reconciliation of changes in property, plant and equipment [abstract]
Balance at beginning of period	(739,544)	(806,656)
Charge for the year	100,840	116,693
Disposals	4,343	196,955
Impairment (reversal)	2,140	13,150
Balance at end of period	(838,181)	(739,544)
Operated Facilities
Reconciliation of changes in property, plant and equipment [abstract]
Balance at beginning of period	65,009
Balance at end of period	66,257	65,009
Operated Facilities | Cost
Reconciliation of changes in property, plant and equipment [abstract]
Balance at beginning of period	68,118	56,060
Additions	3,102	12,058
Transfer from exploration and evaluation assets	0	0
Disposals	0	0
Balance at end of period	71,220	68,118
Operated Facilities | Accumulated depletion, depreciation and impairment losses
Reconciliation of changes in property, plant and equipment [abstract]
Balance at beginning of period	(3,109)	(1,987)
Charge for the year	1,854	1,122
Disposals	0	0
Impairment (reversal)	0	0
Balance at end of period	(4,963)	(3,109)
Office Furniture and Equipment
Reconciliation of changes in property, plant and equipment [abstract]
Balance at beginning of period	13,252
Balance at end of period	11,971	13,252
Office Furniture and Equipment | Cost
Reconciliation of changes in property, plant and equipment [abstract]
Balance at beginning of period	28,308	26,420
Additions	1,311	1,888
Transfer from exploration and evaluation assets	0	0
Disposals	0	0
Balance at end of period	29,619	28,308
Office Furniture and Equipment | Accumulated depletion, depreciation and impairment losses
Reconciliation of changes in property, plant and equipment [abstract]
Balance at beginning of period	(15,056)	(12,219)
Charge for the year	2,592	2,837
Disposals	0	0
Impairment (reversal)	0	0
Balance at end of period	$ (17,648)	$ (15,056)

XML

PROPERTY, PLANT AND EQUIPMENT - Acquisitions (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2018 CAD ($) Boe / d shares	Dec. 31, 2017 CAD ($)
Disclosure of detailed information about property, plant and equipment [line items]
Additions to property, plant and equipment	$ 69,515	$ 121,586
Ferrier Asset Acquisition One
Disclosure of detailed information about property, plant and equipment [line items]
Number of barrels of oil | Boe / d	2,200
Number of barrels of oil, natural gas, percentage	79.00%
Number of barrels of oil, liquids, percentage	21.00%
Number of shares issued for property acquisition | shares	4,000,000
Additions to property, plant and equipment	$ 7,660
Purchase price adjustments	$ 9,100
Ferrier Asset Acquisition Two
Disclosure of detailed information about property, plant and equipment [line items]
Number of barrels of oil | Boe / d	1,250
Number of barrels of oil, natural gas, percentage	65.00%
Number of barrels of oil, liquids, percentage	35.00%
Number of shares issued for property acquisition | shares	6,750,000.00
Additions to property, plant and equipment	$ 1,750

XML

PROPERTY, PLANT AND EQUIPMENT - Dispositions (Details) - CAD ($) $ in Millions	3 Months Ended			12 Months Ended
	Dec. 31, 2018	Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2018	Dec. 31, 2016
Alder Flats Plant Sale
Disclosure of detailed information about property, plant and equipment [line items]
Percentage of working interest disposed of					35.00%
Gains on disposals of property, plant and equipment				$ 14.0
Production Facilities, West Central Alberta
Disclosure of detailed information about property, plant and equipment [line items]
Losses on disposals of property, plant and equipment	$ 3.4
Oil and Gas Properties, West Pembina Area Of Alberta
Disclosure of detailed information about property, plant and equipment [line items]
Losses on disposals of property, plant and equipment		$ 18.6
Proceeds from disposal of oil and gas assets		$ 16.0
Oil And Gas Properties, Strachan Area Of Alberta
Disclosure of detailed information about property, plant and equipment [line items]
Losses on disposals of property, plant and equipment			$ 37.0
Proceeds from disposal of oil and gas assets			34.5
Oil and Gas Properties, Willesden Green Area Of Alberta
Disclosure of detailed information about property, plant and equipment [line items]
Proceeds from disposal of oil and gas assets			$ 20.0

XML

PROPERTY, PLANT AND EQUIPMENT - Impairment Loss (Details) - CAD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure of detailed information about property, plant and equipment [line items]
Increase to discount rate	1.00%
Decrease in discount rate	1.00%
South Central
Disclosure of detailed information about property, plant and equipment [line items]
Impairment loss		$ 1,000,000
Recoverable amount of asset or cash-generating unit		18,300,000
Cash Generating Unit, North Alberta
Disclosure of detailed information about property, plant and equipment [line items]
Impairment loss	$ 800,000
Recoverable amount of asset or cash-generating unit	5,200,000
Increase to impairment loss	200,000
Central Alberta
Disclosure of detailed information about property, plant and equipment [line items]
Impairment loss	0	12,200,000
Recoverable amount of asset or cash-generating unit		$ 4,700,000
Cash Generating Unit, South Alberta
Disclosure of detailed information about property, plant and equipment [line items]
Impairment loss	1,300,000
Recoverable amount of asset or cash-generating unit	18,900,000
Increase to impairment loss	$ 0
Bottom of range
Disclosure of detailed information about property, plant and equipment [line items]
Discount rate used in current estimate of value in use	15.00%
Discount rate used in current measurement of fair value less costs of disposal		15.00%
Bottom of range | Central Alberta
Disclosure of detailed information about property, plant and equipment [line items]
Discount rate used in current estimate of value in use	12.00%
Top of range
Disclosure of detailed information about property, plant and equipment [line items]
Discount rate used in current estimate of value in use	20.00%
Discount rate used in current measurement of fair value less costs of disposal		20.00%
Top of range | Central Alberta
Disclosure of detailed information about property, plant and equipment [line items]
Discount rate used in current estimate of value in use	15.00%

XML

PROPERTY, PLANT AND EQUIPMENT - VIU Cash Generating Units (Details)	Dec. 31, 2018 $ / bbl $ / $ $ / MMBTU	Dec. 31, 2017 $ / bbl $ / $ $ / MMBTU
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / $	1.32	1.27
Later than one year not later than two years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / $	1.28	1.25
Later than two years and not later than three years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / $	1.25	1.23
Later than three years and not later than four years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / $	1.25	1.22
Later than four years and not later than five years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / $	1.25	1.20
Later than five years and not later than six years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / $	1.25	1.19
Later than six years and not later than seven years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / $	1.25	1.18
Later than seven years and not later than eight years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / $	1.25	1.18
Later than eight years and not later than nine years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / $	1.25	1.18
Later than nine years and not later than ten years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / $	1.25	1.18
Thereafter
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / $	0.00	1.18
Edmonton Crude Ref Oil
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	63.50	71.36
Edmonton Crude Ref Oil | Later than one year not later than two years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	75.55	73.44
Edmonton Crude Ref Oil | Later than two years and not later than three years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	80.50	75.47
Edmonton Crude Ref Oil | Later than three years and not later than four years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	83.25	80.49
Edmonton Crude Ref Oil | Later than four years and not later than five years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	85.60	82.38
Edmonton Crude Ref Oil | Later than five years and not later than six years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	87.62	84.22
Edmonton Crude Ref Oil | Later than six years and not later than seven years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	90.01	86.01
Edmonton Crude Ref Oil | Later than seven years and not later than eight years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	92.68	88.85
Edmonton Crude Ref Oil | Later than eight years and not later than nine years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	94.53	90.62
Edmonton Crude Ref Oil | Later than nine years and not later than ten years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	96.42	92.43
Edmonton Crude Ref Oil | Thereafter
Disclosure of information for cash-generating units [line items]
Value in use commodity rate increase per year applied to cash flow projections	2.00%	2.00%
AECO Gas
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / MMBTU	1.90	2.52
AECO Gas | Later than one year not later than two years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / MMBTU	2.29	2.93
AECO Gas | Later than two years and not later than three years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / MMBTU	2.71	3.22
AECO Gas | Later than three years and not later than four years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / MMBTU	3.03	3.51
AECO Gas | Later than four years and not later than five years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / MMBTU	3.21	3.75
AECO Gas | Later than five years and not later than six years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / MMBTU	3.33	3.85
AECO Gas | Later than six years and not later than seven years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / MMBTU	3.44	3.95
AECO Gas | Later than seven years and not later than eight years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / MMBTU	3.50	4.11
AECO Gas | Later than eight years and not later than nine years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / MMBTU	3.57	4.27
AECO Gas | Later than nine years and not later than ten years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections | $ / MMBTU	3.65	4.35
AECO Gas | Thereafter
Disclosure of information for cash-generating units [line items]
Value in use commodity rate increase per year applied to cash flow projections	2.00%	2.00%
Butane
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	20.96	51.38
Butane | Later than one year not later than two years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	37.02	52.88
Butane | Later than two years and not later than three years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	45.89	54.34
Butane | Later than three years and not later than four years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	54.95	57.96
Butane | Later than four years and not later than five years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	58.21	59.31
Butane | Later than five years and not later than six years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	61.33	60.64
Butane | Later than six years and not later than seven years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	62.10	61.93
Butane | Later than seven years and not later than eight years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	63.95	63.97
Butane | Later than eight years and not later than nine years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	65.22	65.25
Butane | Later than nine years and not later than ten years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	66.53	66.55
Butane | Thereafter
Disclosure of information for cash-generating units [line items]
Value in use commodity rate increase per year applied to cash flow projections	2.00%	2.00%
Propane
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	28.58	35.68
Propane | Later than one year not later than two years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	33.24	36.72
Propane | Later than two years and not later than three years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	37.03	35.85
Propane | Later than three years and not later than four years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	38.30	36.22
Propane | Later than four years and not later than five years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	41.52	37.07
Propane | Later than five years and not later than six years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	42.93	37.90
Propane | Later than six years and not later than seven years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	44.10	38.70
Propane | Later than seven years and not later than eight years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	45.41	39.98
Propane | Later than eight years and not later than nine years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	46.32	40.78
Propane | Later than nine years and not later than ten years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	47.25	41.60
Propane | Thereafter
Disclosure of information for cash-generating units [line items]
Value in use commodity rate increase per year applied to cash flow projections	2.00%	2.00%
Condensate
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	67.95	74.93
Condensate | Later than one year not later than two years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	78.95	77.12
Condensate | Later than two years and not later than three years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	83.72	79.25
Condensate | Later than three years and not later than four years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	86.58	84.52
Condensate | Later than four years and not later than five years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	88.60	86.50
Condensate | Later than five years and not later than six years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	90.68	88.43
Condensate | Later than six years and not later than seven years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	93.16	90.31
Condensate | Later than seven years and not later than eight years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	95.92	93.29
Condensate | Later than eight years and not later than nine years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	97.84	95.15
Condensate | Later than nine years and not later than ten years
Disclosure of information for cash-generating units [line items]
Value in use commodity rate applied to cash flow projections	99.79	97.06
Condensate | Thereafter
Disclosure of information for cash-generating units [line items]
Value in use commodity rate increase per year applied to cash flow projections	2.00%	2.00%

XML

DECOMMISSIONING LIABILITIES - Narrative (Details) - Provision for decommissioning liabilities - CAD ($) $ in Millions	Dec. 31, 2018	Dec. 31, 2017
Disclosure of other provisions [line items]
Undiscounted liabilities	$ 98.5	$ 94.6
Inflation rate	2.00%	2.00%
Bottom of range
Disclosure of other provisions [line items]
Risk-free interest rate	1.91%	1.66%
Top of range
Disclosure of other provisions [line items]
Risk-free interest rate	2.15%	2.20%

XML

DECOMMISSIONING LIABILITIES - Rollforward of Decommissioning Liabilities (Details) - Provision for decommissioning liabilities - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure of other provisions [line items]
Balance, beginning of year	$ 60,611	$ 62,844
Incurred on development activities	678	1,501
Acquired through asset acquisitions	3,462	0
Revisions on estimates	37	3,210
Decommissioning costs incurred	(2,242)	(2,758)
Reversed on dispositions	0	(5,473)
Accretion expense	1,328	1,287
Balance, end of year	$ 63,874	$ 60,611

XML

OTHER DEFERRED LIABILITIES - Summary of Other Liabilities (Details) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Disclosure of financial liabilities [line items]
Other liabilities, beginning of period	$ 28,192
Deferred lease inducements	(332)	$ (366)
Payments on finance lease	(1,170)
Loss on onerous contracts	(5,362)	0
Drawdown deferred financing obligations	(1,505)
Drawdown deferred capital obligations	4,755
Realized deferred gain	(13,020)
Other liabilities, end of period	12,772	28,192
Current portion of other deferred liabilities	1,909	20,790
Long term portion of other deferred liabilities	10,863	7,402
Finance lease obligation
Disclosure of financial liabilities [line items]
Other liabilities, beginning of period	6,891
Deferred lease inducements	0
Payments on finance lease	(1,170)
Loss on onerous contracts	0
Drawdown deferred financing obligations	0
Drawdown deferred capital obligations	0
Realized deferred gain	0
Other liabilities, end of period	5,721	6,891
Current portion of other deferred liabilities	476
Long term portion of other deferred liabilities	5,245
Deferred lease inducements
Disclosure of financial liabilities [line items]
Other liabilities, beginning of period	2,021
Deferred lease inducements	(332)
Payments on finance lease	0
Loss on onerous contracts	0
Drawdown deferred financing obligations	0
Drawdown deferred capital obligations	0
Realized deferred gain	0
Other liabilities, end of period	1,689	2,021
Current portion of other deferred liabilities	340
Long term portion of other deferred liabilities	1,349
Onerous Contracts
Disclosure of financial liabilities [line items]
Other liabilities, beginning of period	0
Deferred lease inducements	0
Payments on finance lease	0
Loss on onerous contracts	(5,362)
Drawdown deferred financing obligations	0
Drawdown deferred capital obligations	0
Realized deferred gain	0
Other liabilities, end of period	5,362	0
Current portion of other deferred liabilities	1,093
Long term portion of other deferred liabilities	4,269
Deferred financing obligations
Disclosure of financial liabilities [line items]
Other liabilities, beginning of period	1,505
Deferred lease inducements	0
Payments on finance lease	0
Loss on onerous contracts	0
Drawdown deferred financing obligations	(1,505)
Drawdown deferred capital obligations	0
Realized deferred gain	0
Other liabilities, end of period	0	1,505
Current portion of other deferred liabilities	0
Long term portion of other deferred liabilities	0
Deferred gain
Disclosure of financial liabilities [line items]
Other liabilities, beginning of period	13,020
Deferred lease inducements	0
Payments on finance lease	0
Loss on onerous contracts	0
Drawdown deferred financing obligations	0
Drawdown deferred capital obligations	0
Realized deferred gain	(13,020)
Other liabilities, end of period	0	13,020
Current portion of other deferred liabilities	0
Long term portion of other deferred liabilities	0
Deferred Capital Obligation
Disclosure of financial liabilities [line items]
Other liabilities, beginning of period	4,755
Deferred lease inducements	0
Payments on finance lease	0
Loss on onerous contracts	0
Drawdown deferred financing obligations	0
Drawdown deferred capital obligations	4,755
Realized deferred gain	0
Other liabilities, end of period	0	$ 4,755
Current portion of other deferred liabilities	0
Long term portion of other deferred liabilities	$ 0
Alder Flats Plant Sale
Disclosure of financial liabilities [line items]
Percentage of working interest disposed of			35.00%

XML

OTHER DEFERRED LIABILITIES - Narrative (Details) - CAD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Disclosure of recognised finance lease as assets by lessee [line items]
Other liabilities	$ 12,772	$ 28,192
Operated Facilities | Cost
Disclosure of recognised finance lease as assets by lessee [line items]
Recognised finance lease as assets	15,300	15,300
Operated Facilities | Accumulated depreciation
Disclosure of recognised finance lease as assets by lessee [line items]
Recognised finance lease as assets	5,000	4,400
Onerous Contracts
Disclosure of recognised finance lease as assets by lessee [line items]
Other liabilities	$ 5,362	$ 0

XML

OTHER DEFERRED LIABILITIES - Schedule of Future Minimum Lease Payments (Details) $ in Thousands	Dec. 31, 2018 CAD ($)
Disclosure of finance lease and operating lease by lessee [line items]
Total lease payments	$ 11,334
Amount representing implicit interest at 15.28%	(5,613)
Total lease obligation at December 31, 2018	$ 5,721
Implicit interest rate	15.28%
2019
Disclosure of finance lease and operating lease by lessee [line items]
Total lease payments	$ 1,317
2020
Disclosure of finance lease and operating lease by lessee [line items]
Total lease payments	1,240
2021
Disclosure of finance lease and operating lease by lessee [line items]
Total lease payments	1,164
2022
Disclosure of finance lease and operating lease by lessee [line items]
Total lease payments	1,088
2023
Disclosure of finance lease and operating lease by lessee [line items]
Total lease payments	1,011
Thereafter
Disclosure of finance lease and operating lease by lessee [line items]
Total lease payments	$ 5,514

XML

SHAREHOLDERS' CAPITAL - Summary of Shareholders' Capital (Details) $ in Thousands, $ in Millions	12 Months Ended
	Dec. 31, 2018 USD ($) shares	Dec. 31, 2018 CAD ($) shares	Dec. 31, 2017 CAD ($) shares	Jul. 01, 2017
Disclosure of classes of share capital [line items]
Stockholders equity note stock split conversion ratio				500.00%
Number of shares outstanding, beginning of period (in shares) | shares	49,378,026	49,378,026
Number of shares outstanding, end of period (in shares) | shares	80,909,225	80,909,225	49,378,026
Equity attributable to owners of parent, beginning of period		$ 774,022
Equity attributable to owners of parent, end of period		$ 672,725	$ 774,022
Preference shares
Disclosure of classes of share capital [line items]
Number of shares authorised | shares	95,978,621	95,978,621
Issued capital
Disclosure of classes of share capital [line items]
Number of shares issued for settlement of senior notes | shares	19,900,032	19,900,032	0
Number of shares outstanding, beginning of period (in shares) | shares	49,378,026	49,378,026	49,317,166
Shares issued on settlement of share-based compensation (in shares) | shares	87,516	87,516	60,860
Shares issued on property acquisition, net of tax effect (in shares) | shares	10,750,000	10,750,000	0
Flow through shares issued (in shares) | shares	793,651	793,651	0
Number of shares outstanding, end of period (in shares) | shares	80,909,225	80,909,225	49,378,026
Equity attributable to owners of parent, beginning of period		$ 1,068,377	$ 1,068,084
Shares issued on settlement of Senior Notes (note 7)		31,306	0
Shares issued on settlement of share-based compensation		127	289
Issued for property acquisition, net of tax effect		12,053	0
Flow through shares issued		1,143	0
Share issue costs on equity issue, net of tax effect		(387)	4
Equity attributable to owners of parent, end of period		$ 1,112,619	$ 1,068,377
Senior Notes
Disclosure of classes of share capital [line items]
Repayments of borrowings, note exchanges for common shares	$ 24.1

XML

REVENUE - Revenue Disaggregated by Revenue Source (Details) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure of disaggregation of revenue from contracts with customers [line items]
Revenue from contracts with customers	$ 228,712	$ 249,399
Receivables from contracts with customers	20,900	25,300
Crude oil and condensate
Disclosure of disaggregation of revenue from contracts with customers [line items]
Revenue from contracts with customers	51,761	51,448
NGLs (excluding condensate)
Disclosure of disaggregation of revenue from contracts with customers [line items]
Revenue from contracts with customers	70,970	54,602
Crude oil, condensate and NGLs
Disclosure of disaggregation of revenue from contracts with customers [line items]
Revenue from contracts with customers	122,731	106,050
Natural gas
Disclosure of disaggregation of revenue from contracts with customers [line items]
Revenue from contracts with customers	100,405	137,775
Petroleum and natural gas sales
Disclosure of disaggregation of revenue from contracts with customers [line items]
Revenue from contracts with customers	223,136	243,825
Other income
Disclosure of disaggregation of revenue from contracts with customers [line items]
Revenue from contracts with customers	$ 5,576	$ 5,574

XML

REVENUE Contrats with Customers for the Sale of Future Production (Details) - Commodity price risk - Later than one year	Dec. 31, 2018 barrel_thermal_unit MMBTU
Varying | NGL Product Mix
Disclosure of nature and extent of risks arising from financial instruments [line items]
Underlying derivative volume | barrel_thermal_unit	10,000
Chicago | Natural gas
Disclosure of nature and extent of risks arising from financial instruments [line items]
Underlying derivative volume	20,000
Dawn | Natural gas
Disclosure of nature and extent of risks arising from financial instruments [line items]
Underlying derivative volume	25,000
Malin | Natural gas
Disclosure of nature and extent of risks arising from financial instruments [line items]
Underlying derivative volume	15,000

XML

SHARE-BASED COMPENSATION PLANS - Summary of Share-based Compensation Expense (Recovery) (Details) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure of terms and conditions of share-based payment arrangement [line items]
Share-based compensation expense (recovery) included in general and administrative expense	$ (503)	$ 532
Share-based compensation expense included in operating expense	110	167
Total share-based compensation expense (recovery)	(393)	699
Share Options
Disclosure of terms and conditions of share-based payment arrangement [line items]
Share-based compensation expense (recovery) included in general and administrative expense	334	1,074
Deferred Share Units
Disclosure of terms and conditions of share-based payment arrangement [line items]
Share-based compensation expense (recovery) included in general and administrative expense	(669)	(583)
Restricted Awards
Disclosure of terms and conditions of share-based payment arrangement [line items]
Share-based compensation expense (recovery) included in general and administrative expense	(80)	178
Performance Awards
Disclosure of terms and conditions of share-based payment arrangement [line items]
Share-based compensation expense (recovery) included in general and administrative expense	$ (88)	$ (137)

XML

SHARE-BASED COMPENSATION PLANS - Summary of Share Option Expense (Details) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure of terms and conditions of share-based payment arrangement [line items]
Share options expense	$ (503)	$ 532
Share Options
Disclosure of terms and conditions of share-based payment arrangement [line items]
Share options expense	334	1,074
Share options expense capitalized	73	600
Gross share option expense	$ 407	$ 1,674

XML

SHARE-BASED COMPENSATION PLANS - Summary of Company's Share-Based Compensation Liability Balance (Details) - CAD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Disclosure of terms and conditions of share-based payment arrangement [line items]
Liabilities balance	$ 1,076	$ 2,423
Deferred Share Units
Disclosure of terms and conditions of share-based payment arrangement [line items]
Liabilities balance	543	1,212
Restricted Awards
Disclosure of terms and conditions of share-based payment arrangement [line items]
Liabilities balance	321	754
Performance Awards
Disclosure of terms and conditions of share-based payment arrangement [line items]
Liabilities balance	$ 212	$ 457

XML

SHARE-BASED COMPENSATION PLANS - Options Fair Value Measurements (Details)	12 Months Ended
	Dec. 31, 2018 CAD ($) year day	Dec. 31, 2017 CAD ($) year
Disclosure of terms and conditions of share-based payment arrangement [line items]
Maximum term of options granted	5 years
Share price (in CAD per share)	$ 1.48	$ 4.27
Exercise price (in CAD per share)	$ 1.48	$ 4.55
Risk free interest rate (%)	2.00%	0.90%
Option life (years) | year	2.8	2.8
Option volatility (%)	65.00%	71.00%
Weighted average fair value of each share option granted (in CAD per share)	$ 0.64	$ 1.87
Bottom of range
Disclosure of terms and conditions of share-based payment arrangement [line items]
Forfeiture rate	3.00%	3.00%
Top of range
Disclosure of terms and conditions of share-based payment arrangement [line items]
Forfeiture rate	10.00%	10.00%
Share Options
Disclosure of terms and conditions of share-based payment arrangement [line items]
Number of trading days to determine weighted average trading price for options granted | day	5
Share Options | Tranche One
Disclosure of terms and conditions of share-based payment arrangement [line items]
Vesting percentage	33.33%
Share Options | Tranche Two
Disclosure of terms and conditions of share-based payment arrangement [line items]
Vesting percentage	33.33%
Share Options | Tranche Three
Disclosure of terms and conditions of share-based payment arrangement [line items]
Vesting percentage	33.33%

XML

SHARE-BASED COMPENSATION PLANS - Options Roll Forward (Details)	12 Months Ended
	Dec. 31, 2018 CAD ($) shares	Dec. 31, 2017 CAD ($) shares
Disclosure of terms and conditions of share-based payment arrangement [line items]
Weighted average exercise price of share options outstanding, beginning of period (in CAD per share) | $	$ 15.62	$ 23.22
Weighted average exercise price of share options granted (in CAD per share) | $	1.48	4.55
Weighted average exercise price of share options forfeited (in CAD per share) | $	21.99	35.10
Weighted average exercise price of share options expired (in CAD per share) | $	36.00	17.12
Weighted average exercise price of share options outstanding, end of period (in CAD per share) | $	$ 8.49	$ 15.62
Number of share options outstanding, beginning of period (in shares)	1,622,132	2,573,024
Number of share options granted (in shares)	95,000	185,000
Number of share options forfeited (in shares)	(722,800)	(877,956)
Number of share options expired (in shares)	(41,800)	(257,936)
Number of share options outstanding, end of period (in shares)	952,532	1,622,132
Share Options
Disclosure of terms and conditions of share-based payment arrangement [line items]
Number of common shares reserved for issuance (in shares)	6,472,738
Number of shares available for future grants (in shares)	5,520,206

XML

SHARE-BASED COMPENSATION PLANS - Options Range of Exercise Price (Details)	Dec. 31, 2018 CAD ($) shares year	Dec. 31, 2017 CAD ($) shares	Dec. 31, 2016 CAD ($) shares
Disclosure of range of exercise prices of outstanding share options [line items]
Number of share options outstanding (in shares) | shares	952,532	1,622,132	2,573,024
Weighted average exercise price of share options outstanding (in CAD per share)	$ 8.49	$ 15.62	$ 23.22
Share options outstanding, weighted average remaining contractual life (in years) | year	2.6
Number of share options exercisable (in shares) | shares	624,353
Weighted average exercise price of share options exercisable (in CAD per share)	$ 10.92
Bottom of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	1.48
Top of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	$ 46.90
Exercise Price Range One
Disclosure of range of exercise prices of outstanding share options [line items]
Number of share options outstanding (in shares) | shares	95,000
Weighted average exercise price of share options outstanding (in CAD per share)	$ 1.48
Share options outstanding, weighted average remaining contractual life (in years) | year	4.4
Number of share options exercisable (in shares) | shares	0
Weighted average exercise price of share options exercisable (in CAD per share)	$ 0.00
Exercise Price Range One | Bottom of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	1.48
Exercise Price Range One | Top of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	$ 2.67
Exercise Price Range Two
Disclosure of range of exercise prices of outstanding share options [line items]
Number of share options outstanding (in shares) | shares	119,000
Weighted average exercise price of share options outstanding (in CAD per share)	$ 3.85
Share options outstanding, weighted average remaining contractual life (in years) | year	3.5
Number of share options exercisable (in shares) | shares	39,665
Weighted average exercise price of share options exercisable (in CAD per share)	$ 3.85
Exercise Price Range Two | Bottom of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	2.68
Exercise Price Range Two | Top of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	$ 4.47
Exercise Price Range Three
Disclosure of range of exercise prices of outstanding share options [line items]
Number of share options outstanding (in shares) | shares	446,532
Weighted average exercise price of share options outstanding (in CAD per share)	$ 5.10
Share options outstanding, weighted average remaining contractual life (in years) | year	2.6
Number of share options exercisable (in shares) | shares	332,688
Weighted average exercise price of share options exercisable (in CAD per share)	$ 5.10
Exercise Price Range Three | Bottom of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	4.48
Exercise Price Range Three | Top of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	$ 5.55
Exercise Price Range Four
Disclosure of range of exercise prices of outstanding share options [line items]
Number of share options outstanding (in shares) | shares	60,000
Weighted average exercise price of share options outstanding (in CAD per share)	$ 6.00
Share options outstanding, weighted average remaining contractual life (in years) | year	3.3
Number of share options exercisable (in shares) | shares	20,000
Weighted average exercise price of share options exercisable (in CAD per share)	$ 6.00
Exercise Price Range Four | Bottom of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	5.56
Exercise Price Range Four | Top of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	$ 10.68
Exercise Price Range Five
Disclosure of range of exercise prices of outstanding share options [line items]
Number of share options outstanding (in shares) | shares	1,600
Weighted average exercise price of share options outstanding (in CAD per share)	$ 15.68
Share options outstanding, weighted average remaining contractual life (in years) | year	1.2
Number of share options exercisable (in shares) | shares	1,600
Weighted average exercise price of share options exercisable (in CAD per share)	$ 15.68
Exercise Price Range Five | Bottom of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	10.69
Exercise Price Range Five | Top of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	$ 17.38
Exercise Price Range Six
Disclosure of range of exercise prices of outstanding share options [line items]
Number of share options outstanding (in shares) | shares	204,000
Weighted average exercise price of share options outstanding (in CAD per share)	$ 18.75
Share options outstanding, weighted average remaining contractual life (in years) | year	1.4
Number of share options exercisable (in shares) | shares	204,000
Weighted average exercise price of share options exercisable (in CAD per share)	$ 18.75
Exercise Price Range Six | Bottom of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	17.39
Exercise Price Range Six | Top of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	$ 19.52
Exercise Price Range Seven
Disclosure of range of exercise prices of outstanding share options [line items]
Number of share options outstanding (in shares) | shares	17,400
Weighted average exercise price of share options outstanding (in CAD per share)	$ 33.10
Share options outstanding, weighted average remaining contractual life (in years) | year	0.7
Number of share options exercisable (in shares) | shares	17,400
Weighted average exercise price of share options exercisable (in CAD per share)	$ 33.10
Exercise Price Range Seven | Bottom of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	19.53
Exercise Price Range Seven | Top of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	$ 46.53
Exercise Price Range Eight
Disclosure of range of exercise prices of outstanding share options [line items]
Number of share options outstanding (in shares) | shares	9,000
Weighted average exercise price of share options outstanding (in CAD per share)	$ 46.89
Share options outstanding, weighted average remaining contractual life (in years) | year	0.5
Number of share options exercisable (in shares) | shares	9,000
Weighted average exercise price of share options exercisable (in CAD per share)	$ 46.89
Exercise Price Range Eight | Bottom of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	46.54
Exercise Price Range Eight | Top of range
Disclosure of range of exercise prices of outstanding share options [line items]
Exercise price of outstanding share options (in CAD per share))	$ 46.90

XML

SHARE-BASED COMPENSATION PLANS - Deferred Share Unit Plan (Details) - Deferred Share Units - shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure of terms and conditions of share-based payment arrangement [line items]
Number of instruments outstanding, beginning of period (in shares)	517,898	377,667
Number of instruments granted (in shares)	304,056	260,381
Number of instruments exercised (in shares)		(120,150)
Number of instruments outstanding, end of period (in shares)	821,954	517,898

XML

SHARE-BASED COMPENSATION PLANS - Award Plan (Details)	12 Months Ended
	Dec. 31, 2018 shares day	Dec. 31, 2017 shares
Restricted Awards
Disclosure of terms and conditions of share-based payment arrangement [line items]
Vesting period	3 years
Number of trading days to determine weighted average trading price for instruments granted | day	5
Number of instruments outstanding, beginning of period (in shares)	823,487	426,395
Number of instruments granted (in shares)	880,200	652,740
Number of instruments exercised (in shares)	(317,840)	(175,833)
Number instruments forfeited (in shares)	(202,846)	(79,815)
Number of instruments outstanding, end of period (in shares)	1,183,001	823,487
Performance Awards
Disclosure of terms and conditions of share-based payment arrangement [line items]
Number of trading days to determine weighted average trading price for instruments granted | day	5
Forfeiture rate	5.00%
Number of instruments outstanding, beginning of period (in shares)	573,055	303,335
Number of instruments granted (in shares)	335,800	370,000
Number of instruments exercised (in shares)	(77,870)	(61,920)
Number instruments forfeited (in shares)	(67,910)	(38,360)
Number of instruments outstanding, end of period (in shares)	763,075	573,055
Bottom of range | Restricted Awards
Disclosure of terms and conditions of share-based payment arrangement [line items]
Forfeiture rate	3.00%
Bottom of range | Performance Awards
Disclosure of terms and conditions of share-based payment arrangement [line items]
Payout multiplier	0.00%
Top of range | Restricted Awards
Disclosure of terms and conditions of share-based payment arrangement [line items]
Forfeiture rate	10.00%
Top of range | Performance Awards
Disclosure of terms and conditions of share-based payment arrangement [line items]
Payout multiplier	200.00%

XML

INCOME TAXES - Narrative (Details) - CAD ($) $ in Millions	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Deferred tax expense (income)	$ 70.2
Unrecognized benefit of deductible temporary differences in excess of taxable temporary differences	165.0
Tax pools available for deduction	$ 1,400.0
Federal and provincial corporate income tax rate	27.00%	27.00%
Non-capital loss carryforwards
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Tax pools available for deduction against future income	$ 133.0

XML

INCOME TAXES - Reconciliation of Expected and Actual Income Tax Expense (Recovery) (Details) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Income Taxes [Abstract]
Expected income tax expense (recovery)	$ (26,471)	$ (20,506)
Change in unrecognized deferred tax asset	69,805	44,114
Non-taxable portion of unrealized foreign exchange (gain) loss	3,972	(4,947)
Share based compensation expense	86	610
Flow through share issuance	309	108
Other	594	(3,964)
Deferred tax expense (recovery)	$ 48,295	$ 15,415

XML

INCOME TAXES - Deferred Tax Liabilities and Assets (Details) - CAD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Deferred taxes assets	$ 0	$ 48,298
Deferred tax asset (liability)	0	48,298	$ 63,713
Risk management contract asset
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Deferred tax liabilities	(3,549)	(8,943)
Deferred tax asset (liability)	0	(8,943)	0
Convertible Debentures
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Deferred tax liabilities	(2,122)	(2,616)
Deferred tax asset (liability)	0	(2,616)	(3,028)
Property, plant and equipment and exploration and evaluation assets
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Deferred tax liabilities		(6,845)
Deferred taxes assets	5,280
Deferred tax asset (liability)	0	(6,845)	(12,555)
Senior Notes
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Deferred taxes assets	0	756
Deferred tax asset (liability)	0	756	418
Finance lease obligation
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Deferred taxes assets	0	1,860
Deferred tax asset (liability)	0	1,860	2,276
Onerous lease
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Deferred taxes assets	0	0
Deferred tax asset (liability)	0	0
Deferred financing obligation
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Deferred taxes assets	0	406
Deferred tax asset (liability)	0	406	2,032
Deferred gain on sale
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Deferred taxes assets	0	3,515
Deferred tax asset (liability)	0	3,515	2,890
Risk management contract liability
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Deferred taxes assets	0	1,206
Decommissioning liabilities
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Deferred taxes assets	0	16,365
Deferred tax asset (liability)	0	16,365	16,967
Share issue costs
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Deferred taxes assets	391	840
Deferred tax asset (liability)	0	840	1,950
Non-capital losses
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Deferred taxes assets	0	40,850
Deferred tax asset (liability)	0	38,915	38,895
Other
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Deferred taxes assets	0	904
Deferred tax asset (liability)	$ 0	$ 904	$ 1,546

XML

INCOME TAXES - Continuity of Deferred Tax Asset (Liability) (Details) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	$ 48,298	$ 63,713
Recognized in profit (loss)	(48,295)	(15,415)
Recognized in equity	(3)	0
Ending balance	0	48,298
Property, plant and equipment and exploration and evaluation assets
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	(6,845)	(12,555)
Recognized in profit (loss)	6,845	5,710
Recognized in equity	0	0
Ending balance	0	(6,845)
Decommissioning liabilities
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	16,365	16,967
Recognized in profit (loss)	(16,365)	(602)
Recognized in equity	0	0
Ending balance	0	16,365
Risk management contract asset
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	(8,943)	0
Recognized in profit (loss)	8,943	(8,943)
Recognized in equity	0	0
Ending balance	0	(8,943)
Risk management contract liability
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	1,206	4,477
Recognized in profit (loss)	(1,206)	(3,271)
Recognized in equity	0	0
Ending balance	0	1,206
Share issue costs
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	840	1,950
Recognized in profit (loss)	(983)	(1,110)
Recognized in equity	143	0
Ending balance	0	840
Non-capital losses
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	38,915	38,895
Recognized in profit (loss)	(38,915)	20
Recognized in equity	0	0
Ending balance	0	38,915
Finance lease obligation
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	1,860	2,276
Recognized in profit (loss)	(1,860)	(416)
Recognized in equity	0	0
Ending balance	0	1,860
Onerous lease
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	0
Recognized in profit (loss)	0
Recognized in equity	0
Ending balance	0	0
Deferred capital obligation
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	0	5,910
Recognized in profit (loss)		(5,910)
Recognized in equity		0
Ending balance		0
Deferred financing obligation
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	406	2,032
Recognized in profit (loss)	(406)	(1,626)
Recognized in equity	0	0
Ending balance	0	406
Deferred gain on sale
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	3,515	2,890
Recognized in profit (loss)	(3,515)	625
Recognized in equity	0	0
Ending balance	0	3,515
Alberta non-capital losses greater than Federal non-capital losses
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	1,935	1,935
Recognized in profit (loss)	(1,935)	0
Recognized in equity	0	0
Ending balance	0	1,935
Senior Notes
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	756	418
Recognized in profit (loss)	(756)	338
Recognized in equity	0	0
Ending balance	0	756
Convertible Debentures
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	(2,616)	(3,028)
Recognized in profit (loss)	2,616	412
Recognized in equity	0	0
Ending balance	0	(2,616)
Other
Reconciliation of changes in deferred tax liability (asset) [abstract]
Beginning balance	904	1,546
Recognized in profit (loss)	(758)	(642)
Recognized in equity	(146)	0
Ending balance	$ 0	$ 904

XML

FINANCE INCOME AND EXPENSES (Details) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure of detailed information about borrowings [line items]
Accretion on decommissioning liabilities (non-cash)	$ 1,328	$ 1,287
Finance expense	40,754	39,240
Credit Facilities
Disclosure of detailed information about borrowings [line items]
Interest	4,302	2,194
Second Lien Notes
Disclosure of detailed information about borrowings [line items]
Interest	3,224	0
Senior Notes
Disclosure of detailed information about borrowings [line items]
Interest	26,219	30,378
Convertible debentures
Disclosure of detailed information about borrowings [line items]
Interest	$ 5,681	$ 5,381
Weighted average | Floating interest rate | Credit Facilities
Disclosure of detailed information about borrowings [line items]
Interest rate	4.42%

XML

FOREIGN EXCHANGE - Detail of Gain (Loss) on Foreign Exchange (Details) $ in Thousands, $ in Millions	3 Months Ended	12 Months Ended
	Jun. 30, 2018 USD ($)	Dec. 31, 2018 CAD ($)	Dec. 31, 2017 CAD ($)
Effect Of Changes In Foreign Exchange Rates [Abstract]
Foreign exchange forward purchase contracts terminated	$ 62.5
Unrealized gain (loss) on foreign exchange		$ (18,617)	$ 22,165
Unrealized gain (loss) on foreign exchange contracts		3,422	(3,867)
Total Unrealized gain (loss) on foreign exchange		(15,195)	18,298
Realized gain (loss) on foreign exchange		(8,296)	(797)
Gain (loss) on foreign exchange		$ (23,491)	$ 17,501

XML

PER SHARE AMOUNTS - Narrative (Details) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Earnings per share [abstract]
Net profit (loss)	$ (146,339)	$ (91,363)

XML

PER SHARE AMOUNTS - Disclosure of Per Share Amounts (Details) - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Earnings per share [abstract]
Basic common shares outstanding (in shares)	80,909,225	49,378,026
Fully dilutive effect of:
Share options outstanding (in shares)	952,532	1,622,132
Shares issuable on conversion of Convertible Debentures (in shares)	6,172,840	6,172,840
Warrants outstanding (in shares)	3,088,205	0
Fully diluted common shares outstanding (in shares)	91,122,802	57,172,998
Weighted average shares outstanding (in shares)	59,734,872	49,351,848
Dilutive effect of share options (in shares)	0	0
Diluted weighted average shares outstanding (in shares)	59,734,872	49,351,848
Net (loss) profit per share - basic (in dollars per share)	$ (2.45)	$ (1.85)
Net (loss) profit per share - diluted (in dollars per share)	$ (2.45)	$ (1.85)

XML

COMMITMENTS - Summary of Operating Lease Maturities (Details) MMBTU in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2018 CAD ($) MMcf / d MMBTU
Disclosure of maturity analysis of operating lease payments [line items]
Operating leases	$ 112,067
Transportation and processing agreements	$ 314,133
Market diversification contract commitments | MMBTU	60
Midstream services and governance agreement, purchased capacity access limits | MMcf / d	80.5
Midstream services and governance agreement, purchased capacity contract term	10 years
1 Year
Disclosure of maturity analysis of operating lease payments [line items]
Operating leases	$ 22,433
Transportation and processing agreements	53,943
2-3 Years
Disclosure of maturity analysis of operating lease payments [line items]
Operating leases	41,107
Transportation and processing agreements	92,147
4-5 Years
Disclosure of maturity analysis of operating lease payments [line items]
Operating leases	33,782
Transportation and processing agreements	66,161
More than 5 years
Disclosure of maturity analysis of operating lease payments [line items]
Operating leases	14,745
Transportation and processing agreements	$ 101,882

XML

RELATED PARTY TRANSACTIONS (Details) - CAD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure of transactions between related parties [line items]
Short-term employee benefits	$ 4,805,000	$ 4,901,000
Share-based compensation	(431,000)	452,000
Key management personnel compensation	4,374,000	5,353,000
Key management personnel compensation, termination benefits	0	$ 1,300,000
Director
Disclosure of transactions between related parties [line items]
Retainage deposit	35,000
Fees earned from advisor agreement	$ 1,100,000

XML

SUPPLEMENTAL DISCLOSURES - Changes in Non-cash Working Capital (Details) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure Of Supplemental Disclosures [Abstract]
Accounts receivable	$ 8,717	$ (6,445)
Loans receivable	0	15,000
Deposits and prepaid expenses	193	1,496
Accounts payable and accrued liabilities	(10,958)	(3,578)
Increase (decrease) in working capital	(2,048)	6,473
Operating activities	16,692	(272)
Financing activities	(6,371)	16,353
Investing activities	$ (12,369)	$ (9,608)

XML

SUPPLEMENTAL DISCLOSURES - Consolidated Statement of Comprehensive Income (Loss) Presentation (Details) - CAD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disclosure of defined benefit plans [line items]
Employee compensation	$ 20,568	$ 27,134
Production
Disclosure of defined benefit plans [line items]
Employee compensation	7,169	7,860
General and administrative
Disclosure of defined benefit plans [line items]
Employee compensation	$ 13,399	$ 19,274