Title: Bellatrix Exploration Ltd. - BXE (T) $5.44 Price: $5.44 StockRating: Outperform TargetPrice: $7.

.00 Headline: Strong Reserve Growth

December 12, 2013 The NBF Daily Bulletin
Oil & Gas Exploration and Production

Bellatrix Exploration Ltd.
BXE (T, N) C$7.35, US$6.87
Stock Rating: Outperform
(Unchanged)
Target: Cdn$11.00

(Unchanged)
Risk Rating: Above Average
2014 Guidance Confirmed
Hold on for 2014, it will be the biggest year
yet for the company

(Unchanged)
Est. Total Return 50%

HIGHLIGHTS
Stock Data - Q4e 2013:
52-week High-Low (Cdn$) $3.59 - $8.52
Shares Outstanding (mln) 172.5
Free Float Pct 87%
Net Debt (mln) $343.1
Market Cap. (mln) $1,267.9
Enterprise Value (mln) $1,611.0
Production
2012a 2013e 2014e
Oil & NGL's (bbls/d) 5,717 6,525 16,280
Nat. Gas (mcf/d) 65,812 95,850 166,320
Boe/d (6:1) 16,686 22,500 44,000
% Nat. Gas 66% 71% 63%
Pricing
2012a 2013e 2014e
WTI (US$/bbl) $94.00 $97.75 $92.25
AECO (Cdn$/mcf) $2.40 $3.10 $3.65
Corp. Oil & NGL's ($/bbl) $73.59 $72.00 $74.03
Corp. Nat. Gas ($/mcf) $2.62 $3.39 $3.98
Corp. Wellhead ($/boe) $35.55 $35.33 $42.45
* Strip pricing 13/14 (as at 11/27/2013)
Estimates
2012a 2013e 2014e
Cash Flow (mln) $111.0 $143.1 $359.8
CFPS - diluted $1.02 $1.14 $2.04
CF Netback ($/boe) $17.50 $17.43 $22.40
Capex (mln) $178.7 $534.8 $370.0
Net Debt (mln) $195.4 $343.1 $353.3
Valuation
2012a 2013e 2014e
P/CF 4.0 x 6.5 x 3.6 x
EV/DACF 5.0 x 10.4 x 4.4 x
Net Debt / CF 1.8 x 2.4 x 1.0 x
EV/BOE/D $36,161 $73,058 $37,592
P/NAVPS 1.4x
EV/boe P+P $9.79
Source: Company Reports, NBF Estimates

Industry Rating (Oil & Gas Exploration and Production):
Overweight
(NBF Economics & Strategy Group)
2013 Production Pulled Back
Production is expected to average 22,250 boe/d in 2013. This
falls slightly below our estimate of 22,500 boe/d (29% liquids)
and consensus at 23,000 boe/d. However, the company is set
to meet its exit production of 40,000 boe/d (37% liquids).We
estimate 2013 cash flow at $143.1 mln, or $1.14/sh
compared with consensus at $1.20/sh.
2014 production is expected to average 44,000 boe/d
Following the closing of its NGL acquisition yesterday, the
company is expected to average 44,000 boe/d in 2014. BXE's
2014 capital program is set at $610 mln ($370 mln net)
running 10 rigs. $250 mln of net capital will be allocated to
drilling 146 (76.3 net) wells: 115 (65.7 net) will target the
Cardium and 31 (10.6 net) will target the Mannville. $100 mln
will be allocated to infrastructure and $20 mln to land and
geological costs. BXE has guided towards 47,000 boe/d exit
production in 2014.
Credit facilities increased to $500 mln
The company's previous credit facilities were $245 mln; we
expect leverage to fall throughout 2014 with net debt of $353
mln, or 0.9x D/CF at 2014 year end.
Maintaining Outperform and $11.00 Target Price
The aggregation of the companys operational strengths,
large inventory and promoted JV capital results in very low
capital efficiencies (~$15,000/boe/d) and a high funded
growth rate. In 2014 we estimate BXE to have a CFPS growth
rate of 84% compared with the intermediate peer group
average of 37%. BXE currently trades at a discount of 4.4x
and $37,500/boe/d vs. intermediate peers at 6.1x and
$51,000/boe/d.
Stock Performance (Source: Bloomberg)
Company Profile:
Bellatrix Exploration is an intermediate exploration and
production company with exposure to two core resource plays.
The company's >330 net section land position in the Cardium
provides exposure to ~1,500 potential drilling locations. Since
converting from the True Energy Trust entity, the company has
significantly changed the complexion of its assets, debt and
management. The company is lead by industry veteran
Raymond Smith as President & CEO.

Dan Payne, CFA - (403) 290-5441
dan.payne@nbc.ca

Associate:
Brent Legate, P.Eng. - (403) 290-5445
brent.legate@nbc.ca


$3.00
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NBF Disclosures, click here: http://www.nbcn.ca/contactus/disclosures.html




Page 2

Changes to Our Estimates
We made the following minor changes to our estimates.

BELLATRIX EXPLORATION - NBF ESTIMATES
Old New Change Old New Change
Production
Oil & NGLs (bbl/d) 6,525 6,525 0% 16,280 16,280 0%
Natural Gas (mmcf/d) 95.9 95.9 0% 166.3 166.3 0%
Total 22,500 22,500 0% 44,000 44,000 0%
% Oil 29% 29% 37% 37%
Financial
Cash Flow (mln) $143.1 $143.1 0% $370.3 $359.8 (3%)
CFPS diluted $1.14 $1.14 0% $2.09 $2.04 (3%)
DACF (mln) $157.3 $157.3 0% $386.2 $375.9 (3%)
per share diluted $1.25 $1.25 0% $2.18 $2.13 (3%)
Capital Expenditures (mln) $534.8 $534.8 0% $370.0 $370.0 0%
Net Debt (mln) $343.1 $343.1 0% $342.9 $353.3 3%
Debt/CF 2.4x 2.4x 0% 0.9x 1.0x 6%
NBF COMMODITY FORECAST
WTI (US$/bbl) $97.75 $97.75 0% $92.25 $92.25 0%
AECO (C$/mcf) $3.10 $3.10 0% $3.65 $3.65 0%
Source: NBF estimates
2013e 2014e


Maintain Outperform & $11.00 Target Price
The aggregation of the companys operational strengths, large inventory and promoted JV
capital results in very low capital efficiencies (~$15,000/boe/d) and a high funded growth
rate. In 2014 we estimate BXE to have a CFPS growth rate of 84% compared with the
intermediate peer group average of 37%. BXE currently trades at a discount of 4.4x and
$37,500/boe/d vs. intermediate peers at 6.1x and $51,000/boe/d.
We are maintaining our Outperform rating and target price at $11.00. Our target price is
based on a 4.0x 2014e EV/DACF multiple (was 3.9x) and includes $4.50/sh in risked upside
(unchanged). Our base cash flow target multiple is discounted to the mid-weight commodity
peer group average at 5.3x, while our risked upside is based on a 25% risk factor that we
believe adequately represents the geologic, technical and financing risks associated with
the companys plays.

In the table below we highlighted a breakdown of our target valuation:




Page 3
VALUATION OVERVIEW
Multiple $/sh
Base 2014e EV/DACF Target Multiple 4.0x $6.50
Unrisked Value Risk Factor Risked Value
Resource Upside $mln $/sh % $mln $/sh
Cardium $1,228.5 $11.39 20% $250.6 $2.32
Notikewin $2,329.3 $21.59 10% $232.9 $2.16
Total Resource Upside $3,557.8 $32.98 $483.5 $4.48
Combined Base & Resource Upside $39.48 $10.98
Target Price $11.00
Current Share Price $7.35
Return 50%
Base 2P NAV (2012) $5.30
Source: NBF
$6.50
$5.30
$4.48 $4.48
$28.50
$6.50 $6.50
$2.00
$6.00
$10.00
$14.00
$18.00
$22.00
$26.00
$30.00
Base Base + Risked
Upside
Base + Unrisked
Upside
2P Blow Down NAV
$2.00
$6.00
$10.00
$14.00
$18.00
$22.00
$26.00
$30.00
Unrisked Upside
Risked Upside
Base Cash Flow Component
Target Price
Current Price