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Bellatrix Exploration Ltd. Announces Third Quarter 2012 Financial Results

November 8, 2012

TSX, NYSE MKT: BXE

CALGARY, Nov. 8, 2012 /PRNewswire/ – Bellatrix Exploration Ltd. (“Bellatrix” or
the “Company”) (TSX, NYSE MKT: BXE) announces its financial and
operating results for the three and nine months ended September 30,
2012.

Forward-Looking Statements

This press release, including the report to shareholders, contains
forward-looking statements.  Please refer to our cautionary language on
forward-looking statements and the other matters set forth at the
beginning of the management’s discussion and analysis (the “MD&A”)
attached to this press release.


                                                       HIGHLIGHTS

                                 Three months ended               Nine months ended
                                      September 30,                   September 30,

                               2012            2011            2012            2011

    FINANCIAL
    (unaudited)                                                                    

    (CDN$000s
    except share
    and per share
    amounts)                                                                       

    Revenue
    (before
    royalties and
    risk
    management
    (1))                     48,126          49,145         157,031         143,124

    Funds flow
    from
    operations
    (2)                      26,613          23,964          81,173          64,117

      Per basic
      share (6)               $0.25           $0.22           $0.76           $0.62

      Per diluted
      share (6)               $0.23           $0.21           $0.70           $0.58

    Cash flow
    from
    operating
    activities               24,807          28,023          77,321          67,566

      Per basic
      share (6)               $0.23           $0.26           $0.72           $0.66

      Per diluted
      share (6)               $0.22           $0.24           $0.67           $0.61

    Net profit
    before
    non-cash
    impairment
    loss,
    unrealized
    gain (loss)
    on commodity
    contracts,
    and gain
    (loss) on
    property
    dispositions
    (5)                       5,233           4,168          14,448           9,167

      Per basic
      share (6)               $0.05           $0.04           $0.13           $0.09

      Per diluted
      share (6)               $0.05           $0.04           $0.13           $0.09

    Net profit
    (loss)                    (615)             820          18,520           7,648

      Per basic
      share (6)             ($0.01)           $0.01           $0.17           $0.07

      Per diluted
      share (6)             ($0.01)           $0.01           $0.17           $0.07

    Exploration
    and
    development              39,818          44,093         132,104         128,354

    Corporate and
    property
    acquisitions                 22             134             196           3,945

    Capital
    expenditures
    - cash                   39,840          44,227         132,300         132,299

    Property
    dispositions
    - cash                  (4,325)         (4,140)         (6,670)         (4,181)

    Non-cash
    items                   (1,756)           3,457         (1,612)           4,410

    Total capital
    expenditures
    - net                    33,759          43,544         124,018         132,528

    Long-term
    debt                    104,642          37,379         104,642          37,379

    Convertible
    debentures
    (3)                      50,269          48,692          50,269          48,692

    Adjusted
    working
    capital
    deficiency
    (3)                      11,308          15,265          11,308          15,265

    Total net
    debt (3)                166,219         101,336         166,219         101,336

    Total assets            627,835         546,309         627,835         546,309

    Total
    shareholders'
    equity                  370,235         360,846         370,235         360,846

    OPERATING                                      Three months ended               Nine months ended
                                                        September 30,                   September 30,

                                                 2012            2011            2012            2011

    Average daily
    sales volumes                                                                                    

        Crude oil,
        condensate and
        NGLs                 (bbls/d)           5,204           4,413           5,713           4,242

        Natural gas           (mcf/d)          61,796          44,546          61,654          41,710

        Total oil
        equivalent            (boe/d)          15,503          11,837          15,989          11,194

    Average prices                                                                                   

      Light crude oil
      and condensate          ($/bbl)           84.98           88.91           87.74           91.42

      NGLs                    ($/bbl)           28.62           51.74           38.90           53.10

      Heavy oil               ($/bbl)           63.95           64.19           69.17           66.13

      Crude oil,
      condensate and
      NGLs                    ($/bbl)           70.37           80.78           74.96           83.37

      Crude oil,
      condensate and
      NGLs (including
      risk management
      (1))                    ($/bbl)           70.72           82.38           72.83           80.85

      Natural gas             ($/mcf)            2.45            3.91            2.26            3.97

      Natural gas
      (including risk
      management(1))          ($/mcf)            3.38            4.33            2.96            4.23

      Total oil
      equivalent              ($/boe)           33.38           44.82           35.51           46.39

      Total oil
      equivalent
      (including risk
      management(1))          ($/boe)           37.22           47.02           37.44           46.41

    Statistics                                                                                       

        Operating
        netback (4)           ($/boe)           18.29           23.89           19.85           24.71

        Operating
        netback (4)
        (including
        risk
        management(1))        ($/boe)           22.13           26.09           21.78           24.72

        Transportation        ($/boe)            0.90            1.34            0.86            1.35

        Production
        expenses              ($/boe)            7.96           11.71            8.66           11.85

        General &
        administrative        ($/boe)            2.38            3.14            2.26            2.81

        Royalties as a
        % of sales
        after
        transportation                            19%             18%             18%             19%

    COMMON SHARES                                                                                    

    Common shares
    outstanding                           107,606,884     107,391,298     107,606,884     107,391,298

    Share options
    outstanding                             9,499,007       7,830,931       9,499,007       7,830,931

    Shares issuable on
    conversion of
    convertible
    debentures (7)                          9,821,429       9,821,429       9,821,429       9,821,429

    Diluted common
    shares outstanding                    126,927,320     125,043,658     126,927,320     125,043,658

    Diluted weighted
    average shares -
    net profit (6)                        107,527,718     109,392,760     109,111,492     105,115,006

    Diluted weighted
    average shares -
    funds flow from
    operations
    and cash flow from
    operating
    activities (2) (6)                    117,927,891     119,214,189     118,932,921     114,936,435

    SHARE TRADING
    STATISTICS                                                                                       

    TSX                                                                                              

    (CDN$, except
    volumes) based on
    intra-day trading                                                                                

    High                                         4.26            5.48            5.67            6.19

    Low                                          2.95            3.35            2.45            3.35

    Close                                        3.99            3.37            3.99            3.37

    Average daily
    volume                                    321,383         416,772         499,495         559,103

    NYSE MKT(8)                                                                                      

    (US$, except
    volumes) based on
    intra-day trading                                                                                

    High                                         4.36               -            4.36               -

    Low                                          3.75               -            3.75               -

    Close                                        4.07               -            4.07               -

    Average daily
    volume                                     23,601               -          23,601               -

((1)) 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 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.

((2)) The highlights section contains the term “funds flow from operations”
which should not be considered an alternative to, or more meaningful
than cash flow from operating activities as determined in accordance
with generally accepted accounting principles (“GAAP”) as an indicator
of the Company’s performance. Therefore reference to the non-GAAP terms
of funds flow from operations, or funds flow from operations per share
may not be comparable with the calculation of similar measures for
other entities. Management uses funds flow from operations to analyze
operating performance and leverage and considers funds flow from
operations 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.  The reconciliation between cash flow from operating
activities and funds flow from operations can be found in the MD&A. 
Funds flow from operations per share is calculated using the weighted
average number of common shares for the period.

((3) )Net debt and total net debt are considered non-GAAP terms.  The
Company’s calculation of total net debt includes the liability
component of convertible debentures and excludes deferred liabilities,
long-term commodity contract liabilities, decommissioning liabilities,
long-term finance lease obligations and the deferred tax liability. 
Net debt and total net debt include the net working capital deficiency
(excess) before short-term commodity contract assets and liabilities
and current finance lease obligations.  Net debt also excludes the
liability component of convertible debentures. A reconciliation between
total liabilities under GAAP and total net debt and net debt as
calculated by the Company is found in the MD&A.

((4) )Operating netbacks is considered a non-GAAP term.  Operating netbacks
are calculated by subtracting royalties, transportation, and operating
costs from revenues before other income.

((5) )Net profit before non-cash impairment loss, unrealized gain (loss) on
commodity contracts, and gain (loss) on property dispositions is
considered a non-GAAP term. Net profit before non-cash impairment loss,
unrealized gain (loss) on commodity contracts, and gain (loss) on
property dispositions is calculated as net profit (loss) per the
Consolidated Statement of Comprehensive Income, excluding the non-cash
impairment loss, unrealized gain or loss on commodity contracts, and
gain or loss on property dispositions, net of the deferred tax impact
on these adjustments. The Company’s reconciliation between net profit
(loss) and net profit before non-cash impairment loss, unrealized gain
(loss) on commodity contracts, and gain (loss) on property dispositions
is found in the MD&A.

((6) )Basic weighted average shares for the three and nine months ended
September 30, 2012 were 107,527,718 (2011: 107,391,070) and 107,479,907
(2011: 102,664,721), respectively.

In computing weighted average diluted earnings per share for the three
months ended September 30, 2012, a total of nil (2011: 2,001,690)
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 9,821,429 (2011: 9,821,429) common shares
issuable on conversion of convertible debentures were excluded from the
denominator as they were not dilutive, resulting in diluted weighted
average common shares of 107,527,718 (2011: 109,392,760). 

In computing weighted average diluted earnings per share for the nine
months ended September 30, 2012, a total of 1,631,585 (2011: 2,450,285)
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 9,821,429 (2011: 9,281,429) common shares
issuable on conversion of convertible debentures were excluded from the
denominator as they were not dilutive, resulting in diluted weighted
average common shares of 109,111,492 (2011: 105,115,006).

In computing weighted average diluted net profit before non-cash
impairment loss, unrealized gain (loss) on commodity contracts, and
gain (loss) on property dispositions per share for the three and nine
months ended September 30, 2012, a total of 578,744 (2011: 2,001,690)
and 1,631,585 (2011: 2,450,285) common shares, respectively, were added
to the denominator as a consequence of applying the treasury stock
method to the Company’s outstanding share options as they were
dilutive, and a total of 9,821,429 (2011: 9,821,429)  common shares
issuable on conversion of convertible debentures were excluded from the
denominator as they were not dilutive, resulting in diluted weighted
average shares of 108,106,462 (2011: 109,392,760) and 109,111,492
(2011: 105,115,006).

In computing weighted average diluted cash flow from operating
activities and funds flow from operations for the three and nine months
ended September 30, 2012, a total of 578,744 (2011: 2,001,690) and
1,631,585 (2011: 2,450,285) 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 9,821,429 (2011: 9,821,429)
common shares issuable on conversion of convertible debentures were
also added to the denominator as they were dilutive, resulting in
diluted weighted average common shares of 117,927,891 (2011:
119,214,189) and 118,932,921 (2011: 114,936,435), respectively.  As a
consequence, a total of $0.8 million (2011: $0.7 million) and $2.3
million (2011: $2.2 million) for interest accretion expense (net of
income tax effect) were added to the numerator for the respective
periods.

((7)) Shares issuable on conversion of convertible debentures are calculated
by dividing the $55.0 million principal amount of the convertible
debentures by the conversion price of $5.60 per share.

((8)) The Company’s common shares commenced trading on the NYSE MKT on
September 24, 2012.

REPORT TO SHAREHOLDERS

Bellatrix posted revenues of $48.1 million with funds flow from
operations of $26.6 million ($0.25 per basic share) in the third
quarter of 2012. Compelling reductions in lease operating costs and G&A
to historically low levels facilitated net profit of $5.2 million
($0.05 per basic share) in the quarter before non-cash impairment loss,
unrealized gain (loss) on commodity contracts and gain (loss) on
property dispositions, net of associated deferred tax impacts.

The third quarter of 2012 was also defined by two elements outside of
our control, commodity prices and the weather.  Commodity, namely
natural gas, pricing had a significantly negative impact on revenues
and cash flow which the Company was able to partially counterbalance
with a combination of commodity hedges, increased production rates and
with abatements in lease operating costs and corporate G&A.  As it
concerns the weather, the Company was forced to acquiesce to the
unpredictable, protracted, radical weather conditions throughout West
Central Alberta, which resulted in meaningful production restrictions
occurring simultaneously with considerable delays in the third quarter
drilling program. However, as a direct result of industry leading
production performance from the wells drilled this year, Bellatrix
still expects to meet its 2012 average annual and exit production
guidance despite the aforementioned challenges.

Third quarter 2012 sales volumes averaged 15,503 boe/d (weighted 34% to oil, condensate and NGLs and 66% to natural gas). 
Production for the month of October, based on field estimates, equates
to 18,300 boe/d (weighted 34% to oil, condensate and NGLs and 66% to natural gas). 
Field production estimates for the end of October are 19,000 boe/d carrying the same weighting as the month’s average.

On September 20, 2012, Bellatrix received approval for listing of its
common shares on the NYSE MKT, and its common shares commenced trading
on September 24, 2012 under the symbol “BXE”. Bellatrix is pleased to
obtain a listing on the NYSE MKT and believes that it will result in
improved liquidity for all of Bellatrix’s shareholders and greater
future access to U.S. capital markets.

Operational highlights for the three and nine months ended September 30,
2012 include:

        --  During the first nine months of 2012, Bellatrix posted a 100%
            success rate drilling and/or participating in 24 gross (20.15
            net) wells resulting in 18 gross (15.15 net) Cardium oil wells,
            2.0 gross (2.0 net) Cardium condensate rich gas wells, 1.0
            gross (1.0 net) Duvernay gas well and 3.0 gross (2.0 net)
            Notikewin/Falher liquids rich gas wells. Bellatrix drilled 9
            gross (7.71 net) wells consisting of 7 gross (6.21 net) Cardium
            oil wells and 2 gross (1.5 net) liquids rich Notikewin/Falher
            gas wells in the third quarter of 2012.

        --  In the Brazeau area of West Central Alberta, the Company
            recently completed a long reach Cardium horizontal oil well
            (50% WI) to a total depth of 5,014 m with a 2,767 m horizontal
            leg.   Average production volumes over the initial 30 days of
            production, based on field estimates, equated to 1,062 boe/d,
            70% oil and liquids with 30% gas.

        --  The average sales volumes for Q3 2012 were negatively affected
            by protracted spring breakup conditions, scheduled plant
            turnarounds, a series of intense localized storms resulting in
            an unusually high number of occurrences of unscheduled downtime
            and prolonged wet conditions delaying the third quarter
            drilling, completion and tie-in program. Power outages caused
            by power poles being struck by lightning, hail and intense rain
            shorted out transformers.  In addition a violent rainstorm
            shorted out electrical panels that created significant downtime
            for a major midstream operator that processes a portion of our
            production. However, Bellatrix continues to expect it will meet
            its previously announced 2012 calendar year guidance of average
            daily production of 16,500 to 17,000 boe/d and an exit rate of
            19,000 boe/d to 19,500 boe/d.

        --  Q3 2012 sales volumes averaged 15,503 boe/d (weighted 34% to
            oil, condensate and NGLs and 66% to natural gas).  This
            represents a 31% increase from the third quarter 2011 average
            sales volumes of 11,837 boe/d and a 6% decrease from second
            quarter 2012 average sales volumes of 16,569 boe/d.

        --  Production expenses plummeted to a new low of $7.96 per boe in
            the third quarter as a direct result of the Company staff's
            dedication to the long-term corporate strategic goal of being a
            low cost operator.

            To see the Operating Costs per BOE graph, please click,

http://files.newswire.ca/958/BellatrixGraph.pdf

        --  In the third quarter of 2012 the Company spent $39.8 million on
            capital projects which included the aforementioned drilling
            program coupled with commissioning a 30 mmcf/d compression
            facility in the Ferrier area, installation of 7.2 miles of a 10
            inch high pressure gas line with a 4 inch condensate line and a
            2 inch fuel gas line, a total of 14.3 miles of 10 and 8 inch
            gathering system trunk lines and 4.5 miles of 6 inch gathering
            system lines to tie in the wells drilled in the quarter.

        --  An initial capital budget of $180 million has been set for
            fiscal 2013. Based on the timing of proposed expenditures,
            downtime for anticipated plant turnarounds, resolution of
            infrastructure constraints and normal production declines,
            execution of the 2013 budget is anticipated to provide 2013
            average daily production of approximately 20,000 boe/d to
            21,000 boe/d and an exit rate of approximately 21,500 boe/d to
            22,500 boe/d.

        --  During Q3 2012, Bellatrix closed on the disposition of a minor
            non-core property interest in the Wainwright area, Alberta for
            $4.25 million after adjustments.  This non-operated unit heavy
            oil property had production of approximately 59 boe/d. The net
            proceeds were initially used to reduce the Company's bank
            indebtedness and ultimately will be directed towards the
            development of its Cardium oil resource program.

        --  As at September 30, 2012, Bellatrix had approximately 197,428
            net undeveloped acres of land in Alberta, British Columbia and
            Saskatchewan.

Financial highlights for the three and nine months ended September 30,
2012 include:

        --  Q3 2012 revenue was $48.1 million, 2% lower than the $49.1
            million recorded in Q3 2011. The decrease in revenues between
            quarters was due to reduced liquids and natural gas prices
            experienced in Q3 2012, largely offset by the impact of
            increased sales volumes between periods. Revenue for the first
            nine months of 2012 was $157.0 million, up 10% from $143.1
            million in the same period in 2011.

        --  Funds flow from operations for Q3 2012 was $26.6 million ($0.25
            per basic share), up 11% from $24.0 million ($0.22 per basic
            share) in Q3 2011, in spite of the lower commodity prices
            experienced in Q3 2012.  Funds flow from operations for the
            first nine months of 2012 was $81.2 million ($0.76 per basic
            share), up 27% from $64.1 million ($0.62 per basic share) in
            the same period in 2011.

        --  For the three and nine months ended September 30, 2012, net
            profit before non-cash impairment loss, unrealized gain (loss)
            on commodity contracts and gain (loss) on property
            dispositions, net of associated deferred tax impacts, was $5.2
            million and $14.4 million, compared to $4.2 million and $9.2
            million in 2011 periods, respectively.

        --  The net profit for the first nine months of 2012 was $18.5
            million, inclusive of non-cash impairment loss, unrealized gain
            (loss) on commodity contracts and gain (loss) on property
            dispositions, net of associated deferred tax impacts, compared
            to a net profit of $7.6 million in the same period in 2011.

        --  The Company posted a net loss for Q3 2012 of $0.6 million
            inclusive of non-cash impairment loss, unrealized gain (loss)
            on commodity contracts and gain (loss) on property
            dispositions, net of associated deferred tax impacts, compared
            to a net profit of $0.8 million for Q3 2011.

        --  Crude oil, condensate and NGLs produced 71% and 75% of revenue
            for the three and nine month periods ended September 30, 2012,
            respectively.

        --  Production expenses for Q3 2012 fell to $7.96/boe ($11.4
            million), compared to $11.71/boe ($12.7 million) for Q3 2011
            and $8.80/boe ($13.3 million) for Q2 2012.  The decrease was
            due to increased production which is a result of 2011 and 2012
            drilling in areas with lower production expenses, as well as
            reduced processing fees in certain areas and continued field
            optimization projects.

        --  Operating netbacks after including risk management for Q3 2012
            were $22.13/boe, down from $26.09/boe in Q3 2011.  Operating
            netbacks before risk management for Q3 2012 were $18.29/boe,
            down from $23.89/boe in Q3 2011 and up from $16.42/boe in Q2
            2012.  The decreased netback for Q3 2012 compared to Q3 2011
            was primarily the result of reduced commodity prices, despite a
            reduction in transportation, royalties and production
            expenses.  The Q3 2012 netback reflects slightly increased
            overall commodity prices and reduced expenses compared to Q2
            2012.

        --  Bellatrix spent $39.8 million on capital projects during Q3
            2012 compared to $44.2 million in Q3 2011.   For the first nine
            months of 2012 as well as 2011, Bellatrix spent $132.3 million
            on capital projects.

        --  After dispositions Bellatrix spent $35.5 million on capital
            projects during Q3 2012 and $125.6 million for the first nine
            months of 2012.

        --  G&A expenses for Q3 2012 decreased to $2.38/boe ($3.4 million),
            compared to $3.14/boe ($3.4 million) for Q3 2011.  G&A expenses
            for the nine months ended September 30, 2012 were $2.26/boe
            ($9.9 million), compared to $2.81/boe ($8.6 million) in the
            same period of 2011.

        --  Total net debt as of September 30, 2012 was $166.2 million,
            including the liability component of convertible debentures.

        --  As at September 30, 2012, Bellatrix had $104.6 million drawn on
            its total $200 million credit facility.

OUTLOOK

During the fourth quarter of 2012 the Company expects to drill an
estimated 6 gross (4.85 net) Cardium oil wells which includes a second
long reach Cardium horizontal well (programmed to drill to a total
depth of 5,511 m including a horizontal length of 3,048 m) in the
Brazeau area.  With reductions in industry activity levels Bellatrix,
through negotiation, has been able to reduce our average cost base per well by 10% and expects to carry these savings through the winter of 2012/13.  The
Company is also moving to pad drilling wherever plausible in our continuing effort to bring down the capital cost per well
improving our already industry leading F & D costs and recycle ratios.

In an effort to mitigate the effects of the recent extended spring
breakup conditions which has had a significant impact on Q3 production
during the past couple of years, the Company is maturing drilling pads
that will provide access during this unpredictable inclement period for
drilling, completing and tie in of new wells.

Bellatrix continues to focus on growth by development of its core
Cardium and Notikewin/Falher assets utilizing its large inventory of
geological prospects. The Company has developed an inventory of 644 net remaining Cardium locations and 354 net Notikewin/Falher locations representing a net remaining investment of $3.95 billion based on current drilling costs. As at September 30, 2012, Bellatrix
has approximately 197,428 net undeveloped acres and including all opportunities has in excess of 1,525 net exploitation
drilling opportunities identified, with capital requirements of $6.98
billion, based on current drilling costs, representing over 40 years of drilling inventory based on current annual cash flow.  The Company continues to focus on
adding Cardium and Notikewin prospective lands.

As always we are dedicated to providing our shareholders with sustainable growth in value.

Raymond G. Smith, P. Eng.
President and CEO
November 7, 2012

MANAGEMENT’S DISCUSSION AND ANALYSIS

November 7, 2012 – 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 unaudited interim consolidated financial
statements of the Company for the three and nine months ended September
30, 2012, and the audited consolidated financial statements of the
Company for the years ended December 31, 2011 and 2010 and the related
Management’s Discussion and Analysis of financial results as disclosure
which is unchanged from such Management’s Discussion and Analysis may
not be repeated herein.  This commentary is based on information
available to, and is dated as of, November 7, 2012. The financial data
presented is in Canadian dollars, except where indicated otherwise. 

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.

INITIAL PRODUCTION RATES:  Initial production rates disclosed herein may
not necessarily be indicative of long-term performance or ultimate
recovery.

NON-GAAP MEASURES:  This Management’s Discussion and Analysis and the
accompanying report to shareholders contain the term “funds flow from
operations” which should not be considered an alternative to, or more
meaningful than “cash flow from operating activities” as determined in
accordance with generally accepted accounting principles (“GAAP”) as an
indicator of the Company’s performance. Therefore reference to funds
flow from operations or funds flow from operations per share may not be
comparable with the calculation of similar measures for other entities.
Management uses funds flow from operations to analyze operating
performance and leverage and considers funds flow from operations 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. 
The reconciliation between cash flow from operating activities and
funds flow from operations can be found in this Management’s Discussion
and Analysis.  Funds flow from operations per share is calculated using
the weighted average number of shares for the period.

This Management’s Discussion and Analysis and the accompanying report to
shareholders also contains other terms such as net profit before
non-cash impairment loss, unrealized gain (loss) on commodity
contracts, and gain (loss) on property dispositions, total net debt,
and operating netbacks, which are not recognized measures under GAAP. 
Net profit before non-cash impairment loss, unrealized gain (loss) on
commodity contracts, and gain (loss) on property dispositions is
calculated as net profit (loss) per the Consolidated Statement of
Comprehensive Income, excluding the non-cash impairment loss, net
unrealized gain or loss on commodity contracts, and gain or loss on
property dispositions net of the deferred tax impact on these
adjustments. Total net debt is calculated as long-term debt plus the
liability component of the convertible debentures and the net working
capital deficiency (excess) before short-term commodity contract assets
and liabilities and current finance lease obligations. Net debt is
calculated as long-term debt plus the net working capital deficiency
(excess) before short-term commodity contract assets and liabilities
and current finance lease obligations. Operating netbacks are
calculated by subtracting royalties, transportation, and operating
expenses from revenues before other income.  Management believes these
measures are useful supplemental measures of firstly, the total amount
of current and long-term debt and secondly, the amount of revenues
received after transportation, royalties and operating expenses. 
Readers are cautioned, however, that these measures should not be
construed as an alternative to other terms such as current and
long-term debt or net income determined in accordance with GAAP as
measures of performance. Bellatrix’s method of calculating these
measures may differ from other entities, and accordingly, may not be
comparable to measures used by other companies.

Additional information relating to the Company, including the
Bellatrix’s Annual Information Form, is available on SEDAR at
www.sedar.com.

FORWARD LOOKING STATEMENTS:  Certain information contained herein and in
the accompanying report to shareholders may contain forward looking
statements including management’s assessment of future plans and
operations, drilling plans and the timing thereof, commodity price risk
management strategies, 2012 capital expenditure budget, the nature of
expenditures and the method of financing thereof, expected 2012 average
production and exit rate, anticipated liquidity of the Company and
various matters that may impact such liquidity, expected 2012 operating
expenses and general and administrative expenses, 2013 capital
expenditure budget and the nature of capital expenditures and the
timing and method of financing thereof, expected 2013 average
production and exit rate, expected costs to satisfy drilling
commitments and method of funding drilling commitments, commodity
prices and expected volatility thereof, estimated amount and timing of
incurring decommissioning liabilities, plans to utilize pad drilling,
and use of funds from property dispositions may constitute
forward-looking statements under applicable securities laws and
necessarily involve risks including, without limitation, 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 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 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
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 effect Bellatrix’s operations and
financial results are included in reports on file with Canadian and US
securities regulatory authorities and may be accessed through the SEDAR
website (
www.sedar.com, and at Bellatrix’s website www.bellatrixexploration.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.

Overview and Description of the Business

Bellatrix Exploration Ltd. (“Bellatrix” or the “Company”) is a 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 in the provinces of Alberta, British Columbia
and Saskatchewan.

Bellatrix is the continuing corporation resulting from the
reorganization (the “Reorganization”) effective November 1, 2009
pursuant to a plan of arrangement involving, among others, True Energy
Trust (the “Trust” or “True”), Bellatrix and security holders of the
Trust.

Bellatrix’s common shares and convertible debentures are listed on the
Toronto Stock Exchange under the symbols BXE and BXE.DB.A,
respectively, and the common shares of Bellatrix trade on the NYSE MKT
under the symbol BXE.

Third Quarter 2012 Financial and Operational Results

Disposition

During the third quarter of 2012, Bellatrix closed on the disposition of
a minor non-core property interest in the Wainwright area, Alberta for
$4.25 million after adjustments.  This non-operated unit heavy oil
property had production of approximately 59 boe/d. The net proceeds
from the disposition were initially used to reduce the Company’s bank
indebtedness, and ultimately will be directed towards the development
of the Company’s Cardium oil resource program.

Sales Volumes

Sales volumes for the three months ended September 30, 2012 averaged
15,503 boe/d compared to 11,837 boe/d for the same period in 2011,
representing a 31% increase.  Total crude oil, condensate and NGLs
averaged approximately 34% of sales volumes for the three months ended
September 30, 2012, compared to 37% of sales volumes in the same period
in 2011.  Sales volumes for the nine months ended September 30, 2012
averaged 15,989 boe/d, compared to 11,194 boe/d for the same period in
2011, representing a 43% increase.  The increase in sales was primarily
a result of a year over year increased capital program and the
associated drilling success achieved in the Cardium and Notikewin
resource plays.  Capital expenditures for the nine months ended
September 30, 2012 were $132.3 million, compared to $132.3 million for
the same period in 2011.

Third quarter 2012 sales volumes decreased by 6% from second quarter
2012 average sales volumes of 16,569 boe/d. The average sales volumes
for the third quarter of 2012 were negatively affected by protracted
spring breakup conditions, scheduled plant turnarounds, a series of
intense localized storms resulting in an unusually high number of
occurrences of unscheduled downtime, and prolonged wet conditions
delaying the third quarter drilling, completion, and tie-in program.
Power outages caused by power poles being struck by lightning, hail,
and intense rain shorted out transformers.  In addition, a violent rain
storm shorted out electrical panels which created significant downtime
for a major midstream operator that processes a portion of the
Company’s production.  However, the Company continues to expect it will
meet its previously announced 2012 calendar year guidance of average
daily production of 16,500 to 17,000 boe/d, and an exit rate of 19,000
boe/d to 19,500 boe/d.


    Sales
    Volumes

                                         Three months       Nine months ended
                                                ended           September 30,
                                        September 30,

                                      2012       2011         2012       2011

    Light oil        (bbls/d)        3,672      3,365        4,025      3,245
    and
    condensate

    NGLs             (bbls/d)        1,240        803        1,377        684

    Heavy oil        (bbls/d)          292        245          311        313

    Total            (bbls/d)        5,204      4,413        5,713      4,242
    crude oil,
    condensate
    and NGLs

    Natural           (mcf/d)       61,796     44,546       61,654     41,710
    gas

    Total               (6:1)       15,503     11,837       15,989     11,194
    boe/d

During the first nine months of 2012, Bellatrix posted a 100% success
rate drilling and/or participating in 24 gross (20.15 net) wells,
resulting in 18 gross (15.15 net) Cardium oil wells, 2.0 gross (2.0
net) Cardium condensate-rich gas wells, 1.0 gross (1.0 net) Duvernay
gas well, and 3.0 gross (2.0 net) Notikewin/Falher liquids-rich gas
wells.  Bellatrix drilled 9 gross (7.71 net) wells consisting of 7
gross (6.21 net) Cardium oil wells and 2 gross (1.5 net) liquids-rich
Notikewin/Falher gas wells in the third quarter of 2012.

By comparison, Bellatrix drilled or participated in 42 gross (27.19 net)
wells during the first nine months of 2011, including 31 gross (22.35
net) oil wells and 11 gross (4.84 net) liquids-rich natural gas wells.

For the three months ended September 30, 2012, crude oil, condensate and
NGL sales volumes increased by approximately 18%, averaging 5,204 bbl/d
compared to 4,413 bbl/d in the third quarter of 2011. For the nine
months ended September 30, 2012, crude oil, condensate and NGL sales
volumes increased by approximately 35%, averaging 5,713 bbl/d compared
to 4,242 bbl/d in the same period in 2011.  The weighting towards crude
oil, condensate and NGLs decreased slightly in the third quarter of
2012 at 34%, compared to 37% in the same period in 2011. The reduction
in liquids weighting quarter over quarter was a direct result of adding
the dry gas producing Duvernay well during the second quarter of 2012,
as well as bringing on several other high-productivity gas wells.

The weighting towards crude oil, condensate and NGLs for the nine months
ended September 30, 2012 was 36%, compared to 38% for the same period
in 2011.

Sales of natural gas averaged 61.8 Mmcf/d for the three months ended
September 30, 2012, compared to 44.5 Mmcf/d in the same period in 2011,
an increase of approximately 39%. The weighting towards natural gas
sales volumes averaged approximately 66% for the third quarter of 2012,
compared to 63% in the 2011 third quarter.  For the nine months ended
September 30, 2012, sales of natural gas averaged 61.7 Mmcf/d, an
increase of approximately 48% from average sales volumes of 41.7 Mmcf/d
realized in the comparative 2011 period.

For the remainder of 2012, Bellatrix will continue to be active in
drilling its two core resource plays, the Cardium oil and Notikewin
condensate-rich gas, utilizing horizontal drilling multi-fracturing
technology. The Company’s 2012 capital expenditure budget is between
$140 to $150 million.  Based on the timing of proposed expenditures,
downtime for anticipated plant turnarounds, resolution of
infrastructure constraints and normal production declines, execution of
the 2012 budget is anticipated to provide average daily production of
approximately 16,500 to 17,000 boe/d.  The Company is maintaining its
previously announced 2012 exit rate guidance of approximately 19,000
boe/d to 19,500 boe/d.

Commodity Prices


    Average
    Commodity
    Prices

                                 Three months ended                  Nine months ended
                                      September 30,                      September 30,

                                                  %                                  %
                         2012       2011     Change         2012       2011     Change

    Exchange
    rate
    (US$/CDN$)         1.0053     1.0197        (1)       0.9981     1.0224        (2)

    Crude oil:                                                                        

    WTI
    (US$/bbl)           92.20      89.54          3        96.16      95.48          1

    Edmonton par
    - light oil
    ($/bbl)             84.79      92.45        (8)        87.29      94.32        (7)

    Bow River -
    medium/heavy
    oil ($/bbl)         72.51      71.90          1        76.50      75.25          2

    Hardisty
    Heavy -
    heavy oil
    ($/bbl)             58.08      62.11        (6)        64.69      66.23        (2)

    Bellatrix's
    average
    prices
    ($/bbl)                                                                           

      Light
      crude oil
      and
      condensate        84.98      88.91        (4)        87.74      91.42        (4)

      NGLs              28.62      51.74       (45)        38.90      53.10       (27)

      Heavy
      crude oil         63.95      64.19          -        69.17      66.13          5

      Total
      crude oil
      and NGLs          70.37      80.78       (13)        74.96      83.37       (10)

      Total
      crude oil
      and NGLs
      (including
      risk
      management
      (1))              70.72      82.38       (14)        72.83      80.85       (10)

    Natural gas:                                                                      

    NYMEX
    (US$/mmbtu)          2.89       4.05       (29)         2.58       4.21       (39)

    AECO daily
    index
    (CDN$/mcf)           2.28       3.66       (38)         2.11       3.76       (44)

    AECO monthly
    index
    (CDN$/mcf)           2.19       3.72       (41)         2.18       3.74       (42)

    Bellatrix's
    average
    price
    ($/mcf)              2.45       3.91       (37)         2.26       3.97       (43)

    Bellatrix's
    average
    price
    (including
    risk
    management
    (1)) ($/mcf)         3.38       4.33       (22)         2.96       4.23       (30)

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

For light oil and condensate, Bellatrix recorded an average $84.98/bbl
before commodity price risk management contracts during the third
quarter of 2012, 4% lower than the average price received in the
comparative 2011 period.  In comparison, the Edmonton par price
decreased by 8% over the same period.  For light oil and condensate,
Bellatrix recorded an average $87.74/bbl before commodity price risk
management contracts during the nine months ended September 30, 2012,
4% lower than the average price received in the comparative 2011
period.  In comparison, the Edmonton par price decreased by 7% over the
same period.  The average WTI crude oil benchmark price remained
relatively unchanged in the first nine months of 2012 compared to the
same period in 2011.  The average US$/CDN$ foreign exchange rate was
0.9981 for the nine months ended September 30, 2012, a decrease of 2%
compared to an average rate of 1.0224 in the same period in 2011.

For NGLs, Bellatrix recorded an average $28.62/bbl during the third
quarter of 2012, a 45% decrease from the $51.74/bbl received in the
comparative 2011 period.  For the nine months ended September 30, 2012,
Bellatrix received an average NGL price of $38.90/bbl, a 27% decrease
from the $53.10/bbl received in the comparative 2011 period.  The
decrease in NGL pricing between the 2012 and 2011 periods is largely
attributable to changes in NGL market supply conditions between the
periods.

For heavy crude oil, Bellatrix received an average price before
commodity risk management contracts of $63.95/bbl in the 2012 third
quarter, relatively consistent with prices realized in the third
quarter of 2011. For the nine months ended September 30, 2012,
Bellatrix received an average price of $69.17/bbl for heavy crude oil,
a 5% increase when compared to the same period in 2011. In comparison,
the Bow River reference price increased by 1%, and the Hardisty Heavy
reference price decreased by 6% between the third quarter of 2011 and
the third quarter of 2012.  Between the first nine months of 2011 and
the first nine months of 2012, the Bow River reference price increased
by 2%, and the Hardisty Heavy reference price decreased by 2%.  The
majority of Bellatrix’s heavy crude oil density ranges between 11 and
16 degrees API, consistent with the Hardisty Heavy reference price.

Bellatrix’s natural gas sales are priced with reference to the daily or
monthly AECO indices. During the third quarter of 2012, the AECO daily
reference price decreased by 38%, and the AECO monthly reference price
decreased by approximately 41% compared to the third quarter of 2011.
Bellatrix’s natural gas average sales price before commodity price risk
management contracts for the third quarter of 2012 decreased by 37%
compared to the same period in 2011.  During the nine months ended
September 30, 2012, the AECO daily reference price decreased by
approximately 44% and the AECO monthly reference price decreased by
approximately 42%, compared to the nine months ended September 30,
2011.  Bellatrix’s natural gas average sales price before commodity
price risk management contracts for the nine months ended September 30,
2012 decreased by 43% compared to the same period in 2011.  Bellatrix’s
natural gas average price after including commodity price risk
management contracts for the three and nine months ended September 30,
2012 was $3.38/mcf and $2.96/mcf, compared to $4.33/mcf and $4.23/mcf
for the three and nine months ended September 30, 2011, respectively.

Revenue

Revenue before other income, royalties and commodity price risk
management contracts for the three months ended September 30, 2012 was
$47.6 million, 2% lower than the $48.8 million in the third quarter of
2011. The decrease in revenues between quarters was due to reduced
liquids and natural gas prices experienced in the third quarter of
2012, largely offset by the impact of increased sales volumes between
the periods.  Revenue before other income, royalties and commodity
price risk management contracts for the nine month period ended
September 30, 2012 was $155.6 million, 10% higher than the $141.8
million realized in the comparative 2011 period.

Revenue before other income, royalties and commodity price risk
management contracts for crude oil and NGLs for the three and nine
months ended September 30, 2012 increased from the comparative 2011
periods by approximately 3% and 21%, respectively, resulting from
higher sales volumes, partially offset by lower light crude oil,
condensate and NGL prices when compared to the same periods in 2011. 
In the third quarter of 2012, total crude oil, condensate and NGL
revenues contributed 71% of total revenue (before other) compared to
67% in the same period in 2011.  For the nine months ended September
30, 2012, total crude oil, condensate and NGL revenues contributed 75%
of total revenue (before other), compared to 68% in the same period in
2011. Light crude oil, condensate and NGL revenues in the three and
nine months ended September 30, 2012 comprised 95% of total crude oil,
condensate and NGL revenues (before other) for those periods, compared
to 96% and 94% composition realized in the three month and nine month
periods ended September 30, 2011, respectively.

Natural gas revenue before other income, royalties and commodity price
risk management contracts for the third quarter of 2012 decreased by
approximately 13% compared to the third quarter of 2011 as a result of
a 37% decrease in realized gas prices before risk management, offset by
an approximate 39% increase in sales volumes between the periods.
Natural gas revenue before other income, royalties and commodity price
risk management contracts for the first nine months of 2012 decreased
by approximately 15% compared to the nine months ended September 30,
2011 as a result of a 43% decrease in realized gas prices before risk
management offset by an approximate 48% increase in sales volumes
between the periods.


                             Three months ended           Nine months ended
                                  September 30,               September 30,

    ($000s)                 2012           2011          2012          2011

    Light crude           28,706         27,527        96,766        80,987
    oil and
    condensate

    NGLs                   3,264          3,822        14,676         9,920

    Heavy oil              1,724          1,443         5,886         5,662

    Crude oil             33,694         32,792       117,328        96,569
    and NGLs

    Natural gas           13,914         16,022        38,239        45,191

    Total                 47,608         48,814       155,567       141,760
    revenue
    before
    other

    Other (1)                518            331         1,464         1,364

    Total                 48,126         49,145       157,031       143,124
    revenue
    before
    royalties
    and risk
    management

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

Commodity Price Risk Management

The Company has a formal commodity price risk management policy which
permits management to use specified price risk management strategies
including fixed price contracts, collars and the purchase of floor
price options and other derivative financial instruments and physical
delivery sales contracts to reduce the impact of price volatility for a
maximum of eighteen 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 measure of stability to
funds flow from operations, 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.

A summary of the financial commodity price risk management volumes and
average prices by quarter currently outstanding as of November 7, 2012
is shown in the following tables:

Natural gas 


    Average
    Volumes
    (GJ/d)

                                                                            Q4
                                                                          2012

    Fixed                                                               13,478

    Average
    Price
    ($/GJ
    AECO C)

                                                                            Q4
                                                                          2012

    Fixed                                                                 3.52

Crude oil and liquids      


    Average Volumes
    (bbls/d)

                                                                   Q4 2012

    Call option                                                        833

    Fixed                                                            3,000

    Total bbls/d                                                     3,833

                               Q1 2013     Q2 2013     Q3 2013     Q4 2013

    Call option                  3,000       3,000       3,000       3,000

    Fixed                        1,500       1,500       1,500       1,500

    Total bbls/d                 4,500       4,500       4,500       4,500

    Average Price ($/bbl
    WTI)

                                                                   Q4 2012

    Call option (ceiling                                            110.00
    price) (US$/bbl)

    Fixed price                                                      92.30
    (CDN$/bbl)

                               Q1 2013     Q2 2013     Q3 2013     Q4 2013

    Call option (ceiling        110.00      110.00      110.00      110.00
    price) (US$/bbl)

    Fixed price                  94.50       94.50       94.50       94.50
    (CDN$/bbl)

Included in the above natural gas table are fixed price contracts of an
average of $4.10/GJ at 30,000 GJ/d from April 1, 2012 to October 31,
2012 which were funded by selling call options of 3,000 bbl/d at
US$110.00 for the 2013 calendar year.

As of September 30, 2012, the fair value of Bellatrix’s outstanding
commodity contracts is a net unrealized liability of $1.1 million as
reflected in the financial statements.  The fair value or
mark-to-market value of these contracts is based on the estimated
amount that would have been received or paid to settle the contracts as
at September 30, 2012 and will be different from what will eventually
be realized.  Changes in the fair value of the commodity contracts are
recognized in the Consolidated Statements of Comprehensive Income
within the financial statements.

The following is a summary of the gain (loss) on commodity contracts for
the three and nine months ended September 30, 2012 and 2011 as
reflected in the Consolidated Statements of Comprehensive Income in the
financial statements:


    Commodity
    contracts

                           Crude
                             Oil                                         Q3
                               &         Natural       Q3 2012         2011
    ($000s)              Liquids             Gas         Total        Total

    Realized                 166           5,306         5,472        2,392
    cash gain
    (loss) on
    contracts

    Unrealized
    gain
    (loss) on
    contracts
    (1)                  (1,662)         (5,101)       (6,763)        8,556

    Total gain           (1,496)             205       (1,291)       10,948
    on
    commodity
    contracts

    Commodity
    contracts

                           Crude         Natural           YTD          YTD
                             Oil             Gas          2012         2011
                               &                         Total        Total
    ($000s)              Liquids

    Realized             (3,326)          11,779         8,453           75
    cash gain
    (loss) on
    contracts

    Unrealized
    gain
    (loss) on
    contracts
    (1)                   11,053         (1,560)         9,493       10,776

    Total gain             7,727          10,219        17,946       10,851
    on
    commodity
    contracts

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

Royalties

For the three months ended September 30, 2012, total royalties were $8.9
million compared to $8.6 million incurred in the third quarter of
2011.  Overall royalties as a percentage of revenue (after
transportation costs) in the third quarter of 2012 were 19%, compared
with 18% in the 2011 third quarter.  For the nine months ended
September 30, 2012, total royalties were $26.9 million compared to
$25.9 million incurred in the same period in 2011.  Overall royalties
as a percentage of revenue (after transportation costs) for the nine
months ended September 30, 2012 were 18%, compared with 19% in the same
period in 2011.

The Company’s heavy oil properties consist of principally the Frog Lake
Alberta assets which are subject to high crown royalty rates. Certain
light oil wells are now incurring higher royalty rates as they come off
the initial royalty incentive rates.  The Company’s royalty percentage
for natural gas royalties continues to decline due to increased
production from recently drilled wells which take advantage of Alberta
royalty incentive programs.


    Royalties by               Three months ended         Nine months ended
    Commodity Type                  September 30,             September 30,

    ($000s, except
    where noted)                2012         2011         2012         2011

    Light crude oil,
    condensate and
    NGLs                       7,378        6,353       24,510       16,942

      $/bbl                    16.33        16.57        16.56        15.80

      Average light
      crude oil,
      condensate and
        NGLs royalty
      rate (%)                    24           21           22           19

    Heavy Oil                    837          418        2,775        2,642

      $/bbl                    31.16        18.54        32.57        30.92

      Average heavy
      oil royalty
      rate (%)                    51           29           49           47

    Natural Gas                  664        1,815        (367)        6,338

      $/mcf                     0.12         0.44       (0.02)         0.56

      Average
      natural gas
      royalty rate
      (%)                          5           12          (1)           15

    Total                      8,879        8,586       26,918       25,922

    $/boe                       6.23         7.88         6.14         8.48

    Average total
    royalty rate (%)              19           18           18           19

    Royalties by Type                                                                         

                                                             Three months         Nine months ended
                                                                    ended             September 30,
                                                            September 30,

    ($000s)                                              2012        2011         2012         2011

    Crown royalties                                     2,744       2,776        8,663        9,461

    Indian Oil and Gas Canada royalties                 1,907       2,763        4,802        6,089

    Freehold & GORR                                     4,228       3,047       13,453       10,372

    Total                                               8,879       8,586       26,918       25,922

    Expenses                                                             

                                  Three months ended         Nine months ended
                                       September 30,             September 30,

    ($000s)                        2012         2011         2012         2011

    Production                   11,360       12,748       37,938       36,226

    Transportation                1,282        1,462        3,760        4,138

    General and                   3,397        3,423        9,882        8,590
    administrative

    Interest and
    financing
    charges(1)                    2,476        1,730        7,006        5,299

    Share-based                     945          568        2,505        2,083
    compensation

((1) )Does not include financing charges in relation to the Company’s
accretion of decommissioning liabilities.


    Expenses per
    boe

                                           Three months            Nine months
                                                  ended                  ended
                                          September 30,          September 30,

    ($ per boe)                        2012        2011       2012        2011

    Production                         7.96       11.71       8.66       11.85

    Transportation                     0.90        1.34       0.86        1.35

    General and                        2.38        3.14       2.26        2.81
    administrative

    Interest and                       1.74        1.59       1.60        1.73
    financing
    charges

    Share-based                        0.66        0.52       0.57        0.68
    compensation

Production Expenses

For the three and nine months ended September 30, 2012, production
expenses totaled $11.4 million ($7.96/boe) and $37.9 million
($8.66/boe), respectively, compared to $12.7 million ($11.71/boe) and
$36.2 million ($11.85/boe) recorded in the same periods in 2011.  For
the three months ended September 30, 2012, production expenses
decreased overall and on a per boe basis when compared to the same
period in 2011.  The decrease in production expenses on a boe basis in
the 2012 third quarter is primarily due to increased production, which
is a result of drilling in both 2011 and the first nine months of 2012
in areas with lower production expenses, as well as reduced processing
fees in certain areas and continued field optimization projects.

Bellatrix is targeting operating costs of approximately $54.0 million
($8.75/boe) for the 2012 year in total, which is a reduction from the
$11.53/boe operating costs incurred for the 2011 year.  This is based
upon assumptions of estimated 2012 average production of approximately
16,500 boe/d to 17,000 boe/d, continued field optimization work and
planned capital expenditures in producing areas which are anticipated
to have lower operating costs.


    Production Expenses by Commodity Type                                                            

                                                           Three months ended             Nine months ended
                                                                September 30,                 September 30,

    ($000s, except where noted)                           2012           2011          2012            2011

    Light crude oil, condensate and NGLs                 4,745          5,238        15,375          14,553

      $/bbl                                              10.50          13.66         10.39           13.57

    Heavy oil                                              373            782         1,268           2,016

      $/bbl                                              13.88          34.69         14.88           23.59

    Natural gas                                          6,242          6,728        21,295          19,657

      $/mcf                                               1.10           1.64          1.26            1.73

    Total                                               11,360         12,748        37,938          36,226

      $/boe                                               7.96          11.71          8.66           11.85

    Total                                               11,360         12,748        37,938          36,226

    Processing and other third party income
    (1)                                                  (518)          (331)       (1,464)         (1,364)

    Total after deducting processing and
    other
    third party income                                  10,842         12,417        36,474          34,862

    $/boe                                                 7.60          11.40          8.33           11.41

    (1)  Processing and other third party income is included within
         petroleum and natural gas sales on the
         Consolidated Statements of Comprehensive Income.

Transportation

Transportation expenses for the three and nine months ended September
30, 2012 were $1.3 million ($0.90/boe) and $3.8 million ($0.86/boe),
respectively, compared to $1.5 million ($1.34/boe) and $4.1 million
($1.35/boe) in the same periods in 2011. The decrease in per boe costs
is reflective of a higher volume of oil production being shipped
through pipelines rather than through trucking at a higher cost, as
well as reduced gas transportation fees resulting from the acquisition
of an ownership interest in certain gathering and processing facilities
in the first half of 2011.

Operating Netback


    Field Operating Netback - Corporate (before risk management)

                                       Three months ended              Nine months ended
                                            September 30,                  September 30,

    ($/boe)                          2012            2011           2012            2011

    Sales                           33.38           44.82          35.51           46.39

    Transportation                 (0.90)          (1.34)         (0.86)          (1.35)

    Royalties                      (6.23)          (7.88)         (6.14)          (8.48)

    Production                     (7.96)         (11.71)         (8.66)         (11.85)
    expense

    Field                           18.29           23.89          19.85           24.71
    operating
    netback

For the third quarter of 2012, corporate field operating netback (before
commodity price risk management contracts) was $18.29/boe compared to
$23.89/boe in the third quarter of 2011.  The reduced netback was
primarily the result of reduced commodity prices, offset by reduced
transportation, royalty and production expenses.  After including
commodity price risk management contracts, the corporate field
operating netback for the third quarter of 2012 was $22.13/boe compared
to $26.09/boe in the 2011 third quarter. Per unit metrics including
risk management include realized gains or losses on commodity contracts
and exclude unrealized gains or losses on commodity contracts.

For the nine months ended September 30, 2012, corporate field operating
netback (before commodity price risk management contracts) was
$19.85/boe compared to $24.71/boe in the first nine months of 2011. 
The reduced netback was primarily the result of reduced commodity
prices, despite reductions in transportation, royalty and production
expenses.  After including commodity price risk management contracts,
the corporate field operating netback for the first nine months of 2012
was $21.78/boe compared to $24.72/boe in the same period in 2011.


    Field Operating Netback - Crude Oil, Condensate and NGLs (before risk management)

                                                Three months ended               Nine months ended
                                                     September 30,                   September 30,

    ($/bbl)                                   2012            2011            2012            2011

    Sales                                    70.37           80.77           74.96           83.39

    Transportation                          (1.40)          (1.96)          (1.13)          (1.99)

    Royalties                              (17.16)         (16.68)         (17.43)         (16.91)

    Production                             (10.69)         (14.83)         (10.63)         (14.31)
    expense

    Field                                    41.12           47.30           45.77           50.18
    operating
    netback

Field operating netback for crude oil, condensate and NGLs averaged
$41.12/bbl for the three months ended September 30, 2012, a decrease of
13% from $47.30/bbl realized in the comparative 2011 period. In the
third quarter of 2012, Bellatrix’s combined crude oil and NGLs average
price (before risk management) decreased by approximately 13% compared
to the third quarter of 2011.  The commodity price decrease in
conjunction with a slight increase in royalties was partially offset by
reductions in production, and transportation expenses, resulting in the
overall decrease to the field operating netback for crude oil,
condensate and NGLs.  After including commodity price risk management
contracts, field operating netback for crude oil and NGLs for the three
months ended September 30, 2012 decreased to $41.48/boe compared to
$48.91/boe in the same period in 2011.

Field operating netback for crude oil, condensate and NGLs averaged
$45.77/bbl for the nine months ended September 30, 2012, a decrease of
9% from $50.18/bbl realized in the comparative 2011 period. In the
first nine months of 2012, Bellatrix’s combined crude oil and NGLs
average price (before risk management) decreased by approximately 10%
compared to the same period in 2011.  The commodity price decrease was
partially offset by reductions in production, royalties, and
transportation expenses, resulting in the overall decrease to the field
operating netback for crude oil, condensate and NGLs.  After including
commodity price risk management contracts, field operating netback for
crude oil and NGLs for the nine months ended September 30, 2012
decreased to $43.64/boe compared to $47.65/boe in the same period in
2011.


    Field Operating Netback - Natural Gas (before risk management)

                                          Three months ended             Nine months ended
                                               September 30,                 September 30,

    ($/mcf)                              2012           2011           2012           2011

    Sales                                2.45           3.91           2.26           3.97

    Transportation                     (0.11)         (0.16)         (0.12)         (0.16)

    Royalties                          (0.12)         (0.44)           0.02         (0.56)

    Production                         (1.10)         (1.64)         (1.26)         (1.73)
    expense

    Field                                1.12           1.67           0.90           1.52
    operating
    netback

Field operating netback for natural gas in the third quarter of 2012
year decreased by 33% to $1.12/mcf, compared to $1.67/mcf realized in
the third quarter of 2011, reflecting depressed natural gas prices,
offset somewhat by lower production, transportation and royalty
expenses.  After including commodity price risk management contracts,
field operating netback for natural gas for the three months ended
September 30, 2012 increased to $2.06/mcf, which compared to $2.09/mcf
in the third quarter of 2011.

Field operating netback for natural gas in the nine months ended
September 30, 2012 year decreased by 41% to $0.90/mcf, compared to
$1.52/mcf realized in the third quarter of 2011, reflecting depressed
natural gas prices, offset somewhat by lower production, transportation
and royalty expenses.  After including commodity price risk management
contracts, field operating netback for natural gas for the nine months
ended September 30, 2012 increased to $1.60/mcf, which compared to
$1.79/mcf in the same period in 2011.

General and Administrative

General and administrative (“G&A”) expenses (after capitalized G&A and
recoveries) for the three and nine month periods ended September 30,
2012 were $3.4 million ($2.38/boe) and $9.9 million ($2.26/boe),
respectively, compared to $3.4 million ($3.14/boe) and $8.6 million
($2.81/boe) for the same periods in 2011.  G&A expenses remained
consistent on an overall basis in the third quarter of 2012 compared to
the same period in 2011. For the nine months ended September 30, 2012,
G&A expenses were slightly higher in comparison to the same period in
2011 which is reflective of higher compensation and base costs and
lower recoveries, offset partially by higher capitalized G&A.  On a boe
basis, G&A for the third quarter of 2012 decreased by approximately 24%
when compared to the third quarter of 2011. The decrease was primarily
as a result of higher average sales volumes in the 2012 period, despite
higher overall costs.

For 2012, the Company is anticipating G&A expenses after capitalization
to be approximately $14.0 million ($2.27/boe) based on estimated 2012
average production volumes of approximately 16,500 boe/d to 17,000
boe/d.  This compares to actual 2011 G&A costs of $2.83/boe.


    General and
    Administrative
    Expenses

                                Three months ended               Nine months ended
                                     September 30,                   September 30,

    ($000s, except              2012          2011            2012            2011
    where noted)

    Gross expenses             5,111         4,419          15,104          13,547

    Capitalized              (1,045)         (867)         (3,206)         (2,620)

    Recoveries                 (669)         (129)         (2,016)         (2,337)

    G&A expenses               3,397         3,423           9,882           8,590

    G&A expenses,               2.38          3.14            2.26            2.81
    per unit
    ($/boe)

Interest and Financing Charges

Bellatrix recorded $2.5 million and $7.0 million of interest and
financing charges related to bank debt and its debentures for the three
and nine month periods ended September 30, 2012, compared to $1.7
million and $5.3 million in the three and nine month periods ended
September 30, 2011, respectively. The increase in interest and
financing charges between these periods was primarily due to greater
interest and accretion charges in relation to the Company’s outstanding
debentures in conjunction with higher interest charges related to the
Company’s long-term debt as the Company carried a higher average debt
balance in the 2012 periods compared to the same periods in 2011. 
Bellatrix’s total net debt at September 30, 2012 of $166.2 million
includes the $50.3 million liability portion of its $55 million
principal amount of 4.75% convertible unsecured subordinated debentures
(the “4.75% Debentures”), $104.6 million of bank debt and the net
balance of the working capital deficiency. Total net debt of $101.3
million as of September 30, 2011 reflected a temporary reduction in
bank indebtedness following the completion of a $55 million equity
issuance in May 2011. The 4.75% Debentures have a maturity date of
April 30, 2015.


    Interest and
    Financing
    Charges (1)

                            Three months ended           Nine months ended
                                 September 30,               September 30,

    ($000s,                 2012          2011          2012          2011
    except where
    noted)

    Interest and           2,476         1,730         7,006         5,299
    financing
    charges

    Interest and            1.74          1.59          1.60          1.73
    financing
    charges
    ($/boe)

    (1) Does not include financing charges in relation to the Company's
        accretion of decommissioning liabilities

    Debt to
    Funds Flow
    from
    Operations
    Ratio                                                                   

                              Three months ended           Nine months ended
                                   September 30,               September 30,

    ($000s,
    except where
    noted)                    2012          2011          2012          2011

    Debt to
    funds flow
    from
    operations
    (1) ratio
    (annualized)
    (3)                                                                     

    Funds flow
    from
    operations
    (1)
    (annualized)           106,452        98,856       108,231        85,489

    Total net
    debt (2) at
    period end             166,219       101,336       166,219       101,336

    Total net
    debt to
    periods
    funds flow
    from
    operations
    ratio
    (annualized)
    (3)                       1.6x          1.1x          1.5x          1.2x

    Net debt (2)
    (excluding
    convertible
    debentures)
    at period
    end                    115,950        52,644       115,950        52,644

    Net debt to
    periods
    funds flow
    from
    operations
    ratio
    (annualized)
    (3)                       1.1x          0.6x          1.1x          0.6x

    Debt to
    funds flow
    from
    operations
    (1) ratio
    (trailing)
    (4)                                                                     

    Funds flow
    from
    operations
    (1)
    (trailing)             112,643        80,459       112,643        80,459

    Total net
    debt (2) to
    funds flow
    from
    operations
    (trailing)                1.5x          1.3x          1.5x          1.3x

    Net debt (2)
    (excluding
    convertible
    debentures)
    to funds
    flow
    from
    operations
    for the
    period                    1.0x          0.7x          1.0x          0.7x

    (1) As detailed previously in this Management's Discussion and
        Analysis, funds flow from operations is a term that
        does not have any standardized meaning under GAAP.  Funds flow from
        operations is calculated as cash flow from
        operating activities, less decommissioning costs incurred and
        changes in non-cash working capital incurred.  Refer
        to the reconciliation of cash flow from operating activities to
        funds flow from operations appearing elsewhere herein.

    (2) Net debt and total net debt are considered non-GAAP terms.  The
        Company's calculation of total net debt includes
        the liability component of convertible debentures and excludes
        deferred liabilities, long-term commodity contract
        liabilities, decommissioning liabilities, long-term finance lease
        obligation and the deferred tax liability.  Net debt and
        total net debt include the net working capital deficiency (excess)
        before short-term commodity contract assets and
        liabilities and current finance lease obligation.  Net debt also
        excludes the liability component of convertible debentures.
        Total net debt and net debt are non-GAAP measures; refer to the
        following reconciliation of total liabilities to total net
        debt and net debt.

    (3) Total net debt and net debt to periods funds flow from operations
        ratio (annualized) is calculated based upon third
        quarter funds flow from operations annualized.

    (4) Trailing periods funds flow from operations ratio annualized is
        based on the twelve-month periods ended September 30,
        2012 and September 30, 2011.

    Reconciliation of Total Liabilities to Total Net Debt and Net Debt

                                                      As at September 30,

    ($000s)                                           2012           2011

    Total liabilities per financial                257,600        185,463
    statements

      Current liabilities included                (54,967)       (54,511)
      within working capital
      calculation 

      Deferred liability -                               -          (434)
      flow-through shares

      Commodity contract liability                   (692)          (199)

      Decommissioning Liabilities                 (42,784)       (42,918)

      Finance lease obligation                     (4,246)        (1,330)

    Working Capital                                                      

      Current assets                              (42,705)       (45,445)

      Current liabilities                           54,967         54,511

      Current portion of finance                     (507)          (151)
      lease

      Net commodity contract asset                   (447)          6,350
      (liability)

                                                    11,308         15,265

    Total net debt                                 166,219        101,336

    Convertible debentures                        (50,269)       (48,692)

    Net debt                                       115,950         52,644

Share-Based Compensation

Non-cash share-based compensation expense for the three months ended
September 30, 2012 was an expense of $0.9 million compared to $0.6
million in the same period in 2011. The increase in non-cash
share-based compensation expense between the third quarter of 2011 and
the third quarter of 2012 is primarily a result of higher Deferred
Share Unit Plan expenses of $0.4 million, compared to a net recovery of
$0.1 million recognized in the comparative 2011 period which was the
result of the revaluation of outstanding Deferred Share Units to a
lower unit price for that quarter.

Non-cash share-based compensation expense for the nine months ended
September 30, 2012 was an expense of $2.5 million compared to $2.1
million in the same period in 2011. The overall increase in non-cash
share-based compensation expense between the first nine months of 2011
and the first nine months of 2012 is primarily a result of a larger
number of outstanding share options expensed during the period and
greater Deferred Share Unit Plan expenses of $0.8 million (2011: $0.6
million), offset partially by higher capitalized share-based
compensation of $1.2 million (2011: $0.9 million).

Depletion and Depreciation

Depletion and depreciation expenses for the three and nine month periods
ended September 30, 2012 were $18.0 million ($12.59/boe) and $57.1
million ($13.04/boe), compared to $15.8 million ($14.52/boe) and $45.8
million ($14.98/boe) recognized in the three and nine month periods
ended September 30, 2011, respectively.  For both the three and nine
month periods ended September 30, 2012, the decrease in depletion and
depreciation expense, on a per boe basis, was primarily a result of an
increase in the reserve base used for the depletion calculation,
partially offset by a higher cost base and increased future development
costs.

For the three months ended September 30, 2012 Bellatrix has included a
total of $371.9 million (2011: $159.8 million) for future development
costs in the depletion calculation and excluded from the depletion
calculation a total of $34.8 million (2011: $34.9 million) for
estimated salvage.


    Depletion
    and
    Depreciation

                                    Three months ended             Nine months ended
                                         September 30,                 September 30,

    ($000s,                        2012           2011           2012           2011
    except where
    noted)

    Depletion                    17,953         15,815         57,125         45,764
    and
    Depreciation

    Per unit                      12.59          14.52          13.04          14.98
    ($/boe)

Impairment of Assets

In accordance with IFRS, the Company calculates an impairment test when
there are indicators of impairment.  The impairment test is performed
at the asset or cash generating unit (“CGU”) level.  IAS 36 -
“Impairment of Assets” (“IAS 36″) is a one step process for testing and
measuring impairment of assets.  Under IAS 36, the asset or CGU’s
carrying value is compared to the higher of: value-in-use and fair
value less costs to sell.  Value in use is defined as the present value
of the future cash flows expected to be derived from the asset or CGU.

As at September 30, 2012, Bellatrix reviewed and determined there were
no impairment indicators requiring an impairment test to be performed.

When performed, the impairment test will be based upon the higher of
value-in-use and estimated fair market values for the Company’s
properties, including but not limited to an updated external reserve
engineering report which incorporates a full evaluation of reserves on
an annual basis or internal reserve updates at quarterly periods, and
the latest commodity pricing deck.  Estimating reserves is very
complex, requiring many judgments based on available 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 earnings as further information becomes available and as the
economic environment changes.

Income Taxes

Deferred income taxes arise from differences between the accounting and
tax basis of the Company’s assets and liabilities.  For the nine months
ended September 30, 2012, the Company recognized a deferred income tax
expense of $6.8 million compared to a deferred income tax expense of
$4.8 million in the first nine months of 2011.

At September 30, 2012, the Company had a total deferred tax asset
balance of $4.4 million.

At September 30, 2012, Bellatrix had approximately $560 million in tax
pools available for deduction against future income as follows:


    ($000s)                     Rate %              2012              2011

    Intangible
    resource
    pools:

      Canadian                     100            45,900            43,000
      exploration
      expenses

      Canadian                      30           375,200           322,000
      development
      expenses

      Canadian oil                  10            22,300            24,000
      and gas
      property
      expenses

      Foreign                       10               800             1,000
      resource
      expenses

    Attributed               (Alberta)            16,100            16,000
    Canadian                       100
    Royalty Income

    Undepreciated
    capital cost
    (1)                         6 - 55            86,300            79,000

    Non-capital                    100            10,000            10,000
    losses (expire
    through 2027)

    Financing                  20 S.L.             3,300             4,000
    costs

                                                 559,900           499,000

((1)) Approximately $80 million of undepreciated capital cost pools are class
41, which is claimed at a 25% rate.

Cash Flow from Operating Activities, Funds Flow from Operations and Net
Profit

As detailed previously in this MD&A, funds flow from operations is a
term that does not have any standardized meaning under GAAP.  Funds
flow from operations is calculated as cash flow from operating
activities before decommissioning costs incurred and changes in
non-cash working capital incurred.


    Reconciliation of Cash Flow from Operating Activities and Funds Flow from
    Operations

                                  Three months ended              Nine months ended
                                       September 30,                  September 30,

    ($000s)                     2012            2011           2012            2011

    Cash flow from            24,807          28,023         77,321          67,566
    operating
    activities 

    Decommissioning              196            (87)            559             383
    costs incurred

    Change in                  1,610         (3,972)          3,293         (3,832)
    non-cash
    working capital

    Funds flow from           26,613          23,964         81,173          64,117
    operations

Bellatrix’s cash flow from operating activities of $24.8 million ($0.23
per basic share and $0.22 per diluted share) for the three months ended
September 30, 2012 decreased approximately 11% from the $28.0 million
($0.26 per basic share and $0.24 per diluted share) generated in the
comparative 2011 period.  Bellatrix generated funds flow from
operations of $26.6 million ($0.25 per basic share and $0.23 per
diluted share) for the three months ended September 30, 2012, an
increase of 11% from $24.0 million ($0.22 per basic share and $0.21 per
diluted share) for the comparative 2011 period.

Bellatrix’s cash flow from operating activities of $77.3 million ($0.72
per basic share and $0.67 per diluted share) for the nine months ended
September 30, 2012 increased approximately 14% from the $67.6 million
($0.66 per basic share and $0.61 per diluted share) generated in the
comparative 2011 period.  Bellatrix generated funds flow from
operations of $81.2 million ($0.76 per basic share and $0.70 per
diluted share) for the nine months ended September 30, 2012, an
increase of 27% from $64.1 million ($0.62 per basic share and $0.58 per
diluted share) for the comparative 2011 period.

The increase between the three and nine month periods ended September
30, 2012 and the comparative 2011 periods was principally due to higher
net realized gains on the Company’s commodity risk management
contracts, despite lower operating netbacks due to significantly
reduced commodity prices and financing expenses experienced during the
2012 periods, and slightly higher general and administrative expenses
for the nine month period.

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

As previously noted in this MD&A, net profit before the unrealized gain
on commodity contracts and gain (loss) on property dispositions is a
non-GAAP measure. A reconciliation between this measure and net loss
per the Consolidated Statement of Comprehensive Income is provided
below.

For the three months ended September 30, 2012, net profit before
non-cash impairment loss, unrealized gain (loss) on commodity
contracts, and gain (loss) on property dispositions, net of associated
deferred tax impacts, was $5.2 million compared to a net profit of $4.2
million in the third quarter of 2011.  For the nine months ended
September 30, 2012, net profit before non-cash impairment loss,
unrealized gain (loss) on commodity contracts, and gain (loss) on
property dispositions, net of associated deferred tax impacts, was
$14.4 million compared to a net profit of $9.2 million in the nine
months ended September 30, 2011.


    Reconciliation of Net Profit (Loss) to Net Profit Before Non-Cash Impairment
    Loss, Unrealized Gain (Loss)
    on Commodity Contracts, and Gain (Loss) on Property Dispositions

                                  Three months ended                Nine months ended
                                       September 30,                    September 30,

    ($000s)                     2012            2011            2012             2011

    Net profit
    (loss) per
    financial
    statements                 (615)             820          18,520            7,648

    Items subject
    to reversal                                                                      

      Impairment
      loss on
      property,
      plant and
      equipment                    -          14,551               -           14,551

      Unrealized
      (gain) loss
      on commodity
      contracts                6,763         (8,556)         (9,493)         (10,776)

      Loss (gain)
      on property
      dispositions             1,035         (1,531)           4,063          (1,750)

      Deferred tax
      impact of
      above items            (1,950)         (1,116)           1,358            (506)

    Net profit
    before
    non-cash
    impairment
    loss,
    unrealized
    gain (loss) on
    commodity
    contracts, and
    gain (loss) on
    property
    dispositions               5,233           4,168          14,448            9,167

A net loss of $0.6 million ($0.01 per basic share and $0.01 per diluted
share) was recognized for the three months ended September 30, 2012,
compared to a net profit of $0.8 million ($0.01 per basic share and
$0.01 per diluted share) in the third quarter of 2011.  The net loss
recorded in the three months ended September 30, 2012 compared to the
net profit recognized for the same period in 2011 is primarily a
consequence of higher depletion and depreciation expense, an unrealized
loss on commodity contracts compared to an unrealized gain in the
comparative 2011 period, and a total net loss on property dispositions
compared to a net gain in the 2011 period, partially offset by higher
cash flows as noted above.

A net profit of $18.5 million ($0.17 per basic share and $0.17 per
diluted share) was recognized for the nine months ended September 30,
2012, compared to a net profit of $7.6 million ($0.07 per basic share
and $0.07 per diluted share) in the first nine months of 2011.  The net
profit recorded in the nine months ended September 30, 2012 compared to
the same period in 2011 is primarily a consequence of higher cash flows
as noted above, offset somewhat by a higher depletion and depreciation
expense, a total net loss on property dispositions compared to a minor
gain on property dispositions in the comparative 2011 period, and a
higher deferred tax expense.


    Cash Flow from Operating Activities, Funds Flow from Operations and Net Profit
    (Loss)

                                       Three months ended             Nine months ended
                                            September 30,                 September 30,

    ($000s,                           2012           2011           2012           2011
    except per
    share
    amounts)

    Cash flow                       24,807         28,023         77,321         67,566
    from
    operating
    activities

      Basic                           0.23           0.26           0.72           0.66
      ($/share)

      Diluted                         0.22           0.24           0.67           0.61
      ($/share)

    Funds flow                      26,613         23,964         81,173         64,117
    from
    operations

      Basic                           0.25           0.22           0.76           0.62
      ($/share)

      Diluted                         0.23           0.21           0.70           0.58
      ($/share)

    Net  profit                      (615)            820         18,520          7,648
    (loss)

      Basic                         (0.01)           0.01           0.17           0.07
      ($/share)

      Diluted                       (0.01)           0.01           0.17           0.07
      ($/share)

Capital Expenditures

Bellatrix invested $39.8 million and $132.3 million in capital projects
during the three and nine month periods ended September 30, 2012,
compared to $44.2 million and $132.3 million in the three and nine
month periods ended September 30, 2011, respectively.


    Capital
    Expenditures

                                  Three months ended               Nine months ended
                                       September 30,                   September 30,

    ($000s)                     2012            2011            2012            2011

    Lease
    acquisitions
    and retention              1,757           5,160           4,951          15,324

    Geological and
    geophysical                  254              72             296             390

    Drilling and
    completion
    costs                     28,286          34,762          98,424          96,855

    Facilities and
    equipment                  9,521           4,371          28,433          16,612

                              39,818          44,365         132,104         129,181

    Drilling
    incentive
    credits                        -           (272)               -           (827)

      Exploration
      and
      development
      (1)                     39,818          44,093         132,104         128,354

    Corporate (2)                 22              60             166             222

    Property
    acquisitions                   -              74              30           3,723

      Total
      capital
      expenditures
      - cash                  39,840          44,227         132,300         132,299

    Property
    dispositions -
    cash                     (4,325)         (4,140)         (6,670)         (4,181)

      Total net
      capital
      expenditures
      - cash                  35,515          40,087         125,630         128,118

    Other -
    non-cash (3)             (1,756)           3,457         (1,612)           4,410

    Total net
    capital
    expenditures              33,759          43,544         124,018         132,528

((1)) Excludes capitalized costs related to decommissioning liabilities
expenditures incurred during the period.
((2)) Corporate includes office furniture, fixtures and equipment.
((3)) Other includes non-cash adjustments for the current period’s
decommissioning liabilities and share based compensation.

During the first nine months of 2012, Bellatrix posted a 100% success
rate drilling and/or participating in 24 gross (20.15 net) wells,
resulting in 18 gross (15.15 net) Cardium oil wells, 2.0 gross (2.0
net) Cardium condensate-rich gas wells, 1.0 gross (1.0 net) Duvernay
gas well, and 3.0 gross (2.0 net) Notikewin/Falher liquids-rich gas
wells.  Bellatrix drilled 9 gross (7.71 net) wells consisting of 7
gross (6.21 net) Cardium oil wells and 2 gross (1.5 net) liquids-rich
Notikewin/Falher gas wells in the third quarter of 2012.

By comparison, Bellatrix drilled or participated in 42 gross (27.19 net)
wells during the first nine months of 2011, including 31 gross (22.35
net) oil wells and 11 gross (4.84 net) liquids-rich natural gas wells.

The $39.8 million capital program for the three months ended September
30, 2012 was financed from funds flow from operations and bank debt.

In the third quarter of 2012, the Company spent $39.8 million on capital
projects which included the aforementioned drilling program coupled
with commissioning a 30 mmcf/d compression facility in the Ferrier
area, installation of 7.2 miles of a 10 inch high-pressure gas line
with a 4 inch condensate line and a 2 inch fuel gas line, a total of
14.3 miles of 10 and 8 inch gathering system trunk lines, and 4.5 miles
of 6 inch gathering system lines to tie in the wells drilled in the
quarter.

The Company’s capital program for 2012 is between $140 and $150 million
funded from the Company’s cash flows and to the extent necessary, bank
indebtedness.  The 2012 capital budget is expected to be directed
primarily towards horizontal drilling and completions activities in the
Cardium and Notikewin areas.

Decommissioning Liabilities

At September 30, 2012, Bellatrix has recorded decommissioning
liabilities of $42.8 million, compared to $45.1 million at December 31,
2011, for future abandonment and reclamation of the Company’s
properties.  For the nine months ended September 30, 2012,
decommissioning liabilities decreased by a net $2.3 million as a result
of a reduction of $3.0 million for liabilities reversed on dispositions
and a $0.7 million reduction for changes in estimates, offset by $0.9
million incurred on property acquisitions and development activities
and $0.5 million as a result of charges for the unwinding of the
discount rates used for fair valuing the liabilities.  The $0.7 million
decrease as a result of changes in estimates is primarily due to a
discount rate variations at September 30, 2012 compared to December 31,
2011, in addition to other abandonment liability revisions.

Liquidity and Capital Resources

As an oil and gas business, 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 acquiring
additional reserves. To the extent Bellatrix is successful or
unsuccessful in these activities, cash flow could be increased or
reduced.

Bellatrix is focused on growing oil and natural gas production from its
diversified portfolio of existing and emerging resource plays in
Western Canada.  Bellatrix remains highly focused on key business
objectives of maintaining financial strength, optimizing capital
investments – attained through a disciplined approach to capital
spending, a flexible investment program and financial stewardship.
Natural gas prices are primarily driven by North American supply and
demand, with weather being the key factor in the short term.  Bellatrix
believes that natural gas represents an abundant, secure, long-term
supply of energy to meet North American needs.  Bellatrix’s results are
affected by external market and risk factors, such as fluctuations in
the prices of crude oil and natural gas, movements in foreign currency
exchange rates and inflationary pressures on service costs. Market
conditions have resulted in Bellatrix experiencing primarily downward
trends in crude oil pricing for 2012 compared to 2011, and a more
significant downward trend in natural gas pricing, although natural gas
prices have recently started to recover in 2012.

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 bank 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 operating debt covenants.  Bellatrix is fully
compliant with all of its operating debt covenants.

Bellatrix generally relies on operating cash flows and its credit
facilities to fund capital requirements and provide liquidity.  Future
liquidity depends primarily on cash flow generated from operations,
existing credit facilities and the ability to access debt and equity
markets.  From time to time, the Company accesses capital markets to
meet its additional financing needs and to maintain flexibility in
funding its capital programs.  There can be no assurance that future
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.

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 interest partners in the petroleum and natural gas
industry and are subject to normal industry credit risks.  Bellatrix
sells substantially all of its production to eight primary purchasers
under standard industry sale and payment terms.  The most significant
60 day exposure to a single counterparty is currently approximately
$10.2 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
reducing or mitigating its exposures to certain counterparties 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 joint venture
partners, marketers of its petroleum and natural gas production,
derivative counterparties and other parties.  In the event 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.

Total net debt levels of $166.2 million at September 30, 2012 have
increased by $46.9 million from $119.3 million at December 31, 2011,
primarily as a consequence of an increase in a working capital
deficiency and bank debt as the Company executed the first nine months
of its 2012 capital program. Total net debt of $101.3 million as of
September 30, 2011 reflected a temporary reduction in bank indebtedness
following the completion of a $55 million equity issuance in May 2011.
Total net debt includes the liability component of the 4.75% Debentures
and excludes unrealized commodity contract assets and liabilities,
deferred taxes, finance lease obligations, deferred liabilities and
decommissioning liabilities.

Funds flow from operations represents 67% of the funding requirements
for Bellatrix’s capital expenditures for the three months ended
September 30, 2012.

Effective May 25, 2012, the Company’s borrowing base was increased from
$170 million to $200 million through November 30, 2012 and the
revolving period of the credit facility was extended from June 26, 2012
to June 25, 2013.  The Company’s credit facilities consist of a $15
million demand operating facility provided by a Canadian bank and a
$185 million extendible revolving term credit facility provided by two
Canadian banks and a Canadian financial institution.  Amounts borrowed
under the credit facility bear interest at a floating rate based on the
applicable Canadian prime rate, U.S. base rate or LIBOR margin rate,
plus between 1.00% and 3.50%, depending on the type of borrowing and
the Company’s debt to cash flow ratio.  The credit facilities are
secured by a $400 million debenture containing a first ranking charge
and security interest.  Bellatrix has provided a negative pledge and
undertaking to provide fixed charges over major petroleum and natural
gas reserves in certain circumstances.  A standby fee is charged of
between 0.50% and 0.875% on the undrawn portion of the credit
facilities, depending on the Company’s debt to cash flow ratio.

The revolving period for the revolving term credit facility will end on
June 25, 2013, unless extended for a further 364 day period.  Should
the facility not be extended it will convert to a non-revolving term
facility with the full amount outstanding due 366 days after the last
day of the revolving period of June 25, 2013.  The borrowing base will
be subject to re-determination on May 31 and November 30 in each year
prior to maturity, with the next semi-annual redetermination occurring
on November 30, 2012.

As at September 30, 2012, approximately $95.4 million or 48% of unused
and available bank credit under its credit facilities was available to
fund Bellatrix’s ongoing capital spending and operational requirements.

Bellatrix currently has commitments associated with its credit
facilities outlined above and the commitments outlined under the
“Commitments” section.  Bellatrix continually monitors its capital
spending program in light of the recent volatility with respect to
commodity prices and Canadian dollar exchange rates with the aim of
ensuring the Company will be able to meet future anticipated
obligations incurred from normal ongoing operations with funds flow
from operations and draws on Bellatrix’s credit facility, as
necessary.  Bellatrix has the ability to fund its 2012 capital program
of $140 to $150 million by utilizing cash flow, and to the extent
necessary, bank indebtedness.

As at October 31, 2012, Bellatrix had outstanding a total of 9,367,118
options exercisable at an average exercise price of $3.40 per share,
$55.0 million principal amount of 4.75% Debentures convertible into
common shares (at a conversion price of $5.60 per share) and
107,699,107 common shares.

Commitments

As at September 30, 2012, Bellatrix committed to drill 3 gross (1.5 net)
wells pursuant to farm-in agreements.  Bellatrix expects to satisfy
these drilling commitments at an estimated cost of approximately $6.3
million.  In addition, on February 1, 2011, Bellatrix entered into a
joint venture agreement which includes a minimum commitment for the
Company to drill 3 gross (3.0 net) wells per year from 2011 to 2015 for
a total estimated cost of approximately $52.5 million.  As at September
30, 2012, 10 wells remained to be drilled under this commitment for a
total estimated cost of $35.0 million.  On August 4, 2011, Bellatrix
entered into a joint venture agreement which includes a minimum
commitment for the Company to drill between 5 and 10 gross (net) wells
per year from 2011 to 2016 for a total of 40 gross (net) wells at an
estimated cost of approximately $140.0 million, with the first five
wells requiring completion by December of 2012.  As at September 30,
2012, 34 wells remained to be drilled under this commitment for a total
estimated cost of $119.0 million.


    Financial
    liability                          < 1           1-2          2-5
    ($000s)                           Year         Years        Years       Thereafter

    Accounts
    payable and
    accrued
    liabilities (1)           $     52,593     $       -     $      -     $          -

    Commodity
    contract
    liability                        1,867           692            -                -

    Bank debt -
    principal (2)                        -       104,642            -                -

    Convertible
    debentures -
    principal                            -             -       55,000                -

    Convertible
    debentures -
    interest (3)                     2,613         2,613        1,517                -

    Decommissioning
    liabilities (4)                      -         8,385        4,773           29,626

    Finance lease
    obligation                         507           533        1,615            2,098

    Total                     $     57,580     $ 116,865     $ 62,905     $     31,724

    (1)  Includes $1.1 million of accrued coupon interest payable in
         relation to the 4.75% Debentures and $0.1 million
         of accrued interest payable in relation to the credit facilities
         is included in Accounts Payable and Accrued Liabilities.

    (2)  Bank debt is based on a revolving term which is reviewed annually
         and converts to a 366 day non-revolving
         facility if not renewed.  Interest due on the bank credit facility
         is calculated based upon floating rates.

    (3)  The 4.75% Debentures outstanding at September 30, 2012 bear
         interest at a coupon rate of 4.75%, which
         currently requires total annual interest payments of $2.6 million.

    (4)  Amounts represent the inflated, undiscounted future abandonment
         and reclamation expenditures anticipated
         to be incurred over the life of the Company's properties (between
         2013 and 2053).

Off-Balance Sheet Arrangements

The Company has certain fixed term lease agreements, including primarily
office space leases, which were entered into in the normal course of
operations.  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 do not
currently provide for early termination.  No asset or liability value
has been assigned to these leases in the balance sheet as of September
30, 2012.

Business Prospects and 2012 Year Outlook

Bellatrix continues to develop its core assets and conduct exploration
programs utilizing its large inventory of geological prospects.  As at
September 30, 2012, Bellatrix has approximately 197,428 net undeveloped
acres and including all opportunities has in excess of 1,525 net
exploration drilling opportunities identified.  The Company continues
to focus on adding Cardium and Notikewin prospective lands.  As at
September 30, 2012, Bellatrix controls 44 gross (43 net) contiguous
sections of Duvernay rights.

For the remainder of 2012, Bellatrix will continue to be active in
drilling its two core resource plays, the Cardium oil and Notikewin
condensate rich gas, utilizing horizontal drilling multi fracturing
technology. The Company’s 2012 capital expenditure budget is between
$140 to $150 million.  Based on the timing of proposed expenditures,
downtime for anticipated plant turnarounds, resolution of
infrastructure constraints and normal production declines, execution of
the 2012 budget is anticipated to provide average daily production of
approximately 16,500 to 17,000 boe/d.  The Company is maintaining its
previously announced 2012 exit rate guidance of approximately 19,000
boe/d to 19,500 boe/d.

For the fourth quarter of 2012 the Company expects to drill an estimated
6 gross (4.85 net) Cardium oil wells, which includes a second
long-reach Cardium horizontal well (programmed to drill to a total
depth of 5,511m including a horizontal length of 3,048m) in the Brazeau
area.  With reductions in industry activity levels, Bellatrix, through
negotiation, has been able to reduce its cost base per well by 10%, and
expects to carry these savings through the winter of 2012/13.  The
Company is also moving to pad drilling wherever plausible in its
continuing effort to bring down the capital cost per well, improving
its already industry leading F&D costs and recycle ratios.

An initial capital budget of $180 million has been set for fiscal
2013.  The capital budget is expected to be funded from a combination
of cash flows and bank indebtedness.  Based on the timing of proposed
expenditures, downtime for anticipated plant turnarounds, resolution of
infrastructure constraints, and normal production declines, execution
of the 2013 budget is anticipated to provide 2013 average daily
production of approximately 20,000 boe/d and an exit rate of
approximately 21,500 boe/d to 22,500 boe/d.

Business Risks and Uncertainties

The reader is advised that Bellatrix continues to be subject to various
types of business risks and uncertainties as described in the Company’s
Management Discussion and Analysis for the year ended December 31,
2011, and the Company’s Annual Information Form for the year ended
December 31, 2011.

Critical Accounting Estimates

The reader is advised that the critical accounting estimates, policies,
and practices described in the Company’s Management Discussion and
Analysis for the year ended December 31, 2011 continue to be critical
in determining Bellatrix’s unaudited financial results as of September
30, 2012. There were no changes in accounting policies during the nine
months ended September 30, 2012.

A summary of future accounting pronouncements is found in the Company’s
Management Discussion and Analysis for the year ended December 31,
2011, available at www.sedar.com.

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
monitor known and potential contingent matters and make appropriate
provisions by charges to earnings when warranted by the circumstances.

Controls and Procedures

Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have
designed, or caused to be designed under their supervision, disclosure
controls and procedures to provide reasonable assurance that: (i)
material information relating to the Company is made known to the
Company’s Chief Executive Officer and Chief Financial Officer 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 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.

Internal Control over Financial Reporting

The Company’s Chief Executive Officer and Chief Financial Officer have
designed, or caused to be designed under their supervision, internal
control over financial reporting to provide reasonable assurance
regarding the reliability of the Company’s financial reporting and the
preparation of financial statements for external purposes in accordance
with GAAP.

The Company is required to disclose herein any change in the Company’s
internal control over financial reporting that occurred during the
period beginning on July 1, 2012 and ended on September 30, 2012 that
has materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial reporting.  No material
changes in the Company’s internal control over financial reporting were
identified during such period that has materially affected, or are
reasonably likely to materially affect, the Company’s internal control
over financial reporting.

It should be noted that a control system, including the Company’s
disclosure and internal controls and procedures, 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 and internal controls and procedures
will prevent all errors or fraud.

Sensitivity Analysis

The table below shows sensitivities to funds flow from operations as a
result of product price, exchange rate, and interest rate changes. 
This is based on actual average prices received for the third quarter
of 2012 and average production volumes of 15,503 boe/d during that
period, as well as the same level of debt outstanding at September 30,
2012.  Diluted weighted average shares are based upon the third quarter
of 2012.  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:


                                  Funds Flow from          Funds Flow  from
                                   Operations (1)                Operations
                                                                        (1)

                                     (annualized)         Per Diluted Share

    Sensitivity                           ($000s)                       ($)
    Analysis

    Change of US $1/bbl                     1,400                      0.01
    WTI

    Change of $0.10/                        2,100                      0.02
    mcf

    Change of US $0.01                      1,000                      0.01
    CDN/ US exchange
    rate

    Change in prime of                      1,000                      0.01
    1%

    (1) The term "funds flow from operations" 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 diluted funds flow from operations or funds
        flow from operations per share may not be comparable
        with the calculation of similar measures for other entities.
        Management uses funds flow from operations to analyze
        operating performance and leverage and considers funds flow from
        operations 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.  The
        reconciliation between cash flow from operating activities and
        funds flow from operations can be found elsewhere herein.
        Funds flow from operations per share is calculated using the
        weighted average number of common shares for the period.

Selected Quarterly Consolidated Information

The following table sets forth selected consolidated financial
information of the Company for the first, second and third quarters in
2012, and for the quarters in 2011 and 2010.  The adoption date of IFRS
of January 1, 2011 required restatement for comparative purposes, of
the Company’s opening balance sheet as at January 1, 2010, all interim
quarterly periods in 2010 and for its year ended December 31, 2010.


    2012 -
    Quarter
    ended
    (unaudited)
    ($000s,
    except per
    share                    March                       Sept.
    amounts)                    31       June 30            30               

    Revenues
    before
    royalties
    and risk
    management              58,191        50,714        48,126               

    Cash flow
    from
    operating
    activities              24,056        28,458        24,807               

    Cash flow
    from
    operating
    activities
    per share                                                                

      Basic                  $0.22         $0.24         $0.23               

      Diluted                $0.21         $0.22         $0.22               

    Funds flow
    from
    operations
    (1)                     29,194        25,366        26,613               

    Funds flow
    from
    operations
    per share
    (1)                                                                      

      Basic                  $0.27         $0.24         $0.25               

      Diluted                $0.25         $0.22         $0.23               

    Net profit
    (loss)                   9,172         9,963         (615)               

    Net profit
    (loss) per
    share                                                                    

      Basic                  $0.09         $0.09       ($0.01)               

      Diluted                $0.08         $0.09       ($0.01)               

    Net capital
    expenditures
    (cash)                  73,831        16,284        35,515               

    2011 -
    Quarter
    ended
    (unaudited)
    ($000s,
    except per
    share                    March                       Sept.
    amounts)                    31       June 30            30        Dec. 31

    Revenues
    before
    royalties
    and risk
    management              40,535        53,444        49,145         59,194

    Cash flow
    from
    operating
    activities              15,718        23,825        28,023         30,626

    Cash flow
    from
    operating
    activities
    per share                                                                

      Basic                  $0.16         $0.23         $0.26          $0.28

      Diluted                $0.15         $0.22         $0.24          $0.26

    Funds flow
    from
    operations
    (1)                     17,027        23,126        23,964         30,120

    Funds flow
    from
    operations
    per share
    (1)                                                                      

      Basic                  $0.17         $0.22         $0.22          $0.28

      Diluted                $0.16         $0.21         $0.21          $0.26

    Net profit
    (loss)                 (5,487)        12,315           820       (13,597)

    Net profit
    (loss) per
    share                                                                    

      Basic                $(0.06)         $0.12         $0.01        $(0.13)

      Diluted              $(0.06)         $0.11         $0.01        $(0.13)

    Net capital
    expenditures
    (cash)                  59,247        28,784        40,087         47,240

    2010 -
    Quarter
    ended
    (unaudited)
    ($000s,
    except per
    share                    March                       Sept.
    amounts)                    31       June 30            30        Dec. 31

    Revenues
    before
    royalties
    and risk
    management              26,929        25,574        27,344         37,826

    Cash flow
    from
    operating
    activities              13,456         6,065        13,466         11,285

    Cash flow
    from
    operating
    activities
    per share                                                                

      Basic                  $0.15         $0.07         $0.14          $0.12

      Diluted                $0.15         $0.07         $0.14          $0.11

    Funds flow
    from
    operations
    (1)                     10,198        10,610        16,342         15,892

    Funds flow
    from
    operations
    per share
    (1)                                                                      

      Basic                  $0.12         $0.11         $0.17          $0.16

      Diluted                $0.11         $0.11         $0.17          $0.15

    Net profit
    (loss)                   3,969       (6,351)       (2,546)           (57)

    Net profit
    (loss) per
    share                                                                    

      Basic                  $0.04       $(0.07)       $(0.03)        $(0.00)

      Diluted                $0.04       $(0.07)       $(0.03)        $(0.00)

    Net capital
    expenditures
    (cash)                  18,393        17,656        30,416         25,716

    (1) Refer to "Non-GAAP Measures" in respect of the term "funds flow
        from operations" and "funds flow from operations per share".


    BELLATRIX EXPLORATION LTD.                                                                                               

    CONDENSED CONSOLIDATED BALANCE SHEETS
    As at September 30, 2012 and December 31, 2011

    (unaudited, expressed in Canadian dollars)                                                                               

    ($000s)                                                                                           2012               2011

    ASSETS                                                                                                                   

    Current assets                                                                                                           

      Accounts receivable (note 12)                                                         $       36,212     $       45,322

      Deposits and prepaid expenses                                                                  5,073              3,626

      Commodity contract asset (note 12)                                                             1,420              2,979

                                                                                                    42,705             51,927

    Exploration and evaluation assets (note 3)                                                      29,162             33,089

    Property, plant and equipment (note 4)                                                         551,616            484,301

    Deferred taxes (note 8)                                                                          4,352             11,105

    Total assets                                                                            $      627,835     $      580,422

    LIABILITIES                                                                                                              

    Current liabilities                                                                                                      

      Accounts payable and accrued liabilities                                              $       52,593     $       62,421

      Current portion of finance lease obligation                                                      507                490

      Commodity contract liability (note 12)                                                         1,867             10,667

                                                                                                    54,967             73,578

    Commodity contract liability (note 12)                                                             692              2,944

    Long-term debt (note 5)                                                                        104,642             56,701

    Convertible debentures                                                                          50,269             49,076

    Finance lease obligation                                                                         4,246              4,627

    Decommissioning liabilities                                                                     42,784             45,091

    Total liabilities                                                                              257,600            232,017

    SHAREHOLDERS' EQUITY                                                                                                     

      Shareholders' capital                                                                        370,664            370,048

      Equity component of convertible debentures                                                     4,378              4,378

      Contributed surplus                                                                           36,576             33,882

      Deficit                                                                                     (41,383)           (59,903)

    Total shareholders' equity                                                                     370,235            348,405

    Total liabilities and shareholders' equity                                              $      627,835     $      580,422

    COMMITMENTS (note 11)                                                                                                    

    See accompanying notes to the condensed consolidated financial statements.

    BELLATRIX
    EXPLORATION
    LTD.

    CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    For the three
    months and
    nine months
    ended
    September 30,

    (unaudited,
    expressed in
    Canadian
    dollars)

                                Three months ended             Nine months ended
                                     September 30,                 September 30,

    ($000s)                     2012          2011           2012           2011

    REVENUES                                                                    

      Petroleum            $  47,608     $  48,814     $  155,567     $  141,760
    and natural
    gas sales

      Other income               518           331          1,464          1,364

      Royalties              (8,879)       (8,586)       (26,918)       (25,922)

      Total                   39,247        40,559        130,113        117,202
    revenues

      Realized                 5,472         2,392          8,453             75
    gain on
    commodity
    contracts

      Unrealized             (6,763)         8,556          9,493         10,776
    gain (loss) on
    commodity
    contracts

                              37,956        51,507        148,059        128,053

    EXPENSES                                                                    

      Production              11,360        12,748         37,938         36,226

                               1,282         1,462          3,760          4,138
    Transportation

      General and              3,397         3,423          9,882          8,590
    administrative

      Share-based                945           568          2,505          2,083
    compensation
    (note 6)

      Depletion               17,953        15,815         57,125         45,764
    and
    depreciation
    (note 4)

      Loss (gain)              1,035       (1,531)          4,063        (1,750)
    on property
    dispositions

      Impairment                   -        14,551              -         14,551
    loss on
    property,
    plant and
    equipment

                              35,972        47,036        115,273        109,602

    NET PROFIT                 1,984         4,471         32,786         18,451
    BEFORE FINANCE
    AND TAXES

      Finance                  2,631         1,903          7,513          6,009
    expenses (note
    9)

    NET PROFIT                 (647)         2,568         25,273         12,442
    (LOSS) BEFORE
    TAXES

    TAXES                                                                       

      Deferred tax              (32)         1,748          6,753          4,794
    expense
    (recovery)
    (note 8)

    NET PROFIT                 (615)           820         18,520          7,648
    (LOSS) AND
    COMPREHENSIVE
    INCOME

    Net profit
    (loss) per
    share (note
    10)

      Basic                  ($0.01)         $0.01          $0.17          $0.07

      Diluted                ($0.01)         $0.01          $0.17          $0.07

    See accompanying notes to the condensed consolidated financial statements.


    BELLATRIX EXPLORATION LTD.  

    CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY  

    For the nine months ended September 30,

    (unaudited, expressed in Canadian dollars)

    ($000s)                                            2012           2011

    SHAREHOLDERS' CAPITAL                                                 

         Common shares                                                    

           Balance, beginning of period         $   370,048     $  316,779

           Issued for cash, net of
           transaction costs                              -         52,734

           Issued on exercise of share
           options                                      429            362

           Contributed surplus transferred
           on exercised options                         187            147

           Balance, end of period                   370,664        370,022

    EQUITY COMPONENT OF CONVERTIBLE
    DEBENTURES                                                            

           Balance, beginning and end of
           period                                     4,378          4,378

    CONTRIBUTED SURPLUS(note 6)                                           

           Balance, beginning of period              33,882         30,489

           Share-based compensation expense           3,053          2,473

           Adjustment of share-based
           compensation expense for
           forfeitures of unvested share
           options                                    (172)           (63)

           Transfer to share capital for
           exercised options                          (187)          (147)

           Balance, end of period                    36,576         32,752

    DEFICIT                                                               

           Balance, beginning of period            (59,903)       (53,954)

           Net profit                                18,520          7,648

           Balance, end of period                  (41,383)       (46,306)

    TOTAL SHAREHOLDERS' EQUITY                  $   370,235     $  360,846

See accompanying notes to the condensed consolidated financial
statements.


    BELLATRIX EXPLORATION LTD.

    CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

    For the three and nine months ended September 30,

    (unaudited, expressed in Canadian dollars)

                                      Three months ended               Nine months ended
                                           September 30,                   September 30,

    ($000s)                          2012           2011            2012            2011

    Cash provided by (used
    in):                                                                                

    CASH FLOW FROM
    OPERATING ACTIVITIES                                                                

    Net profit (loss)         $     (615)     $      820     $    18,520     $     7,648

    Adjustments for:                                                                    

            Depletion and
            depreciation           17,953         15,815          57,125          45,764

            Finance
            expenses (note
            9)                        564            549           1,700           1,803

            Share-based
            compensation
            (note 6)                  945            568           2,505           2,083

            Unrealized
            (gain) loss on
            commodity
            contracts               6,763        (8,556)         (9,493)        (10,776)

            Loss (gain) on
            property
            dispositions            1,035        (1,531)           4,063         (1,750)

            Impairment loss
            on property,
            plant and
            equipment                   -         14,551               -          14,551

            Deferred tax
            expense
            (recovery)
            (note 8)                 (32)          1,748           6,753           4,794

            Decommissioning
            costs incurred          (196)             87           (559)           (383)

            Change in
            non-cash
            working capital
            (note 7)              (1,610)          3,972         (3,293)           3,832

                                   24,807         28,023          77,321          67,566

    CASH FLOW FROM (USED
    IN) FINANCING
    ACTIVITIES                                                                          

            Issuance of
            share capital             193              3             429          55,365

            Issue costs on
            share capital               -              -               -         (3,088)

            Advances from
            loans and
            borrowings             96,074         57,476         360,849         270,607

            Repayment of
            loans and
            borrowings          (105,707)       (64,750)       (312,908)       (274,400)

            Obligations
            under finance
            lease                   (126)           (37)           (364)           (108)

                                  (9,566)        (7,308)          48,006          48,376

            Change in
            non-cash
            working capital
            (note 7)              (1,086)            546         (1,965)             639

                                 (10,652)        (6,762)          46,041          49,015

    CASH FLOW FROM (USED
    IN) INVESTING
    ACTIVITIES                                                                          

            Expenditure on
            exploration and
            evaluation
            assets                (2,012)        (5,160)         (5,248)        (15,324)

            Additions to
            property, plant
            and equipment        (37,828)       (39,067)       (127,052)       (116,975)

            Proceeds on
            sale of
            property, plant
            and equipment           4,325          4,140           6,670           4,181

                                 (35,515)       (40,087)       (125,630)       (128,118)

            Change in
            non-cash
            working capital
            (note 7)               21,360         18,826           2,268          11,537

                                 (14,155)       (21,261)       (123,362)       (116,581)

            Change in cash              -              -               -               -

            Cash, beginning
            of period                   -              -               -               -

            Cash, end of
            period            $         -     $        -     $         -     $         -

    Cash paid:                                                                          

          Interest            $     1,576     $      508     $     4,751     $     3,021

          Taxes                         -              -               -               -

See accompanying notes to the condensed consolidated financial
statements.


 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, expressed in Canadian dollars)

1. CORPORATE INFORMATION

Bellatrix Exploration Ltd. (the “Company” or “Bellatrix”) is a growth
oriented, public exploration and production company.  The Company
resulted from a reorganization (the “Reorganization) effective November
1, 2009 pursuant to a plan of arrangement (the “Arrangement”)
involving, among others, True Energy Trust (the “Trust” or “True”),
Bellatrix Exploration Ltd. and securityholders of the Trust.

2. BASIS OF PREPARATION

a. Statement of compliance

These condensed consolidated financial statements (“interim financial
statements”) were authorized by the Board of Directors on November 7,
2012.  The Company prepared these interim financial statements in
accordance with IAS 34 Interim Financial Reporting.  The interim
financial statements do not include all information and disclosures
normally provided in annual financial statements and should be read in
conjunction with the Company’s 2011 audited annual financial
statements, available at www.sedar.com.  The Company has prepared these interim financial statements using the
same accounting policies and critical accounting estimates applied in
the 2011 audited annual financial statements.

b. Basis of measurement

The condensed consolidated 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 condensed consolidated
financial statements have, in management’s opinion, been properly
prepared using careful judgment and reasonable limits of materiality.
These condensed consolidated financial statements are prepared within
the framework of the same significant accounting policies, critical
judgments, accounting estimates, accounting policies and methods of
computation as the consolidated financial statements for the fiscal
year ended December 31, 2011. The condensed consolidated financial
statement note disclosures do not include all of those required by IFRS
applicable for annual financial statements. Accordingly, the condensed
consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto as at and for
the year ended December 31, 2011.

3. EXPLORATION AND EVALUATION ASSETS


    ($000s)                                                       

    Cost                                                          

    Balance, December 31, 2010                         $    18,535

    Additions                                               16,839

    Transfer to oil and natural gas properties             (1,817)

    Disposals(1)                                             (468)

    Balance, December 31, 2011                              33,089

    Additions                                                5,248

    Transfer to oil and natural gas properties             (7,446)

    Disposals(1)                                           (1,729)

    Balance, September 30, 2012                        $    29,162

((1)) Disposals include swaps.

4. PROPERTY, PLANT AND EQUIPMENT


    ($000s)                                                         

                                 Oil and              Office
                             natural gas       furniture and
                              properties           equipment          Total

    Cost                                                                   

    Balance, December
    31, 2010               $     484,600     $         2,236     $  486,836

    Additions                    173,595                 267        173,862

    Transfer from
    exploration and
    evaluation assets              1,817                   -          1,817

    Disposals(1)                 (2,697)                   -        (2,697)

    Balance, December
    31, 2011                     657,315               2,503        659,818

    Additions                    125,802                 196        125,998

    Transfer from
    exploration and
    evaluation assets              7,446                   -          7,446

    Disposals(1)                (10,910)                   -       (10,910)

    Balance, September
    30, 2012               $     779,653     $         2,699     $  782,352

    Accumulated
    Depletion,
    Depreciation and
    Impairment losses                                                      

    Balance, December
    31, 2010               $      86,482     $           774     $   87,256

    Charge for time
    period                        63,085                 299         63,384

    Impairment loss               28,039                 194         28,233

    Impairment
    reversal                     (2,664)                   -        (2,664)

    Disposals(1)                   (692)                   -          (692)

    Balance, December
    31, 2011               $     174,250     $         1,267     $  175,517

    Charge for time
    period                        56,933                 192         57,125

    Disposals(1)                 (1,906)                   -        (1,906)

    Balance, September
    30, 2012               $     229,277     $         1,459     $  230,736

    (1) Disposals
    include swaps.                                                         

    Carrying amounts                                                       

    At December 31,
    2011                   $     483,065     $         1,236     $  484,301

    At September 30,
    2012                   $     550,376     $         1,240     $  551,616

Bellatrix has included $371.9 million (2011: $159.8 million) for future
development costs and excluded $34.8 million (2011: $34.9 million) for
estimated salvage from the depletion calculation for the three months
ended September 30, 2012.

For the nine month period ended September 30, 2012, the Company
capitalized $3.2 million (2011: $2.7 million) of general and
administrative expenses and $1.2 million (2011: $0.9 million) of
share-based compensation expense directly related to exploration and
development activities.

Bellatrix’s credit facilities are secured against all of the assets of
the Corporation by a $400 million debenture containing a first ranking
floating charge and security interest.  The Corporation has provided a
negative pledge and undertaking to provide fixed charges over major
petroleum and natural gas reserves in certain circumstances.

5. LONG-TERM DEBT


    ($000s)                      September 30, 2012       December 31, 2011

    Operating facility           $            3,642       $           5,701

    Revolving term                          101,000                  51,000
    facility

    Balance, end of period       $          104,642       $          56,701

As of September 30, 2012, the Company’s credit facilities consist of a
$15 million demand operating facility provided by a Canadian bank and a
$185 million extendible revolving term credit facility provided by two
Canadian banks and a Canadian financial institution.

The revolving period for the revolving term credit facility will end on
June 25, 2013, unless extended for a further 364 – day period.  Should
the facility not be extended it will convert to a non-revolving term
facility with the full amount outstanding due 366 days after the last
day of the revolving period of June 25, 2013. The borrowing base will
be subject to re-determination on May 31 and November 30 in each year
prior to maturity, with the next semi-annual redetermination occurring
on November 30, 2012.

As at September 30, 2012, the Company had outstanding letters of credit
totaling $0.8 million that reduce the amount otherwise available to be
drawn on the syndicated facility.

As at September 30, 2012 the Company had approximately $95.4 million, or
48% of unused and available bank credit under its credit facilities.
Bellatrix was fully compliant with all of its operating debt covenants.

 6. SHARE-BASED COMPENSATION PLANS

a. Share Option Plan

During the nine month period ended September 30, 2012, Bellatrix granted
2,363,000 (2011: 2,324,000) share options and recorded share-based
compensation of $2.9 million related to its outstanding share options,
net of $0.2 million of forfeitures. $1.2 million of the share-based
compensation expense was capitalized to property, plant and equipment. 
In addition, $0.8 million (note 6 b.) was expensed in relation to the
Director’s Deferred Share Unit Plan, resulting in total net share-based
compensation of $2.5 million recognized as an expense for the first
nine months of 2012 (2011: $2.1 million).

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 three
month periods ended September 30, 2012 and 2011, and the weighted
average assumptions used in their determination are as noted below:


                                                        2012       2011

        Inputs:                                                        

        Share price                                     3.40       5.29

        Exercise price                                  3.40       5.29

        Risk free interest rate (%)                      1.1        1.9

        Option life (years)                              2.8        3.7

        Option volatility (%)                             54         65

        Results:                                                       

        Weighted average fair value of each share
        option granted                                  1.23       2.55

Bellatrix calculates volatility based on historical share price.
Bellatrix incorporates an estimated forfeiture rate between 3% and 10%
(2011: 3% to 10%) for stock options that will not vest, and adjusts for
actual forfeitures as they occur.

The weighted average TSX share trading price for the three and nine
months ended September 30, 2012 was $3.54 (2011: $4.41), and $4.35
(2011: $5.19), respectively.

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


    Share Options Continuity                                  

                                      Weighted Average
                                        Exercise Price          Number

    Balance, December 31, 2011        $           3.44       7,985,320

    Granted                           $           3.48       2,363,000

    Exercised                         $           2.15       (199,643)

    Forfeited and cancelled           $           4.60       (649,670)

    Balance, September 30, 2012       $           3.40       9,499,007

As of September 30, 2012, a total of 10,739,129 share options were
reserved, leaving an additional 1,240,122 available for future grants.


    Share Options Outstanding, September 30, 2012

                   Outstanding                                      Exercisable

                                               Weighted
                               Weighted         Average
                        At      Average       Remaining            At
    Exercise     September     Exercise     Contractual     September     Exercise
    Price         30, 2012        Price            Life     30, 20121        Price

    $  0.65        277,729         $                1.5       277,729         $
    - $                            0.69                                       0.69
    0.83

    $  0.84        832,279         $                1.6       786,943         $
    - $                            1.37                                       1.38
    1.50

    $  1.51      1,593,832         $                1.5     1,529,493         $
    - $                            1.88                                       1.87
    2.00

    $  2.01      4,268,501         $                3.4     1,540,812         $
    - $                            3.51                                       3.55
    3.94

    $  3.95      2,526,666         $                3.8       751,976         $
    - $                            5.13                                       5.22
    5.45

    $  0.65      9,499,007         $                3.0     4,886,953         $
    - $                            3.40                                       2.77
    5.45

b.  Deferred Share Unit Plan

During the nine months ended September 30, 2012, the Company granted
246,225 Deferred Share Units (“DSUs”) (2011: 156,934) and had 405,451
DSUs outstanding as at September 30, 2012.  For the nine months ended
September 30, 2012, Bellatrix recorded approximately $0.8 million
(2011: $0.6 million) of share based compensation expense and had a
liability balance of $1.6 million relating to the Company’s outstanding
DSUs.

7. SUPPLEMENTAL CASH FLOW INFORMATION


    Change in Non-cash Working Capital                                

                             Three months ended           Nine months ended
      ($000s)                     September 30,               September 30,

                              2012         2011           2012         2011

      Changes in
      non-cash
      working
      capital items:

      Accounts           $     787     $  9,740     $    9,110     $  4,955
      receivable

      Deposits and             677          753        (1,447)          667
      prepaid
      expenses

      Accounts              17,200       12,851       (10,653)       10,386
      payable and
      accrued
      liabilities

                         $  18,664     $ 23,344     $  (2,990)     $ 16,008

      Changes
      related to:

      Operating          $ (1,610)     $  3,972     $  (3,293)     $  3,832
      activities

      Financing            (1,086)          546        (1,965)          639
      activities

      Investing             21,360       18,826          2,268       11,537
      activities

                         $  18,664     $ 23,344     $  (2,990)     $ 16,008

8. 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.

Deferred taxes reflect the tax effects of differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts reported for tax purposes.  As at September
30, 2012, Bellatrix has approximately $560 million in tax pools
available for deduction against future income.  Included in this tax
basis are estimated non-capital loss carry forwards of approximately
$10 million that expire in years through 2027.

9. FINANCE INCOME AND EXPENSES


                            Three months ended       Nine months ended
                                 September 30,           September 30,

    ($000s)                  2012         2011        2012        2011

    Finance expense                                                   

      Interest on         $ 1,408     $    696     $ 3,852     $ 2,253
      long-term debt

      Interest on             659          658       1,961       1,953
      convertible
      debentures

      Accretion on            409          376       1,193       1,093
      convertible
      debentures

      Accretion on            155          173         507         710
      decommissioning
      liabilities

                              564          549       1,700       1,803

    Finance expense       $ 2,631     $  1,903     $ 7,513     $ 6,009

10. PER SHARE AMOUNTS

The calculation of basic earnings per share for the three and nine
months ended September 30, 2012 was based on a net loss of $0.6 million
(2011: net profit of $0.8 million) and net profit of $18.5 million
(2011: $7.6 million), respectively


                               Three months ended               Nine months ended
                                    September 30,                   September 30,

                             2012            2011            2012            2011

    Basic common
    shares
    outstanding       107,606,884     107,391,298     107,606,884     107,391,298

    Dilutive
    effect of:                                                                   

      Share
      options
      outstanding       9,499,007       7,830,931       9,499,007       7,830,931

      Shares
      issuable
      for
      convertible
      debentures        9,821,429       9,821,429       9,821,429       9,821,429

    Diluted
    common shares
    outstanding       126,927,320     125,043,658     126,927,320     125,043,658

    Weighted
    average
    shares
    outstanding       107,527,718     107,391,070     107,479,907     102,664,721

    Dilutive
    effect of
    share options
    and
    convertible
    debentures
    (1)                         -       2,001,690       1,631,585       2,450,285

    Diluted
    weighted
    average
    shares
    outstanding       107,527,718     109,392,760     109,111,492     105,115,006


    (1)   For the three month period ending September 30, 2012, a total of
          9,499,007 (2011: 5,829,241) share options and 9,821,429 (2011:
          9,821,429) common shares issuable pursuant to the conversion of
          the convertible debentures were excluded from the calculation as
          they were not dilutive.

          For the nine month period ending September 30, 2012, a total of
          7,867,422 (2011: 5,380,646) share options and 9,821,429 (2011:
          9,821,429) common shares issuable pursuant to the conversion of
          the convertible debentures were excluded from the calculation as
          they were not dilutive. 

11. COMMITMENTS

As at September 30, 2012, Bellatrix committed to drill 3 gross (1.5 net)
wells pursuant to farm-in agreements.   Bellatrix expects to satisfy
these drilling commitments at an estimated cost of approximately $6.3
million.   In addition, on February 1, 2011, Bellatrix entered into a
joint venture agreement which includes a minimum commitment for the
Company to drill 3 gross (3.0 net) wells per year from 2011 to 2015 for
a total estimated cost of approximately $52.5 million.   As at
September 30, 2012, 10 wells remained to be drilled under this
commitment for a total estimated cost of $35.0 million.   On August 4,
2011, Bellatrix entered into a joint venture agreement which includes a
minimum commitment for the Company to drill between 5 and 10 gross
(net) wells per year from 2011 to 2016 for a total of 40 gross (net)
wells at an estimated cost of approximately $140.0 million, with the
first five wells requiring completion by December of 2012.   As at
September 30, 2012, 34 wells remained to be drilled under this
commitment for a total estimated cost of $119.0 million.

12. FINANCIAL RISK MANAGEMENT

a. Credit risk


    As at September 30, 2012, accounts receivable was comprised of the
    following:

                              Not past due
                             (less than 90      Past due (90
    Aging ($000s)                    days)     days or more)          Total

    Joint venture and
    other trade accounts
    receivable               $       7,990     $       2,909     $   10,899

    Amounts due from
    government agencies                250               729            979

    Revenue and other
    accruals                        20,285             2,297         22,582

    Cash call
    receivables                          -                65             65

    Plant revenue
    allocation
    receivable                           -             2,855          2,855

    Less:  Allowance for
    doubtful accounts                    -           (1,168)        (1,168)

    Total accounts
    receivable                      28,525             7,687         36,212

    Less:                                                                  

    Accounts payable due
    to same partners                     -             (321)          (321)

    Subsequent receipts
    to October 31, 2012           (15,764)             (194)       (15,958)

                             $      12,761     $       7,172     $   19,933

Amounts due from government agencies include GST and royalty
adjustments.  Plant revenue allocation receivable includes amounts
under dispute over plant revenue allocations, net of expenses, from an
operator.  The Company has commenced legal action for collection of
these amounts.  Accounts payable due to same partners includes amounts
which may be available for offset against certain receivables.

Cash call receivables consist of advances paid to joint interest
partners for capital projects.

The carrying amount of accounts receivable and derivative assets
represents the maximum credit exposure.

b.  Liquidity risk

The following are the contractual maturities of financial liabilities as
at September 30, 2012:


    Financial
    liability                < 1           1-2          2-5
    ($000s)                 Year         Years        Years       Thereafter

    Accounts
    payable and
    accrued
    liabilities (1)     $ 52,593     $       -     $      -     $          -

    Commodity
    contract
    liability              1,867           692            -                -

    Bank debt -
    principal (2)              -       104,642            -                -

    Convertible
    debentures -
    principal                  -             -       55,000                -

    Convertible
    debentures -
    interest (3)           2,613         2,613        1,517                -

    Decommissioning
    liabilities (4)            -         8,385        4,773           29,626

    Finance lease
    obligation               507           533        1,615            2,098

    Total               $ 57,580     $ 116,865     $ 62,905     $     31,724

    (1)   Includes $1.1 million of accrued coupon interest payable in
          relation to the 4.75% Debentures and $0.1 million of accrued
          interest payable in relation to the credit facilities is included
          in Accounts Payable and Accrued Liabilities.

    (2)   Bank debt is based on a revolving term which is reviewed annually
          and converts to a 366 day non-revolving facility if not renewed.
          Interest due on the bank credit facility is calculated based upon
          floating rates.

    (3)   The 4.75% Debentures outstanding at September 30, 2012 bear
          interest at a coupon rate of 4.75%, which currently requires
          total annual interest payments of $2.6 million.

    (4)   Amounts represent the inflated, undiscounted future abandonment
          and reclamation expenditures anticipated to be incurred over the
          life of the Company's properties (between 2013 and 2053).

c.     Commodity price risk

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.

As at September 30, 2012, the Company has entered into commodity price
risk management arrangements as follows:


    Type         Period     Volume          Price           Price     Index
                                            Floor         Ceiling

    Crude       January      1,000     $    90.00     $ 90.00 CDN       WTI
    oil         1, 2012      bbl/d            CDN
    fixed       to Dec.
                    31,
                   2012

    Crude       January      1,000     $    90.49     $ 90.49 CDN       WTI
    oil         1, 2012      bbl/d            CDN
    fixed       to Dec.
                    31,
                   2012

    Crude       January      1,000     $    96.40     $ 96.40 CDN       WTI
    oil         1, 2012      bbl/d            CDN
    fixed       to Dec.
                    31,
                   2012

    Crude       January      1,500     $    94.50     $ 94.50 CDN       WTI
    oil         1, 2013      bbl/d            CDN
    fixed       to Dec.
                    31,
                   2013

    Crude       January        833              -     $ 110.00          WTI
    oil         1, 2012      bbl/d                             US
    call        to Dec.
    option          31,
                   2012

    Crude       January      1,000              -     $ 110.00          WTI
    oil         1, 2013      bbl/d                             US
    call        to Dec.
    option          31,
                   2013

    Crude       January      1,000              -     $ 110.00          WTI
    oil         1, 2013      bbl/d                             US
    call        to Dec.
    option          31,
                   2013

    Crude       January      1,000              -     $ 110.00          WTI
    oil         1, 2013      bbl/d                             US
    call        to Dec.
    option          31,
                   2013

    Natural       April     10,000     $ 4.10 CDN     $  4.10 CDN      AECO
    gas         1, 2012       GJ/d
    fixed       to Oct.
                    31,
                   2012

    Natural       April     10,000     $ 4.10 CDN     $  4.10 CDN      AECO
    gas         1, 2012       GJ/d
    fixed       to Oct.
                    31,
                   2012

    Natural       April     10,000     $ 4.11 CDN     $  4.11 CDN      AECO
    gas         1, 2012       GJ/d
    fixed       to Oct.
                    31,
                   2012

    Natural      May 1,     10,000     $ 1.77 CDN     $  1.77 CDN      AECO
    gas         2012 to       GJ/d
    fixed          Oct.
                    31,
                   2012

The Company’s updated corporate presentation is available at www.bellatrixexploration.com.

Bellatrix Exploration Ltd. is a 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
in the provinces of Alberta, British Columbia and Saskatchewan.  Common
shares and convertible debentures of Bellatrix trade on the Toronto
Stock Exchange (“TSX”) under the symbols BXE and BXE.DB.A,
respectively, and the common shares of Bellatrix trade on the NYSE MKT
under the symbol BXE. 

 

 

 

SOURCE Bellatrix Exploration Ltd.

PDF available at: http://stream1.newswire.ca/media/2012/11/08/20121108_C5037_DOC_EN_20288.pdf


Source: PR Newswire