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Bellatrix Exploration Ltd. Announces Second Quarter 2014 Financial Results

August 6, 2014

TSX, NYSE MKT: BXE

CALGARY, Aug. 6, 2014 /PRNewswire/ – Bellatrix Exploration Ltd. (“Bellatrix” or
the “Company”) (TSX, NYSE MKT: BXE) announces its financial and
operating results for the three and six months ended June 30, 2014.

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 June
                                            30,   Six months ended June 30,

                           2014            2013        2014            2013

    FINANCIAL(unaudited)

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

    Revenue (before
    royalties and
    risk management
    (1))                152,311          74,564     315,896         140,107

    Funds flow from
    operations (2)       71,014          36,563     148,656          74,108

      Per basic share
      (5)                 $0.40           $0.34       $0.85           $0.69

      Per diluted
      share (5)           $0.39           $0.31       $0.84           $0.63

    Cash flow from
    operating
    activities           60,063          29,611     144,363          65,138

      Per basic share
      (5)                 $0.34           $0.27       $0.83           $0.60

      Per diluted
      share (5)           $0.33           $0.25       $0.81           $0.55

    Net profit           38,252          15,466      63,419          20,027

      Per basic share
      (5)                 $0.22           $0.14       $0.36           $0.19

      Per diluted
      share (5)           $0.21           $0.13       $0.36           $0.18

    Exploration and
    development         131,362          46,172     284,049         137,632

    Corporate             3,206             543       6,161             682

    Capital
    expenditures -
    cash                134,568          46,715     290,210         138,314

    Property
    dispositions -
    cash                (8,613)            (16)     (8,392)             (1)

    Total net capital
    expenditures -
    cash                125,955          46,699     281,818         138,313

    Other non-cash
    items                 3,602         (1,308)       8,592           (521)

    Total capital
    expenditures -
    net (4)             129,557          45,391     290,410         137,792

    Long-term debt      323,007         194,002     323,007         194,002

    Convertible
    debentures (6)            -          51,536           -          51,536

    Adjusted working
    capital
    deficiency (3)       40,426          10,927      40,426          10,927

    Total net debt
    (3)                 363,433         256,465     363,433         256,465

    Total assets      1,837,242         779,648   1,837,242         779,648

    Total
    shareholders'
    equity            1,141,830         402,904   1,141,830         402,904


    OPERATING                      Three months ended   Six months ended June
                                             June 30,                     30,

                                     2014        2013        2014        2013

    Average daily
    sales volumes                                                            

      Crude oil,
      condensate and
      NGLs           (bbls/d)      12,640       6,206      12,524       6,095

      Natural gas     (mcf/d)     142,214      95,376     139,051      87,812

      Total oil
      equivalent      (boe/d)      36,342      22,102      35,699      20,730

    Average prices                                                           

      Crude oil and
      condensate      ($/bbl)      103.25       93.48      100.72       91.83

      NGLs
      (excluding
      condensate)     ($/bbl)       42.70       36.20       49.72       39.05

      Crude oil,
      condensate and
      NGLs            ($/bbl)       74.73       71.84       77.53       72.70

      Crude oil,
      condensate and
      NGLs
      (including
      risk
      management
      (1))            ($/bbl)       67.71       73.10       71.14       73.26

      Natural gas     ($/mcf)        5.04        3.85        5.45        3.69

      Natural gas
      (including
      risk
      management(1))  ($/mcf)        4.40        3.68        4.64        4.01

      Total oil
      equivalent      ($/boe)       45.72       36.78       48.43       37.01

      Total oil
      equivalent
      (including
      risk
      management(1))  ($/boe)       40.78       36.39       43.01       38.54

    Statistics                                                               

      Operating
      netback (4)     ($/boe)       28.93       21.06       30.85       21.04

      Operating
      netback (4)
      (including
      risk
      management(1))  ($/boe)       23.98       20.68       25.43       22.58

      Transportation  ($/boe)        0.82        0.83        1.20        0.83

      Production
      expenses        ($/boe)        7.80        8.64        7.96        8.65

      General &
      administrative  ($/boe)        1.37        1.24        1.56        1.62

      Royalties as a
      % of sales
      after
      transportation                  18%         17%         17%         18%

    COMMON SHARES                                                            

    Common shares outstanding 191,091,741 107,919,329 191,091,741 107,919,329

    Share options outstanding  11,576,839   9,173,560  11,576,839   9,173,560

    Shares issuable on
    conversion of convertible
    debentures (6)                      -   9,821,429           -   9,821,429

    Fully diluted common
    shares outstanding        202,668,580 126,914,318 202,668,580 126,914,318

    Diluted weighted average
    shares - net profit (5)   180,975,410 121,265,334 177,408,647 121,038,666

    Diluted weighted average
    shares - funds flow from
    operations and cash flow
    from operating activities
    (2) (5)                   180,975,410 121,265,334 177,408,647 121,038,666

    SHARE TRADING STATISTICS                                                 

    TSX and Other (7)                                                        

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

    High                            11.65        6.94       11.65        6.94

    Low                              8.88        4.70        7.64        4.03

    Close                            9.26        6.45        9.26        6.45

    Average daily volume        3,266,310   1,005,989   2,563,117     844,333

    NYSE MKT                                                                 

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

    High                            10.70        6.85       10.70        6.85

    Low                              8.15        4.55        6.93        4.03

    Close                            8.71        6.08        8.71        6.08

    Average daily volume          371,163      67,541     265,351      70,189

    (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 measures 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 measures.
        Therefore reference to the non-GAAP measures of net debt or total
        net debt may not be comparable with the calculation of similar
        measures for other entities.  The Company's 2014 calculation of
        total net debt excludes deferred lease inducements, long-term
        commodity contract liabilities, decommissioning liabilities, the
        long-term finance lease obligation, deferred lease inducements, and
        the deferred tax liability.  Net debt and total net debt include
        the adjusted working capital deficiency (excess).  The adjusted
        working capital deficiency (excess) is a non-GAAP measure
        calculated as net working capital deficiency (excess) excluding
        short-term commodity contract assets and liabilities, current
        finance lease obligation, and deferred lease inducements.  For the
        comparative 2013 calculation, net debt also excludes the liability
        component of convertible debentures which were then outstanding.  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 and total capital expenditures - net are
        considered non-GAAP measures.  Operating netbacks are calculated by
        subtracting royalties, transportation, and operating costs from
        revenues before other income.  Total capital expenditures - net
        includes the cash impact of capital expenditures and property
        dispositions, as well as the non-cash capital impacts of corporate
        acquisitions, adjustments to the Company's decommissioning
        liabilities, and share based compensation. The detailed
        calculations of operating netbacks are found in the MD&A.

    (5) Basic weighted average shares for the three and six months ended
        June 30, 2014 were 177,847,190 (2013: 107,919,329), and 174,754,132
        (2013: 107,900,781), respectively.

        In computing weighted average diluted earnings per share and
        weighted average diluted cash flow from operating activities and
        funds flow from operations per share for the three and six months
        ended June 30, 2014, a total of 3,128,220 (2013: 3,524,576), and
        2,654,515 (2013: 3,316,456) common shares were added to the
        denominator as a consequence of applying the treasury stock method
        to the Company's outstanding share options and no common shares
        issuable (three and six months ended June 30, 2013: 9,821,429) on
        conversion of convertible debentures were added to the denominator
        as they were dilutive, resulting in diluted weighted average common
        shares of 180,975,410 (2013: 121,265,334), and 177,408,647 (2013:
        121,038,666), respectively.  As a consequence, a total of nil
        (2013: $0.8 million) and nil (2013: $1.6 million) for interest and
        accretion expense (net of income tax effect) was added to the
        numerator for the three and six month calculations, respectively

    (6) During the year ended December 31, 2013, the Company announced a
        notice of redemption of its then outstanding $55.0 million 4.75%
        convertible debentures, with a redemption date set of October 21,
        2013.  During September and October 2013, the $55.0 million
        principal amount of remaining convertible debentures were converted
        or redeemed in exchange for an aggregate of 9,794,848 common shares
        of the Company.  For the three and six months ended June 30, 2013,
        shares issuable on conversion of convertible debentures were
        calculated by dividing the $55.0 million principal amount of the
        convertible debentures by the conversion price of $5.60 per share. 

    (7) TSX and Other includes the trading statistics for the Toronto Stock
        Exchange and other Canadian trading markets.

REPORT TO SHAREHOLDERS

In spite of the significant production processing wantage experienced in
the first half of 2014 the Company continues to demonstrate accelerated
growth posting record earnings, revenue, cash flow and production while
continuing to drive down operating expenses
. The wells drilled in the first half of 2014 are in line with our
published type curves, facilitating the Company’s ability to meet its
published guidance of 2014 average daily production of +/-41,000 boe/d
and an exit rate of approximately +/-48,000 boe/d, assuming no future
unscheduled production constraints occur. Bellatrix’s technical staff
were habile in redirecting gas production from plant to plant thereby
maximizing throughput in an active plant turnaround season.

Operational highlights for the three and six months ended June 30, 2014
include:

        --  Record sales of 36,342 boe/d (65% natural gas) up 64% from
            sales volumes of 22,102 boe/d registered in the second quarter
            of 2013.

        --  Funds flow from operations for the six months ending June 30,
            2014 was $148.7 million, doubling the same period in 2013
            ($74.1 million) and furthermore, exceeds the funds flow for all
            of 2013 ($143.5 million).

        --  Earnings for the second quarter 2014 of $38.3 million were 147%
            higher than the $15.5 million posted in Q2 2013.

        --  On a year to date basis the Company has posted earnings of
            $63.4 million up 217% over the same period in 2013 ($20.0
            million).

        --  Operating costs reduced to a record $7.80/boein the second
            quarter of 2014.

        --  During the first six months of 2014, Bellatrix posted a 100%
            success rate drilling and/or participating in 63 gross (34.56
            net) wells, resulting in 47 gross (27.38 net) Cardium oil
            wells, 14 gross (6.02 net) Notikewin/Falher liquids-rich gas
            wells, and 2 gross (1.15 net) Cardium gas wells. During the
            second quarter of 2014, Bellatrix drilled and/or participated
            in 19 gross (9.00 net) wells, consisting of 11 gross (5.51 net)
            Cardium oil wells, 7 gross (2.99 net) Notikewin/Falher
            liquids-rich gas wells, and 1 gross (0.50 net) Cardium gas
            well.

        --  During the second quarter of 2014, the Company successfully
            drilled and completed a two mile Spirit River gas wellin the
            Ferrier area which was placed on restricted production in
            mid-July at 18 mmcf/d with 2,000 psi of back pressure.  As more
            production space comes available the well rate will be
            increased.

        --  On April 2, 2014, Bellatrix announced the completion of a 1.6
            km river bore and a 7 km pipeline in conjunction with Blaze
            Energy Ltd. ("Blaze"), completing a 55 km pipeline to tie-in
            Bellatrix natural gas for processing in the Blaze gas plant
            located at 4-31-48-12W5.  Bellatrix has secured firm processing
            capacity of 100 mmcf/d in the plant.

        --  During the second quarter of 2014, Bellatrix spent $134.6
            million on capital projects, compared to $46.7 million in Q2
            2013.  In the six months ended June 30, 2014, Bellatrix spent
            $290.2 million on capital projects, compared to $138.3 million
            in the first six months of 2013.

        --  As at June 30, 2014, Bellatrix had approximately 395,237 net
            undeveloped acres of land in Alberta, British Columbia and
            Saskatchewan.

        --  To facilitate moving our growing production base to the area
            third party gas processing plants, Bellatrix has purchased 21
            compressors in the field totaling 31,000 hp in the first half
            of 2014.  In addition the Company completed 55km of group
            pipelines.  In the second quarter the Company completed
            construction of an oil battery at 5-5-46-12W5M with a treating
            capacity of 2,800 bbl/d.

To view Bellatrix’s Gas Processing Infrastructure please click here.

Currently when all of the eleven third party plants are in full
operation Bellatrix has access to 213 mmcf/d of firm processing
capacity to process both the Company’s and our joint operator (partner)
gas. There is a further 179 mmcf/d of interruptible processing
capacity available on a first come first serve basis. This
interruptible capacity has recently become congested due to both system
constraints and the influx of new reserves and production in the area
due to significant drilling with the application of new horizontal
drilling and muti-stage fracing technology by all of the area
operators. The area plant throughputs are further impacted by
fluctuations in the TransCanada system pressures which are forecasted
to be high through the summer to accommodate their maintenance
programs.

In the second quarter of 2014, Bellatrix processed an average of 142.2
mmcf/d along with approximately 95 mmcf/d of partner gas. In the third
quarter following completion of the various plant turnarounds, the
Company is forecasting net production of approximately 175 mmcf/d given
the area plants have the capacity to process these volumes.

The system tightness is expected to continue until the Bellatrix Plant
Phase 1 comes online. All major gas plant equipment has been ordered
and is undergoing fabrication. The surface lease has been built to
meet the required specifications. Process packages are on schedule for
Q3 and Q4 2014 delivery. To date the construction of the gas plant is
on budget and on schedule for plant start-up on or before July 1, 2015.

$750.0 Million Short Form Base Shelf Prospectus and $172.6 Million
Bought Deal Financing

In May 2014, Bellatrix filed a short form base shelf prospectus (the
“$750 million Shelf Prospectus”) of up to $750.0 million, with the
securities regulatory authorities in each of the provinces of Canada
(other than Quebec) and a Registration Statement filed with the United
States Securities and Exchange Commission. The $750 million Shelf
Prospectus allows Bellatrix to offer and issue common shares,
subscription receipts, warrants and units (comprising any combination
of the foregoing securities), by way of one or more prospectus
supplements at any time during the 25-month period that the $750
million Shelf Prospectus remains in place.

Pursuant to a prospectus supplement to the $750 million Shelf
Prospectus, on June 5, 2014, Bellatrix closed a bought deal offering of
18,170,000 common shares of the Company (the “Common Shares”) at a
price of $9.50 per Common Share for aggregate gross proceeds of $172.6
million (the “Offering”), through a syndicate of underwriters. Net
proceeds of $165.5 million received from the Offering were utilized to
temporarily reduce outstanding indebtedness under the Company’s credit
facilities, thereby freeing up borrowing capacity that may be redrawn,
from time to time, to fund the Company’s ongoing capital expenditure
program and for general corporate purposes.

As at June 30, 2014, there was $577.4 million available on the $750
million Shelf Prospectus.

Credit Facility Increased 25% to $625 million

Based upon the Company’s semi-annual borrowing base review for May 31,
2014, Bellatrix increased its borrowing base and credit facilities to
$625 million from $500 million. This 25% increase of $125 million was
the result of Bellatrix’s strong 2013 drilling results continuing into
the first quarter of 2014, combined with benefits derived from the
acquisition of Angle Energy Inc. (“Angle”) in the fourth quarter of
2013, cumulatively delivering significant reserves and production
growth. The increased credit facilities will be available to finance
Bellatrix’s ongoing capital expenditures, working capital requirements
and for general corporate purposes.

The bank syndicate lenders approved the Company’s request to change the
term of the credit facilities to a 3 year facility, fully revolving
until maturity, and extendible annually at the Company’s option
(subject to lender approval), provided that the term after any
extension would not be more than 3 years. Concurrently with such
changes, the credit facilities were also amended to include certain
ongoing financial covenants that will require quarterly compliance.

Grafton Joint Venture Capital Investment Increase

On April 10, 2014, Bellatrix announced that Grafton elected to exercise
an option to increase committed capital investment to the Grafton Joint
Venture established during 2013 by an additional $50 million, for a
total commitment of $250 million, on the same terms and conditions as
the previously announced Grafton Joint Venture. Grafton’s increased
capital investment will continue to support the accelerated development
of a portion of Bellatrix’s extensive undeveloped land holdings.

The Grafton Joint Venture properties are located in the Willesden Green
and Brazeau areas of West-Central Alberta. After giving effect to the
exercise by Grafton of its option, Grafton was committed to
contributing 82%, or $250 million, to the $305 million Joint Venture to
participate in a Notikewin/Falher and Cardium well program. Under the
agreement, Grafton will earn 54% of Bellatrix’s working interest (“WI”)
in each well drilled in the development program until payout (being
recovery of Grafton’s capital investment plus an 8% return) on the
total program, reverting to 33% of Bellatrix’s WI after payout. At any
time after payout of the entire program, Grafton shall have the option
to elect to convert all wells from the 33% WI to a 17.5% Gross
Overriding Royalty on Bellatrix’s pre-Joint Venture WI. The effective
date of the initial agreement for the Joint Venture is July 1, 2013 and
had an initial term of 2 years. With the exercise of the $50 million
option, Bellatrix shall have until the end of the third anniversary of
the effective date to spend the additional capital.

Financial highlights for the three and six months ended June 30, 2014
include:

        --  Bellatrix's net profit for Q2 2014 was $38.3 million, compared
            to a net profit of $15.5 million in Q2 2013. For the first half
            of 2014, Bellatrix recognized a net profit of $63.4 million,
            compared to a net profit of $20.0 million in the same period of
            2013.

        --  Q2 2014 revenue before royalties and risk management contracts
            was $152.3 million, 105% higherthan the $74.6 million
            recognized in Q2 2013.  The increase in revenues between the
            periods was primarily due to significantly increased sales
            volumes for all products, in conjunction with higher realized
            prices for all commodities in Q2 2014 compared to Q2 2013.
            Revenue for the first six months of 2014 was $315.9 million, an
            increase of 125% from $140.1 million in the same period in
            2013.

        --  Funds flow from operations for Q2 2014 was $71.0 million ($0.40
            per basic share), up 94% from $36.6 million ($0.34 per basic
            share) in Q2 2013, and down 9% from $77.6 million ($0.45 per
            basic share) in Q1 2014.  The decrease in funds flow from
            operations between the first and second quarters of 2014 was
            due primarily to reduced natural gas and NGL prices impacting
            revenues and netbacks and higher finance expenses, partially
            offset by the impact of higher crude oil commodity prices,
            lower transportation and general and administrative expenses,
            and a lower net realized loss on commodity contracts.  The
            increase in funds flow from operations between the three months
            ended June 30, 2014 and the same period in 2013 was principally
            attributable to higher overall funds from operating netbacks,
            partially offset by a greater net loss on realized commodity
            contracts in the 2014 three month period, higher general and
            administrative expenses, and increased financing expenses.
            Funds flow from operations for the first half of 2014 was
            $148.7 million ($0.85 per basic share), up 101% from $74.1
            million ($0.69 per basic share)in the first six months of 2013.

        --  Crude oil, condensate and NGLs produced 57% and 56% of
            petroleum and natural gas sales revenue for the three and six
            month periods ended June 30, 2014, respectively.

        --  Production expenses for Q2 2014 were $7.80/boe ($25.8 million),
            compared to $8.64/boe ($17.4 million) for Q2 2013 and $8.12/boe
            ($25.6 million) for Q1 2014.  Production expenses for the six
            months ended June 30, 2014 were $7.96/boe ($51.4 million),
            compared to $8.65/boe ($32.4 million) for the same period in
            2013.

        --  Operating netbacks after including risk management for the six
            months ended June 30, 2014 were $25.43/boe, up from $22.58/boe
            in the first half of 2013.  Operating netbacks before risk
            management for the six months ended June 30, 2014 were
            $30.85/boe, compared with $21.04/boe in the same period in
            2013. The netback increased between the periods as a result of
            higher commodity prices and reduced production expenses,
            partially offset by higher royalties and transportation
            expenses.|

        --  Operating netbacks after including risk management for Q2 2014
            were $23.98/boe, up from $20.68/boe in Q2 2013.  Operating
            netbacks before risk management for Q2 2014 were $28.93/boe, up
            from $21.06/boe in Q2 2013.  The greater netback including risk
            management between the periods was primarily the result of
            higher commodity prices, reduced production expenses, partially
            offset by higher royalty expenses.

        --  G&A expenses for Q2 2014increased on a per boe basis to
            $1.37/boe ($4.5 million), compared to $1.24/boe ($2.5 million)
            for Q2 2013.  G&A expenses for the six months ended June 30,
            2014 were $1.56/boe ($10.1 million), compared to $1.62/boe
            ($6.1 million) in the same period in 2013.

        --  As at June 30, 2014, Bellatrix had $301.5 million undrawn on
            its total $625 million credit facilities.

        --  Total net debt as of June 30, 2014 was $363.4 million.

Commodity Price Risk Management

As of August 5, 2014, the Company has entered into the following
commodity price risk management arrangements:


    Type          Period     Volume          Price          Price     Index
                                             Floor        Ceiling

    Crude        January        500     $              $                WTI
    oil          1, 2014      bbl/d       93.30          93.30
    fixed        to Dec.                        US             US
                31, 2014

    Crude        January      1,500     $              $                WTI
    oil          1, 2014      bbl/d          94.00          94.00
    fixed        to Dec.                       CDN            CDN
                31, 2014

    Crude        January        500     $              $                WTI
    oil          1, 2014      bbl/d       95.00          95.00
    fixed        to Dec.                        US             US
                31, 2014

    Crude        January      1,500     $              $                WTI
    oil          1, 2014      bbl/d          95.22          95.22
    fixed        to Dec.                       CDN            CDN
                31, 2014

    Crude        January        500     $              $                WTI
    oil          1, 2014      bbl/d          98.30          98.30
    fixed        to Dec.                       CDN            CDN
                31, 2014

    Crude        January      1,000     $              $                WTI
    oil          1, 2014      bbl/d          99.50          99.50
    fixed        to Dec.                       CDN            CDN
                31, 2014

    Crude        January        500     $              $                WTI
    oil          1, 2014      bbl/d          99.60          99.60
    fixed        to Dec.                       CDN            CDN
                31, 2014

    Natural      January     20,000     $              $               AECO
    gas          1, 2014       GJ/d       3.30 CDN       3.30 CDN
    fixed        to Dec.
                31, 2014

    Natural      January     20,000     $              $               AECO
    gas          1, 2014       GJ/d       3.60 CDN       3.60 CDN
    fixed        to Dec.
                31, 2014

    Natural      July 1,     15,000     $              $               AECO
    gas          2014 to       GJ/d       3.71 CDN       3.71 CDN
    fixed       Dec. 31,
                    2014

    Natural     February     10,000     $              $               AECO
    gas          1, 2014       GJ/d       3.79 CDN       3.79 CDN
    fixed        to Dec.
                31, 2014

    Natural     February     10,000     $              $               AECO
    gas          1, 2014       GJ/d       3.80 CDN       3.80 CDN
    fixed        to Dec.
                31, 2014

    Natural     February     15,000     $              $               AECO
    gas          1, 2014       GJ/d       3.85 CDN       3.85 CDN
    fixed        to Dec.
                31, 2014

    Natural     February     10,000     $              $               AECO
    gas          1, 2014       GJ/d       3.84 CDN       3.84 CDN
    fixed        to Dec.
                31, 2014

    Natural     March 1,     10,000     $              $               AECO
    gas          2014 to       GJ/d       4.14 CDN       4.14 CDN
    fixed       Dec. 31,
                    2014

Outlook

Bellatrix continues to develop its core assets and conduct exploration
programs utilizing its large inventory of geological prospects.

2014 cash flow forecasts for the year have been updated to reflect the
recent softening natural gas prices due to the current cooler summer
weather conditions. 2014 funds flow from operations expectations have
been lowered to approximately $350 million or $1.90 per basic share. This represents a 144% increase over 2013 funds flow from operations of $143.5 million or $1.27 per basic share.

Based on an assumed 2014 average Edmonton Light oil price of $96.85/bbl
and AECO $4.34/GJ, average 2014 royalty rates of 18% and estimated 2014
operating costs of $116.5 million or $7.75 boe/d, the Company expects
to exit 2014 with total net debt of approximately $390 million or
approximately 1.0 times total net debt to annualized estimated fourth
quarter 2014 funds flow from operations.

For the remainder of 2014, Bellatrix will be active in drilling with 10
to 12 rigs operating in its two core resource plays, the Cardium light
oil play (Bellatrix is the second largest land holder with 338 net
sections in the Cardium) and Mannville condensate rich gas play,
utilizing horizontal drilling multi-fracturing technology. A revised
net capital budget of $515 million has been set for fiscal 2014. Based
on the timing of proposed expenditures, downtime for anticipated plant
turnarounds and normal production declines, execution of the 2014
budget is anticipated to provide 2014 average daily production of
approximately 41,000 boe/d and an exit rate of approximately 48,000
boe/d.

Value is constantly created as we expand with a dominating control of
our core area and infrastructure thereby managing our destiny and
future growth.

Raymond G. Smith, P. Eng.

President and CEO

August 5, 2014

Note:

A conference call to discuss Bellatrix’s 2014 second quarter financial
and operating results and address investor questions will be held on
August 6, 2014 at 9:00 am MDT/11:00 am EDT. To participate, please call
toll-free 1-888-390-0546 or 416-764-8688. The conference call will also
be recorded and available until August 13, 2014 by calling
1-888-390-0541 or 416-764-8677 and entering passcode 631737 followed by
the pound sign.

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

MANAGEMENT’S DISCUSSION AND ANALYSIS

August 5, 2014 – 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 condensed consolidated financial
statements of the Company for the three and six months ended June 30,
2014 and the audited consolidated financial statements of the Company
for the years ended December 31, 2013 and 2012, 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, August 5, 2014. 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 contains the terms of operating
netbacks and total capital expenditures – net, which are not recognized
measures under generally accepted accounting principles (“GAAP”).
Operating netbacks are calculated by subtracting royalties,
transportation, and operating expenses from revenues before other
income. Management believes this measure is a useful supplemental
measure of the amount of revenues received after transportation,
royalties and operating expenses. Readers are cautioned, however, that
this measure should not be construed as an alternative to net profit or
loss determined in accordance with GAAP as a measure of performance.
Bellatrix’s method of calculating this measure may differ from other
entities, and accordingly, may not be comparable to measures used by
other companies. Total capital expenditures- net includes the cash
impact of capital expenditures and property dispositions, as well as
the non-cash capital impacts of corporate acquisitions, adjustments to
the Company’s decommissioning liabilities, and share based
compensation.

This Management’s Discussion and Analysis and the accompanying report to
shareholders and financial statements also contain the terms total net
debt and net debt which also are not recognized measures under GAAP.
Therefore reference to the non-GAAP measures of net debt or total net
debt may not be comparable with the calculation of similar measures for
other entities. The Company’s 2014 calculation of total net debt
excludes deferred lease inducements, long-term commodity contract
liabilities, decommissioning liabilities, the long-term finance lease
obligation, and the deferred tax liability. Net debt and total net
debt include the adjusted working capital deficiency (excess). The
adjusted working capital deficiency (excess) is a non-GAAP measure
calculated as net working capital deficiency (excess) excluding
short-term commodity contract assets and liabilities, current finance
lease obligation, and current deferred lease inducements. For the
comparative 2013 calculation, net debt also excludes the liability
component of convertible debentures which were then outstanding.
Management believes these measures are useful supplementary measures of
the total amount of current and long-term debt.

This Management’s Discussion and Analysis and the accompanying report to
shareholders and financial statements also 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 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.

DISCLOSURES: Due to immateriality, The Company has combined the
previously separated disclosure of “Heavy Oil” revenue, volumes,
pricing, production expenses and royalties into “Crude Oil and
condensate” revenue, volumes, pricing, production expenses and
royalties for the three and six month periods ending June 30, 2014.
Prior periods have been adjusted for comparative purposes.

JOINT ARRANGEMENTS: Bellatrix is a partner of the following joint
arrangements, which have been classified under IFRS as joint
operations. This classification is on the basis that the arrangement
is not conducted through a separate legal entity and the partners are
legally obligated to pay their share of costs incurred and take their
share of output produced from the various production areas. For
purposes of disclosure throughout the MD&A and financial statements,
Bellatrix has referred to these arrangements by the common oil and gas
industry term of joint ventures.


        GRAFTON JOINT VENTURE - On April 10, 2014, Bellatrix announced that
        Grafton Energy Co I Ltd. ("Grafton") elected to exercise an option
        to increase committed capital investment to the joint venture (the
        "Grafton Joint Venture") with Grafton established during 2013 by an
        additional $50 million, for a total commitment of $250 million, on
        the same terms and conditions as the previously announced Grafton
        Joint Venture.  The Grafton Joint Venture properties are in the
        Willesden Green and Brazeau areas of West-Central Alberta, whereby
        Grafton will contribute 82%, or $250 million, to the joint venture
        to participate in a Notikewin/Falher and Cardium well program.
        Under the agreement, Grafton will earn 54% of Bellatrix's working
        interest ("WI") in each well drilled in the well program until
        payout (being recovery of Grafton's capital investment plus an 8%
        internal rate of return) on the total program, reverting to 33% of
        Bellatrix's WI after payout. At any time after payout of the entire
        program, Grafton shall have the option to elect to convert all
        wells from the 33% WI to a 17.5% Gross Overriding Royalty ("GORR")
        on Bellatrix's pre-Grafton Joint Venture WI. 

        DAEWOO AND DEVONIAN PARTNERSHIP - Bellatrix has a joint venture
        arrangement (the "Daewoo and Devonian Partnership") with Canadian
        subsidiaries of two Korean entities, Daewoo International
        Corporation ("Daewoo") and Devonian Natural Resources Private
        Equity Fund ("Devonian") in the Baptiste area of West-Central
        Alberta, whereby Daewoo and Devonian own a combined 50% of
        Bellatrix's WI share of producing assets, an operated compressor
        station and gathering system and related land acreage.

        TROIKA JOINT VENTURE - Bellatrix has a joint venture (the "Troika
        Joint Venture") with TCA Energy Ltd. ("TCA")  in the Ferrier
        Cardium area of West-Central Alberta, whereby Troika will
        contribute 50% or $120 million towards a capital program for
        drilling of an expected 63 gross wells and will receive a 35% WI
        until payout (being recovery of TCA's capital investment plus a 15%
        internal rate of return) on the total program, and thereafter
        reverting to 25% of Bellatrix's WI.

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,
operations and strategy, drilling plans and the timing thereof,
commodity price risk management strategies, 2014 capital expenditure
budget, the nature of expenditures and the method of financing thereof,
anticipated liquidity of the Company and various matters that may
impact such liquidity, expected 2014 production expenses and general
and administrative expenses, 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, the Company’s drilling inventory
and capital required therefor, estimated capital expenditures and wells
to be drilled under joint venture agreements, the ability to fund the
2014 capital expenditure program utilizing various available sources of
capital, expected 2014 average daily production and exit rate, plans to
continue commodity risk management strategies, timing of
redetermination of borrowing base, plans for additional facilities and
infrastructure and timing and effects thereof, expectation that well
rate will increase as production space becomes available, expectation
that TransCanada system pressures will continue to be high through the
summer, expected net production through processing infrastructure,
expected 2014 funds flow from operations and funds flow from operations
per share, exit 2014 net debt and ratio of total net debt to annualized
estimated fourth quarter 2014 funds flow from operations may constitute
forward-looking statements under applicable securities laws. Included
herein are estimates of Bellatrix’s 2014 funds flow from operations and
funds flow from operations per share, exit 2014 net debt and ratio of
total net debt to annualized estimated fourth quarter 2014 funds flow
from operations based on the assumptions provided herein and other
assumptions utilized in arriving at Bellatrix’s budget. To the extent
such estimates constitute a financial outlook, they were approved by
management on August 5, 2014 and are included herein to provide readers
with an understanding of the anticipated funds available to Bellatrix
to fund its operations and readers are cautioned that the information
may not be appropriate for other purposes.
Forward-looking statements necessarily involve risks, including, without
limitation, risks associated with 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), through the SEC website (www.sec.gov, 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.

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

$750.0 Million Short Form Base Shelf Prospectus and $172.6 Million
Bought Deal Financing

In May 2014, Bellatrix filed a short form base shelf prospectus (the
“$750 million Shelf Prospectus”) of up to $750 million, with the
securities regulatory authorities in each of the provinces of Canada
(other than Quebec) and a Registration Statement filed with the United
States Securities and Exchange Commission. The $750 million Shelf
Prospectus allows Bellatrix to offer and issue common shares,
subscription receipts, warrants and units (comprising any combination
of the foregoing securities), by way of one or more prospectus
supplements at any time during the 25-month period that the $750
million Shelf Prospectus remains in place.

Pursuant to a prospectus supplement to the $750 million Shelf
Prospectus, on June 5, 2014, Bellatrix closed a bought deal offering of
18,170,000 common shares of the Company (the “Common Shares”) at a
price of $9.50 per Common Share for aggregate gross proceeds of $172.6
million (the “Offering”), through a syndicate of underwriters. Net
proceeds of $165.5 million received from the Offering were utilized to
temporarily reduce outstanding indebtedness under the Company’s credit
facilities, thereby freeing up borrowing capacity that may be redrawn,
from time to time, to fund the Company’s ongoing capital expenditure
program and for general corporate purposes.

As at June 30, 2014, there was $577.4 million available on the $750
million Shelf Prospectus.

Credit Facility Increased 25% to $625 million

Based upon the Company’s semi-annual borrowing base review for May 31,
2014, Bellatrix increased its borrowing base and credit facilities to
$625 million from $500 million. This 25% increase of $125 million was
the result of Bellatrix’s strong 2013 drilling results continuing into
the first quarter of 2014, combined with benefits derived from the
acquisition of Angle Energy Inc. (“Angle”) in the fourth quarter of
2013, cumulatively delivering significant reserves and production
growth. The increased credit facilities will be available to finance
Bellatrix’s ongoing capital expenditures, working capital requirements
and for general corporate purposes.

The bank syndicate lenders approved the Company’s request to change the
term of the credit facilities to a 3 year facility, fully revolving
until maturity, and extendible annually at the Company’s option
(subject to lender approval), provided that the term after any
extension would not be more than 3 years. Concurrently with such
changes, the credit facilities were also amended to include certain
ongoing financial covenants that will require quarterly compliance.

Grafton Joint Venture Capital Investment Increase

On April 10, 2014, Bellatrix announced that Grafton elected to exercise
an option to increase committed capital investment to the Grafton Joint
Venture established during 2013 by an additional $50 million, for a
total commitment of $250 million, on the same terms and conditions as
the previously announced Grafton Joint Venture. Grafton’s increased
capital investment will continue to support the accelerated development
of a portion of Bellatrix’s extensive undeveloped land holdings.

The Grafton Joint Venture properties are located in the Willesden Green
and Brazeau areas of West-Central Alberta. After giving effect to the
exercise by Grafton of its option, Grafton was committed to
contributing 82%, or $250 million, to the $305 million Joint Venture to
participate in a Notikewin/Falher and Cardium well program. Under the
agreement, Grafton will earn 54% of Bellatrix’s working interest (“WI”)
in each well drilled in the development program until payout (being
recovery of Grafton’s capital investment plus an 8% return) on the
total program, reverting to 33% of Bellatrix’s WI after payout. At any
time after payout of the entire program, Grafton shall have the option
to elect to convert all wells from the 33% WI to a 17.5% Gross
Overriding Royalty on Bellatrix’s pre-Joint Venture WI. The effective
date of the initial agreement for the Joint Venture is July 1, 2013 and
had an initial term of 2 years. With the exercise of the $50 million
option, Bellatrix shall have until the end of the third anniversary of
the effective date to spend the additional capital.

Blaze Pipeline

On April 2, 2014, Bellatrix announced the completion of a 1.6 km river
bore and a 7 km pipeline in conjunction with Blaze Energy Ltd.
(“Blaze”), completing a 55 km pipeline to tie-in Bellatrix natural gas
for processing in the Blaze gas plant located at 4-31-48-12W5.
Bellatrix has secured firm processing capacity of 100 mmcf/d in the
plant. The pipeline was commissioned on April 1, 2014 reaching 35
mmcf/d on the first day of operations. Bellatrix was delivering up to
84 mmcf/d (including partner gas) at its peak to the Blaze plant during
the second quarter of 2014. As of August 1, 2014, the plant was
accepting up to 80 mmcf/d at the inlet of the facility.

Second Quarter 2014 Financial and Operational Results

Sales Volumes

Sales volumes for the three months ended June 30, 2014 averaged 36,342
boe/d compared to 22,102 boe/d in the same period of 2013, representing
a 65% increase. Total crude oil, condensate and NGLs averaged
approximately 35% of sales volumes for the 2014 second quarter,
compared to 28% in the corresponding period in 2013. Sales volumes for
the six months ended June 30, 2014 averaged 35,699 boe/d, compared to
20,730 boe/d for the same period in 2013, representing a 72% increase.
The increase in total sales volumes experienced in the three and six
month periods was primarily a result of a $151.9 million increase in
capital expenditures over the comparable six month period ending June
30, 2013, attributable in part to the Grafton Joint Venture, the Daewoo
and Devonian Partnership, and the Troika Joint Venture entered into
after the second quarter of 2013, Bellatrix’s continued drilling
success achieved in the Cardium and Notikewin/Falher resource plays,
and additional sales volumes acquired through the acquisition of Angle
in December, 2013, offset partially by outages and delays due to
unscheduled temporary plant turnarounds. Capital expenditures for the
six months ended June 30, 2014 were $290.2 million, compared to $138.3
million during the same period of 2013.


    Sales Volumes

                              Three months ended June Six months ended June
                                                  30,                   30,

                                 2014            2013    2014          2013

    Crude oil and    (bbls/d)   6,686           3,862   6,829         3,886
    condensate

    NGLs (excluding  (bbls/d)   5,954           2,344   5,695         2,209
    condensate)

    Total crude oil, (bbls/d)  12,640           6,206  12,524         6,095
    condensate and
    NGLs

    Natural gas       (mcf/d) 142,214          95,376 139,051        87,812

    Total (6:1)       (boe/d)  36,342          22,102  35,699        20,730

In the first six months of 2014, Bellatrix posted a 100% success rate
drilling and/or participating in 63 gross (34.56 net) wells, resulting
in 47 gross (27.38 net) Cardium light oil horizontal oil wells, 14
gross (6.02 net) Notikewin/Falher liquids-rich gas wells, and 2 gross
(1.15 net) Cardium gas wells. During the second quarter of 2014,
Bellatrix drilled and/or participated in 19 gross (9.00 net) wells,
consisting of 11 gross (5.51 net) Cardium oil wells, 7 gross (2.99 net)
Notikewin/Falher liquids-rich gas wells, and 1 gross (0.50 net) Cardium
gas well.

By comparison, during the first half of 2013, Bellatrix drilled and/or
participated in 26 gross (22.08 net) wells, which included 23 gross
(15.98 net) Cardium light oil horizontal wells and 3 gross (2.10 net)
Notikewin/Falher liquids-rich gas horizontal wells. During the second
quarter of 2013, Bellatrix drilled and/or participated in 5 gross (5
net) Cardium oil wells.

For the three months ended June 30, 2014, crude oil, condensate and NGL
sales volumes increased by approximately 104%, averaging 12,640 bbls/d
compared to 6,206 bbls/d in the second quarter of 2013. During the
first six months of 2014, crude oil, condensate and NGL sales volumes
increased by approximately 106%, averaging 12,524 bbls/d compared to
6,095 bbls/d in the first half of 2013. The weighting towards crude
oil, condensate and NGLs for the three and six months ended June 30,
2014 was 35% for both periods, compared to 28% and 29% in the same
periods in 2013, respectively.

Sales of natural gas averaged 142.2 mmcf/d during the second quarter of
2014, compared to 95.4 mmcf/d in the same period in 2013, an increase
of 50%. Sales of natural gas increased by 59% during the first six
months of 2014 to 139.1 mmcf/d, compared to 87.8 mmcf/d in the same
period of 2013.

Bellatrix experienced significant outages and delays due to unscheduled
temporary plant turnarounds at some of Bellatrix’s 3(rd) party operated gas processing plants during the months of May and June
2014.

For 2014, Bellatrix will continue to be active in drilling with 10 to 12
rigs operating in its two core resource plays, the Cardium oil and
Mannville condensate rich gas, utilizing horizontal drilling
multi-fracturing technology. A revised net capital budget of $515
million has been set for fiscal 2014. Based on the timing of proposed
expenditures, downtime for anticipated plant turnarounds and normal
production declines, execution of the revised $515 million 2014 budget
is anticipated to provide 2014 average daily production of
approximately 41,000 boe/d and an exit rate of approximately 48,000
boe/d.

Commodity Prices

Average Commodity Prices


                       Three months ended June
                                           30,    Six months ended June 30,

                                             %
                        2014     2013   Change     2014     2013   % Change

    Exchange rate
    (US$/CDN$)        0.9164   0.9774      (7)   0.9115   0.9846        (8)

    Crude oil:                                                             

      WTI (US$/bbl)   102.99    94.17       10   100.84    94.26          7

      Edmonton par
      - light oil
      ($/bbl)         106.67    92.94       15   103.42    90.77         14

    Bellatrix's
    average prices
    ($/bbl)                                                                

        Crude oil
        and
        condensate    103.25    93.48       10   100.72    91.83         10

        NGLs
        (excluding
        condensate)    42.70    36.20       18    49.72    39.05         28

        Total crude
        oil and
        NGLs           74.73    71.84        4    77.53    72.70          7

        Total crude
        oil and
        NGLs
        (including
        risk
        management
        (1))           67.71    73.10      (8)    71.14    73.26        (3)

    Natural gas:                                                           

    NYMEX
    (US$/mmbtu)         4.58     4.02       14     4.65     3.76         24

    AECO daily
    index
    (CDN$/mcf)          4.69     3.53       33     5.20     3.36         55

    AECO monthly
    index
    (CDN$/mcf)          4.68     3.59       31     4.72     3.33         42

        Bellatrix's
        average
        price
        ($/mcf)         5.04     3.85       31     5.45     3.69         48

        Bellatrix's
        average
        price
        (including
        risk
        management
        (1))
        ($/mcf)         4.40     3.68       20     4.64     4.01         16

    (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 crude oil and condensate, Bellatrix recorded an average price of
$103.25/bbl before commodity price risk management contracts during the
three months ended June 30, 2014, 10% higher than the average price of
$93.48/bbl received in the second quarter of 2013. In comparison, the
Edmonton par price increased by 15%, and the average WTI crude oil
benchmark price increased by 10% between the 2014 and 2013 second
quarters. During the six months ended June 30, 2014, Bellatrix
recorded an average price of $100.72/bbl before commodity price risk
management contracts for crude oil and condensate, 10% higher than the
average price of $91.83/bbl received in the first six months of 2013.
In comparison, the Edmonton par price increased by 14%, and the average
WTI crude oil benchmark price increased by 7% between the first half of
2014 and 2013.

The average US$/CDN$ foreign exchange rate was 0.9115 for the six months
ended June 30, 2014, a decrease of 8% compared to an average rate of
0.9846 in the corresponding period in 2013.

For NGLs (excluding condensate), Bellatrix recorded an average price of
$42.70/bbl during the three months ended June 30, 2014, an increase of
18% from the $36.20/bbl received in the comparative 2013 period. For
the six months ended June 30, 2014, Bellatrix received an average NGL
price of $49.72/bbl, a 28% increase from the $39.05/bbl received in the
first half of 2013. The overall increase in NGL pricing between the
2014 and 2013 six-month periods is largely attributable to changes in
NGL market supply conditions between the periods.

Bellatrix’s natural gas sales are priced with reference to the daily or
monthly AECO indices. Bellatrix’s natural gas sold has a higher heat
content than the industry average, which results in slightly higher
prices per mcf than the daily AECO index. During the second quarter of
2014, the AECO daily reference price increased by 33% and the AECO
monthly reference price increased by approximately 31% compared to the
second quarter of 2013. Bellatrix’s natural gas average sales price
before commodity price risk management contracts for the three months
ended June 30, 2014 increased by 31% to $5.04/mcf compared to $3.85/mcf
in the second quarter of 2013. During the six months ended June 30,
2014, the AECO daily reference price increased by 55% and the AECO
monthly reference price increased by 42% compared to the same period in
2013. Bellatrix’s natural gas average sales price before commodity
price risk management contracts for the first six months of 2014
increased by 48% to $5.45/mcf compared to $3.69/mcf in the first half
of 2013. Bellatrix’s natural gas average prices after including
commodity price risk management contracts for the three and six months
ended June 30, 2014 were $4.40/mcf and $4.64/mcf, compared to $3.68/mcf
and $4.01/mcf in the same periods in 2013, respectively.

Revenue

Revenue before other income, royalties and commodity price risk
management contracts for the three months ended June 30, 2014 was
$151.2 million, an increase of 104% from the $74.0 million realized in
the second quarter of 2013. Revenue before other income, royalties and
commodity price risk management contracts for the six months ended June
30, 2014 was $312.9 million, 125% higher than the $138.9 million
realized in the first half of 2013. In the first six months of 2014,
Bellatrix realized increased light oil, condensate, natural gas, and
NGL sales volumes due primarily to Bellatrix’s ongoing drilling success
and additional sales volumes realized from the acquisition of Angle in
December of 2013. The higher revenue before other income between the
2014 and 2013 six month periods was attributable to these increases to
sales volumes for all products in conjunction with higher realized
prices for all commodities experienced in the first six months of 2014.

Crude oil and NGLs revenue before other income, royalties and commodity
price risk management contracts for the three months ended June 30,
2014 increased from the same period in 2013 by approximately 112%,
resulting from 104% higher sales volumes in conjunction with increased
realized prices for all products when compared to the second quarter of
2013. Revenue before other income, royalties and commodity price risk
management contracts for crude oil and NGLs for the six months ended
June 30, 2014 increased by 119% compared to the first six months of
2013, resulting from 106% higher sales volumes in conjunction with
increased realized prices for all products when compared to the first
half of 2013.

In the three and six month periods ending June 30, 2014, total crude
oil, condensate and NGL revenues contributed 57% and 56% of total
revenue (before other income), compared to 55% and 58% in the same
periods in 2013, respectively.

Natural gas revenue before other income, royalties and commodity price
risk management contracts for the three months ended June 30, 2014
increased by approximately 95% compared to the second quarter of 2013
as a result of a 31% increase in realized gas prices before risk
management in conjunction with a 50% increase in sales volumes between
the periods. For the six months ended June 30, 2014, natural gas
revenue before other income, royalties and commodity price risk
management contracts increased by approximately 134% compared to the
first half of 2013 as a result of a 48% increase in realized gas prices
before risk management in conjunction with a 59% increase in sales
volumes between the periods.


                       Three months ended June Six months ended June 30,
                                           30,

    ($000s)               2014            2013    2014              2013

    Crude oil and       62,817          32,849 124,488            64,590
    condensate

    NGLs (excluding     23,138           7,724  51,249            15,613
    condensate)

    Crude oil and NGLs  85,955          40,573 175,737            80,203

    Natural gas         65,255          33,404 137,192            58,682

    Total revenue      151,210          73,977 312,929           138,885
    (before other
    income)

    Other income (1)     1,101             587   2,967             1,222

    Total revenue      152,311          74,564 315,896           140,107
    (before royalties
    and risk
    management)

    (1) Other income 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 outstanding as of August 5, 2014 is shown in
the following tables:


    Natural gas

    Average Volumes (GJ/d)

                                            Q3 2014      Q4 2014

    Fixed                                   110,000      110,000

     Average Price ($/GJ AECO C)

                                            Q3 2014      Q4 2014

    Fixed price                                3.70         3.70

    Crude oil and liquids  

    Average Volumes (bbls/d)

                                            Q3 2014      Q4 2014

    Fixed (CDN$)                              5,000        5,000

    Fixed (US$)                               1,000        1,000

    Average Price ($/bbl WTI)

                                            Q3 2014      Q4 2014

    Fixed price (CDN$/bbl)                    96.46        96.46

    Fixed price (US$/bbl)                     94.15        94.15

As at June 30, 2014, the fair value of Bellatrix’s outstanding commodity
contracts was a net unrealized liability of $25.6 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 June 30, 2014 and will
differ from what will eventually be realized. Changes in the fair
value of the commodity contracts are recognized in the Condensed
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 six months ended June 30, 2014 and 2013 as reflected in
the Condensed Consolidated Statements of Comprehensive Income:


    Commodity contracts

    Three months ended June 30, 2014

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

    Realized cash loss on
    contracts                                  (8,074)     (8,287) (16,361)

    Unrealized gain on contracts
    (3)                                          2,952      12,044   14,996

    Total gain (loss) on commodity
    contracts                                  (5,122)       3,757  (1,365)

    Commodity contracts

    Three months ended June 30, 2013

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

    Realized cash gain (loss) on
    contracts                                      709     (1,494)    (785)

    Unrealized gain (loss) on
    contracts (3)                                (490)       6,482    5,992

    Total gain on commodity
    contracts                                      219       4,988    5,207

    Commodity contracts

    Six months ended June 30, 2014

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

    Realized cash loss on
    contracts (1)                             (14,490)    (20,509) (34,999)

    Unrealized loss on contracts
    (3)                                        (3,113)     (5,567)  (8,680)

    Total loss on commodity
    contracts                                 (17,603)    (26,076) (43,679)

    Commodity contracts

    Six months ended June 30, 2013

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

    Realized cash gain on
    contracts (2)                                  621       5,096    5,717

    Unrealized gain (loss) on
    contracts (3)                                1,517     (7,824)  (6,307)

    Total gain (loss) on commodity
    contracts                                    2,138     (2,728)    (590)

    (1) In January 2014, the Company settled a 1,500 bbl/d $105.00 US crude
        call
        option for the term of February to December 31, 2014 for US $0.5
        million.

    (2) In January 2013, the Company crystalized and realized $6.5 million
        in cash
        proceeds by resetting the fixed prices on natural gas   commodity
        price risk
        management contracts for the period from April 1, 2013 through to
        October
        31, 2013.

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

Royalties

For the three months ended June 30, 2014, total royalties were $27.0
million compared to $12.6 million incurred in the second quarter of
2013. Overall royalties as a percentage of revenue (after
transportation costs) in the second quarter of 2014 were 18% compared
with 17% in the same period in 2013. For the six months ended June 30,
2014, total royalties were $54.4 million compared to $24.3 million
incurred in the first six months of 2013. Overall royalties as a
percentage of revenue (after transportation costs) in the first half of
2014 were 17%, compared with 18% in the same period in 2013.

Natural gas royalties in the three months ended June 30, 2014 were
increased by $1.3 million for annual gas cost allowance adjustments.
Excluding these adjustments, the average natural gas and overall
corporate royalty rate percentages for the second quarter of 2014 would
be 15% and 17%, respectively. Natural gas royalties in the three
months ended June 30, 2013 were reduced by $1.1 million for annual gas
cost allowance adjustments. Excluding these adjustments, the average
natural gas and overall corporate royalty rate percentages for the
second quarter of 2013 would be 9% and 19%, respectively.

Crude oil, condensate and NGL royalties, and total royalties recognized
in the second quarter of 2014 were increased by $2.3 million for
adjustments relating to prior period 2012 and 2013 estimates of
condensate and NGL royalties for Ferrier area wells paying Indian Oil
and Gas Canada (“IOGC”) royalties with royalty incentive programs.
These adjustments arose as a result of clarification of the
interpretation of the allowable deductions in certain contracts.
Excluding these adjustments, the average crude oil, condensate and NGL
royalty and corporate royalty rate percentages were 16% and 17%,
respectively.


    Royalties by          Three months ended June Six months ended June 30,
    Commodity Type                            30,

    ($000s, except where    2014             2013   2014               2013
    noted)

    Crude oil, condensate 16,198           10,872 34,982             19,573
    and NGLs

      $/bbl                14.08            19.25  15.43              17.74

      Average crude oil,
      condensate and
        NGLs royalty rate
      (%)                     19               27     20                 25

    Natural Gas           10,817            1,689 19,420              4,773

      $/mcf                 0.84             0.19   0.77               0.30

      Average natural gas     17                5     14                  8
      royalty rate (%)

    Total                 27,015           12,561 54,402             24,346

    Total $/boe             8.17             6.25   8.42               6.49

    Average total royalty     18               17     17                 18
    rate (%)

    Royalties by Type

                                                Three months     Six months
                                              ended June 30, ended June 30,

    ($000s)                                     2014    2013   2014    2013

    Crown royalties                            9,524   2,994 18,072   6,113

    Indian Oil and Gas Canada royalties        6,419   4,438 10,587   7,160

    Freehold & GORR                           11,072   5,129 25,743  11,073

    Total                                     27,015  12,561 54,402  24,346

The Company’s light crude oil, condensate and NGLs, and natural gas
royalties are impacted by lower royalties on more recent wells in their
early years of production under the Alberta royalty incentive program.
This is offset by increased royalty rates on wells coming off initial
royalty incentive rates and wells drilled on Ferrier lands with higher
combined IOGC and GORR royalty rates.


    EXPENSES

                             Three months ended June Six months ended June
                                                 30,                   30,

    ($000s)                    2014             2013   2014           2013

    Production               25,799           17,383 51,428         32,441

    Transportation            2,721            1,662  7,758          3,107

    General and               4,536            2,499 10,061          6,085
    administrative

    Interest and financing
    charges(1)                4,866            3,542  8,593          6,586

    Share-based compensation  2,328              241  4,837          1,691

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

    Expenses per boe

                               Three months ended Six months ended June
                                         June 30,                   30,

    ($ per boe)                2014          2013 2014             2013

    Production                 7.80          8.64 7.96             8.65

    Transportation             0.82          0.83 1.20             0.83

    General and administrative 1.37          1.24 1.56             1.62

    Interest and financing     1.47          1.76 1.33             1.75
    charges

    Share-based compensation   0.70          0.12 0.75             0.45

Production Expenses

For the three and six months ended June 30, 2014, production expenses
totaled $25.8 million ($7.80/boe) and $51.4 million ($7.96/boe),
compared to $17.4 million ($8.64/boe) and $32.4 million ($8.65/boe) in
the three and six months ended June 30, 2013, respectively. In the
three and six month periods ended June 30, 2014, production expenses
increased overall but decreased on a per boe basis when compared to the
same periods in 2013. The decrease in production expenses per boe
between the 2013 and 2014 periods is due to continued field
optimization projects and increased production in areas of Ferrier and
Harmattan with lower production expenses.

Bellatrix is targeting production expenses of approximately $116.5
million ($7.75/boe) in the 2014 year, which is a reduction from the
$8.74/boe production expenses incurred for the 2013 year. This is
based upon assumptions of estimated 2014 average production of
approximately 41,000 boe/d, continued field optimization work and
planned capital expenditures in producing areas which are anticipated
to lower production expenses.


    Production Expenses by Commodity Type

                                                   Three months      Six months
                                                 ended June 30,  ended June 30,

    ($000s, except where noted)                     2014   2013    2014    2013

    Crude oil, condensate and NGLs                 8,675  7,621  17,799  14,748

     $/bbl                                          7.54  13.50    7.85   13.37

    Natural gas                                   17,124  9,762  33,629  17,693

     $/mcf                                          1.32   1.12    1.34    1.11

    Total Production                              25,799 17,383  51,428  32,441
    Expenses                                    

     Total $/boe                                    7.80   8.64    7.96    8.65

    Total Production Expenses                     25,799 17,383  51,428  32,441

    Processing and other third party income (1)  (1,101)  (587) (2,967) (1,222)

    Total after deducting processing and other    24,698 16,796  48,461  31,219
    third party income

    Total $/boe                                     7.47   8.35    7.50    8.32

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

Transportation

Transportation expenses for the three and six months ended June 30, 2014
were $2.7 million ($0.82/boe) and $7.8 million ($1.20/boe), compared to
$1.7 million ($0.83/boe) and $3.1 million ($0.83/boe) in the same
periods in 2013, respectively. The increase in transportation costs per
boe between the six month periods of 2013 and 2014 was due to increased
fuel costs resulting from higher natural gas pricing realized during
the first quarter of 2014, as well as higher hauling costs which were
initially necessary for crude oil and associated products produced from
wells which began producing in the first six months of 2014.

Operating Netback


    Operating Netback - Corporate (before risk management)

                       Three months ended June Six months ended June 30,
                                           30,

    ($/boe)              2014             2013   2014               2013

    Sales               45.72            36.78  48.43              37.01

    Transportation     (0.82)           (0.83) (1.20)             (0.83)

    Royalties          (8.17)           (6.25) (8.42)             (6.49)

    Production expense (7.80)           (8.64) (7.96)             (8.65)

    Operating netback   28.93            21.06  30.85              21.04

For the three months ended June 30, 2014, the corporate operating
netback (before commodity risk management contracts) was $28.93/boe
compared to $21.06/boe in the second quarter of 2013. The 37%
increased netback was primarily the result of higher commodity prices
and lower production and transportation expenses, partially offset by
increased royalty expenses. After including commodity risk management
contracts, the corporate operating netback for the second quarter of
2014 was $23.98/boe compared to $20.68/boe in the same period in 2013.
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 six months ended June 30, 2014, the corporate operating netback
(before commodity risk management contracts) was $30.85/boe compared to
$21.04/boe in the same period in 2013. The 47% increased netback was
primarily the result of higher commodity prices and lower production
expenses, partially offset by increased transportation and royalty
expenses. After including commodity risk management contracts, the
corporate operating netback for the first six months of 2014 was
$25.43/boe compared to $22.58/boe in the same period in 2013.


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

                       Three months ended June Six months ended June 30,
                                           30,

    ($/bbl)               2014            2013    2014              2013

    Sales                74.73           71.84   77.53             72.70

    Transportation      (0.52)          (0.85)  (1.20)            (0.89)

    Royalties          (14.08)         (19.25) (15.43)           (17.74)

    Production expense  (7.54)         (13.49)  (7.85)           (13.37)

    Operating netback    52.59           38.25   53.05             40.70

Operating netback for crude oil, condensate and NGLs averaged $52.59/bbl
for the three months ended June 30, 2014, a 37% increase from
$38.25/bbl realized in the second quarter of 2013. The increased
netback was primarily attributable to higher commodity prices as well
as reduced production, royalty and transportation expenses. After
including commodity price risk management contracts, operating netback
for crude oil, condensate, and NGLs for the second quarter of 2014
increased to $45.56/bbl compared to $39.50/bbl in the same period in
2013.

Operating netback for crude oil, condensate and NGLs increased by 30% to
$53.05/bbl for the six months ended June 30, 2014 from $40.70/bbl
realized in the second quarter of 2013. The increased netback was
primarily attributable to commodity prices and reduced production and
royalty expenses, partially offset by higher transportation expenses.
After including commodity price risk management contracts, operating
netback for crude oil, condensate, and NGLs for the first half of 2014
increased to $46.65/bbl compared to $41.26/bbl in the same period in
2013.


    Operating Netback - Natural Gas (before risk management)

                       Three months ended June Six months ended June 30,
                                           30,

    ($/mcf)              2014             2013   2014               2013

    Sales                5.04             3.85   5.45               3.69

    Transportation     (0.16)           (0.14) (0.20)             (0.14)

    Royalties          (0.84)           (0.19) (0.77)             (0.30)

    Production expense (1.32)           (1.12) (1.34)             (1.11)

    Operating netback    2.72             2.40   3.14               2.14

For the three months ended June 30, 2014, operating netback for natural
gas was $2.72/mcf, an increase of 13% from $2.40/mcf realized in the
second quarter of 2013. The increase reflected increased natural gas
prices, partially offset by increased production, transportation, and
royalty expenses. After including commodity risk management contracts,
operating netback for natural gas for the three months ended June 30,
2014 decreased to $2.08/mcf, compared to $2.22/mcf in the same period
in 2013.

For the six months ended June 30, 2014, operating netback for natural
gas increased by 47% to $3.14/mcf, compared to $2.14/mcf realized in
the first six months of 2013. The increase reflected increased natural
gas prices, partially offset by increased production, transportation,
and royalty expenses. After including commodity risk management
contracts, operating netback for natural gas for the first half of 2014
decreased to $2.33/mcf, compared to $2.47/mcf in the first six months
of 2013.

General and Administrative

General and administrative (“G&A”) expenses (after capitalized G&A and
recoveries) for the three and six months ended June 30, 2014 were $4.5
million ($1.37/boe) and $10.1 million ($1.56/boe), compared to $2.5
million ($1.24/boe) and $6.1 million ($1.62/boe) in the same periods of
2013, respectively. The higher G&A expenses in the second quarter of
2014 were primarily reflective of higher compensation costs and related
staffing costs as Bellatrix’s headcount has increased by 67%, as well
as additional office rent, partially offset by increased recoveries and
capitalization. On a per boe basis, G&A for the three months ended June
30, 2014 increased by 10% when compared to the same period in 2013. The
increase was primarily a result of higher overall costs, which more
than offset the higher average sales volumes realized between the 2013
and 2014 periods.

For 2014, the Company is anticipating G&A expenses after capitalization
and recoveries to be approximately $25.0 million ($1.67/boe) based on
estimated 2014 average production volumes of approximately 41,000
boe/d.


    General and Administrative Expenses

                      Three months ended June 30, Six months ended June 30,

    ($000s, except       2014                2013     2014             2013
    where noted)

    Gross expenses     11,971               6,754   25,873           12,919

    Capitalized       (1,499)             (1,307)  (5,386)          (2,458)

    Recoveries        (5,936)             (2,948) (10,426)          (4,376)

    G&A expenses        4,536               2,499   10,061            6,085

    G&A expenses, per    1.37                1.24     1.56             1.62
    unit ($/boe)

Interest and Financing Charges

For the three and six months ended June 30, 2014, Bellatrix recorded
$4.9 million ($1.47/boe) and $8.6 million ($1.33/boe) of interest and
financing charges related to bank debt, compared to $3.5 million
($1.76/boe) and $6.6 million ($1.76/boe) in the comparative periods in
2013, respectively, which included amounts relating to its then
outstanding $55.0 million 4.75% convertible debentures. Bellatrix’s
convertible debentures were settled during September and October of
2013. The overall increase in interest and financing charges between
the second quarters of 2014 and 2013 was primarily due to higher
interest charges as the Company carried a higher average debt balance
in the second quarter of 2014 compared to the 2013 period. Bellatrix’s
total net debt at June 30, 2014 of $363.4 million included $323.0
million of bank debt and the net balance being the working capital
deficiency.


    Interest and Financing Charges (1)    

                         Three months ended June Six months ended June 30,
                                             30,

    ($000s, except where  2014              2013  2014                2013
    noted)

    Interest and         4,866             3,542 8,593               6,586
    financing charges

    Interest and          1.47              1.76  1.33                1.76
    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          Six months
                                       ended June 30,      ended June 30,

    ($000s, except where noted)       2014       2013        2014    2013

    Shareholders' equity         1,141,830    402,904   1,141,830 402,904

    Long-term debt                 323,007    194,002     323,007 194,002

    Convertible debentures               -     51,536           -  51,536
    (liability component)

    Working capital deficiency      40,426     10,927      40,426  10,927
    (2)

    Total net debt (2) at period   363,433    256,465     363,433 256,465
    end

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

    Funds flow from operations     284,052    146,252     297,310 148,216
    (1) (annualized)

    Total net debt (2) at period   363,433    256,465     363,433 256,456
    end (5)

    Total net debt to periods         1.3x       1.8x        1.2x    1.7x
    funds flow from operations
    ratio (annualized) (3) (5)

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

    Funds flow from operations     243,172    130,586     243,172 130,586
    (1) (trailing) (4) (6)

    Total net debt (2) to funds       1.5x       2.0x        1.5x    2.0x
    flow from operations ratio
    (1) (trailing)(4) (5) (6)

    (1) 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, excluding decommissioning
        costs incurred, changes in non-cash working capital incurred, and
        transaction costs.  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 measures.
        Therefore reference to the non-GAAP
        measures of net debt or total net debt may not be comparable with
        the calculation of similar measures for other entities.
        The Company's 2014 calculation of total net debt excludes deferred
        lease inducements, long-term commodity contract
        liabilities, decommissioning liabilities, the long-term finance
        lease obligation, deferred lease inducements, and the
        deferred tax liability.  Net debt and total net debt include the
        adjusted working capital deficiency (excess).  The
        adjusted working capital deficiency (excess) is a non-GAAP measure
        calculated as net working capital deficiency
        (excess) excluding short-term commodity contract assets and
        liabilities, current finance lease obligation, and
        deferred lease inducements.  For the comparative 2013 calculation,
        net debt also excludes the liability component
        of convertible debentures which were then outstanding.  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.

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

    (4) Trailing periods funds flow from operations ratio annualized is
        based upon the twelve-month periods ended June 30,
        2014 and June 30, 2013.

    (5) During part of the 2013 year, Bellatrix had outstanding $55.0
        million 4.75% convertible unsecured subordinated
        debentures (the "convertible debentures").  The convertible
        debentures were converted or redeemed during
        September and October of 2013.  At June 30, 2013, net debt
        excluding convertible debentures was $204.9
        million, net debt excluding convertible debentures to funds flow
        from operations ratio (trailing) was 1.6x, and
        net debt excluding convertible debentures to periods funds flow
        from operations ratio (annualized) was 1.4x.

    (6) The calculations of funds flow from operations (trailing) and total
        net debt to funds flow from operations ratio
        (trailing) for June 30, 2014 include Angle funds flow from
        operations for the twelve-month period ending June
        30, 2014.


    Reconciliation of Total Liabilities to Total Net Debt and Net Debt

                                                           As at June 30,

    ($000s)                                               2014       2013

    Total liabilities per financial statements         695,412    376,744

        Current liabilities (included within         (237,099)   (68,069)
        working capital calculation below) 

        Commodity contract liability - long term             -    (1,539)

        Decommissioning liabilities                   (74,480)   (43,102)

        Finance lease obligation                      (10,873)   (12,406)

        Deferred lease inducements                     (2,836)          -

        Deferred taxes                                (47,117)    (6,090)

    Working Capital                                                      

        Current assets                               (169,194)   (51,089)

        Current liabilities                            237,099     68,069

        Current portion of finance lease               (1,534)    (1,459)

        Current portion of deferred lease                (333)          -
        inducements

        Net commodity contract liability              (25,612)    (4,594)

                                                        40,426     10,927

    Total net debt                                     363,433    256,465

        Convertible debentures                               -   (51,536)

    Net debt                                           363,433    204,929

Share-Based Compensation

For the three months ended June 30, 2014, non-cash share-based
compensation expense was $2.3 million compared to $0.2 million in the
same period in 2013. The increase in non-cash share-based compensation
expense was primarily a result of a higher expense net of forfeitures
for the Company’s outstanding share options of $1.5 million (2013: $0.7
million), an expense of $1.0 million for Deferred Share Units (“DSUs”)
(2013: recovery of $0.2 million), an expense of $0.5 million (2013:
nil) for Restricted Awards (“RAs”), and an expense of $0.4 million
(2013: nil) for Performance Awards (“PAs”). The increase was partially
offset by higher capitalized share-based compensation of $1.1 million
(2013: $0.3 million).

Non-cash share-based compensation expense for the six months ended June
30, 2014 was $4.8 million compared to $1.7 million in the first half of
2013. The increase in non-cash share-based compensation expense was
primarily a result of a higher expense net of forfeitures for the
Company’s outstanding share options of $2.8 million (2013: $1.6
million), an expense of $1.8 million (2013: $0.8 million) for DSUs, an
expense of $1.5 million (2013: nil) for RAs, and an expense of $0.8
million (2013: nil) for PAs. The increase was partially offset by
higher capitalized share-based compensation of $2.1 million (2013: $0.7
million).

Depletion and Depreciation

Depletion and depreciation expense for the three and six month periods
ended June 30, 2014 was $41.0 million ($12.39/boe) and $77.4 million
($11.98/boe), compared to $20.9 million ($10.38/boe) and $38.0 million
($10.12/boe) recognized in the same periods in 2013, respectively. For
both the three and six month periods, the increase in depletion and
depreciation expense between the periods, on a per boe basis, was
primarily a result of a higher cost base and increased future
development costs, partially offset by an increase in the reserve base
used for the depletion calculation.

For the three months ended June 30, 2014, Bellatrix has included a total
of $1.1 billion (2013: $504.7 million) for future development costs in
the depletion calculation and excluded from the depletion calculation a
total of $70.2 million (2013: $39.3 million) for estimated salvage.
Facilities under construction associated capital of $28.7 million was
excluded from the depletable base for the depletion calculation for the
three months ended June 30, 2014.


    Depletion and Depreciation

                     Three months ended June 30, Six months ended June 30,

    ($000s, except     2014                 2013   2014               2013
    where noted)

    Depletion and    40,984               20,877 77,389             37,967
    Depreciation

    Per unit ($/boe)  12.39                10.38  11.98              10.12

In the three and six months ended June 30, 2014, a total net gain on
dispositions of $9.4 million and $28.5 million, respectively, was
recognized relating to gains on wells drilled under the Grafton Joint
Venture and the Troika Joint Venture which were completed during the
three and six month periods ended June 30, 2014.

Impairment of Assets

As at June 30, 2014, Bellatrix determined there were no impairment
indicators requiring an impairment test to be performed.

Income Taxes

Deferred income taxes arise from differences between the accounting and
tax basis of the Company’s assets and liabilities. For the three and
six month periods ended June 30, 2014, the Company recognized a
deferred income tax expense of $13.4 million and $22.0 million,
compared to $5.3 million and $7.1 million in the same periods in 2013,
respectively.

At June 30, 2014, the Company had a total deferred tax liability balance
of $47.1 million.

At June 30, 2014, Bellatrix had approximately $1.4 billion in tax pools
available for deduction against future income as follows:


                                                       June 30, June 30,
    ($000s)                                    Rate %      2014     2013

    Intangible resource pools:                                          

          Canadian exploration expenses           100   101,000   42,600

          Canadian development expenses            30   736,100  443,500

          Canadian oil and gas property                           39,400
          expenses                                 10    73,500

          Foreign resource expenses                10       800      700

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

    Alberta non-capital losses greater
    than
    Federal non-capital losses          (Alberta) 100    16,100        -

    Undepreciated capital cost (1)             6 - 55   265,600   94,900

    Non-capital losses (expire through
    2030)                                         100   157,100   10,000

    Financing costs                           20 S.L.    13,900    2,000

                                                      1,364,100  649,200

    (1)  Approximately $236 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.
Bellatrix’s method of calculating funds flow from operations may differ
from that of other companies, and accordingly, may not be comparable to
measures used by other companies. Funds flow from operations is
calculated as cash flow from operating activities before
decommissioning costs incurred, changes in non-cash working capital
incurred, and transaction costs.


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

                       Three months ended June Six months ended June 30,
                                           30,

    ($000s)              2014             2013    2014              2013

    Cash flow from     60,063           29,611 144,363            65,138
    operating
    activities 

    Decommissioning        73              268     137               547
    costs incurred

    Change in non-cash 10,878            6,684   4,156             8,423
    working capital

    Funds flow from    71,014           36,563 148,656            74,108
    operations

Bellatrix’s cash flow from operating activities of $60.1 million ($0.34
per basic share and $0.33 per diluted share) for the three months ended
June 30, 2014 increased by 103% from $29.6 million ($0.27 per basic
share and $0.25 per diluted share) generated in the second quarter of
2013. Bellatrix generated funds flow from operations of $71.0 million
($0.40 per basic share and $0.39 per diluted share) in the second
quarter of 2014, an increase of 94% from $36.6 million ($0.34 per basic
share and $0.31 per diluted share) generated in the same period in
2013. The increase in funds flow from operations between the second
quarter of 2014 and 2013 was principally due to increased overall
production volumes and higher realized prices for all commodities,
partially offset by a higher net realized loss on commodity contracts,
and increased general and administrative, production, transportation,
and royalty expenses.

Bellatrix’s cash flow from operating activities of $144.4 million ($0.83
per basic share and $0.81 per diluted share) for the six months ended
June 30, 2014 increased by 122% from $65.1 million ($0.60 per basic
share and $0.55 per diluted share) generated in the first half of
2013. Bellatrix generated funds flow from operations of $148.7 million
($0.85 per basic share and $0.84 per diluted share) in the first six
months of 2014, an increase of 101% from $74.1 million ($0.69 per basic
share and $0.63 per diluted share) generated in the first half of
2013. The increase in funds flow from operations between the 2014 and
2013 periods was principally due to increased overall production
volumes and higher realized prices for all commodities, partially
offset by a net realized loss on commodity contracts compared to a net
realized gain in the 2013 period, as well as increased general and
administrative, production, transportation, and royalty expenses.

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 fair
market value of the contract over its entire term and are included in
the calculation of net profit.

Bellatrix recognized a net profit of $38.3 million ($0.22 per basic
share and $0.21 per diluted share) for the three months ended June 30,
2014, compared to a net profit of $15.5 million ($0.14 per basic share
and $0.13 per diluted share) in the second quarter of 2013. The higher
net profit recorded in the second quarter of 2014 compared to 2013 was
primarily the result of higher funds from operating activities as noted
above, a greater unrealized gain on commodity contracts, and a gain on
property dispositions recognized in the second quarter of 2014. These
positive impacts to net profit were partially offset by increased
depletion and depreciation, stock-based compensation, and deferred tax
expense and a higher realized loss on commodity contracts in the second
quarter of 2014 compared to the same period in 2013.

For the six months ended June 30, 2014, Bellatrix recognized a net
profit of $63.4 million ($0.36 per basic share and $0.36 per diluted
share), compared to a net profit of $20.0 million ($0.19 per basic
share and $0.18 per diluted share) in the first half of 2013. The
higher net profit recorded in the first six months of 2014 compared to
2013 was primarily the result of higher funds from operating activities
as noted above and a higher gain on property dispositions. These
positive impacts to net profit were partially offset by increased
depletion and depreciation, stock-based compensation, and deferred tax
expenses, a realized loss on commodity contracts in the first half of
2014 compared to a realized gain in the 2013 period, and a greater
unrealized loss on commodity contracts in the first six months of 2014
compared to the same period in 2013.


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

                         Three months ended June Six months ended June 30,
                                             30,

    ($000s, except per     2014             2013    2014              2013
    share amounts)

    Cash flow from       60,063           29,611 144,363            65,138
    operating activities

         Basic             0.34             0.27    0.83              0.60
         ($/share)

         Diluted           0.33             0.25    0.81              0.55
         ($/share)

    Funds flow from      71,014           36,563 148,656            74,108
    operations

         Basic             0.40             0.34    0.85              0.69
         ($/share)

         Diluted           0.39             0.31    0.84              0.63
         ($/share)

    Net profit           38,252           15,466  63,419            20,027

         Basic             0.22             0.14    0.36              0.19
         ($/share)

         Diluted           0.21             0.13    0.36              0.18
         ($/share)

Capital Expenditures

Bellatrix invested $134.6 million and $290.2 million in capital
expenditures during the three and six months ended June 30, 2014,
compared to $46.7 million and $138.3 million in the three and six
months ended June 30, 2013, respectively.

Capital Expenditures


                          Three months ended June
                                              30, Six months ended June 30,

    ($000s)                  2014            2013    2014              2013

    Lease acquisitions
    and retention           4,264           1,235   6,737             6,841

    Geological and
    geophysical               931              35   1,676                58

    Drilling and
    completion costs       51,159          30,597 151,539            99,924

    Facilities and
    equipment              75,008          14,305 124,097            30,809

        Exploration and
        development (1)   131,362          46,172 284,049           137,632

    Corporate (2)           3,206             543   6,161               682

        Total capital
        expenditures -
        cash              134,568          46,715 290,210           138,314

    Property dispositions
    - cash                (8,613)            (16) (8,392)               (1)

        Total net capital
        expenditures -
        cash              125,955          46,699 281,818           138,313

    Other - non-cash (3)    3,602         (1,308)   8,592             (521)

    Total capital
    expenditures - net    129,557          45,391 290,410           137,792

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

    (2) Corporate includes office leasehold improvements, furniture,
        fixtures and equipment before
        recoveries realized from landlord lease inducements.

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

In the first six months of 2014, Bellatrix posted a 100% success rate
drilling and/or participating in 63 gross (34.56 net) wells, resulting
in 47 gross (27.38 net) Cardium light oil wells, 14 gross (6.02 net)
Notikewin/Falher liquids-rich gas wells, and 2 gross (1.15 net) Cardium
gas wells. During the second quarter of 2014, Bellatrix drilled and/or
participated in 19 gross (9.00 net) wells, consisting of 11 gross (5.51
net) Cardium oil wells, 7 gross (2.99 net) Notikewin/Falher
liquids-rich gas wells, and 1 gross (0.50 net) Cardium gas well.

By comparison, during the first half of 2013, Bellatrix drilled and/or
participated in 26 gross (22.08 net) wells, which included 23 gross
(15.98 net) Cardium light oil horizontal wells and 3 gross (2.10 net)
Notikewin/Falher liquids-rich gas horizontal wells. During the second
quarter of 2013, Bellatrix drilled and/or participated in 5 gross (5
net) Cardium oil wells.

The $134.6 million capital program for the three months ended June 30,
2014 was financed from a combination of proceeds from the June 2014
bought deal financing, funds flow from operations and bank debt.

Based on the current economic conditions and Bellatrix’s operating
forecast for 2014, the Company budgets a revised net capital program of
$515 million funded from the Company’s cash flows and to the extent
necessary, bank indebtedness. The 2014 capital budget is expected to
be directed primarily towards horizontal drilling and completions
activities in the Cardium and Mannville formations.

During the second quarter of 2014, the Company reduced its working
interests in certain Cardium and Notikewin/Falher lands and production
in the Willesden Green (Baptiste) area of Alberta through the sale of
working interests to two joint venture partners for a total net sales
price of $8.3 million.

Decommissioning Liabilities

At June 30, 2014, Bellatrix has recorded decommissioning liabilities of
$74.5 million, compared to $67.1 million at December 31, 2013, for
future abandonment and reclamation of the Company’s properties. For
the six months ended June 30, 2014, decommissioning liabilities
increased by a net $7.4 million as a result of $1.9 million incurred on
development activities, $4.7 million resulting from changes in
estimates, and $0.9 million as a result of charges for the unwinding of
the discount rates used for assessing liability fair values, partially
offset by a $0.1 million decrease related to working interest
dispositions during the period. The $4.7 million increase as a result
of changes in estimates was primarily due to discount rate variations
between June 30, 2014 and December 31, 2013.

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 upon 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
decreased.

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 and optimizing capital
investments – which it seeks to attain 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. Recent market conditions have resulted in Bellatrix
experiencing recent upward trends in natural gas, light oil and
condensate, and NGL pricing.

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 financing debt covenants.

Bellatrix generally relies upon its 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
currently sells substantially all of its production to nine primary
purchasers under standard industry sale and payment terms. The most
significant 60 day exposure to a single counterparty is approximately
$20.3 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 partners and 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.

In May 2014, Bellatrix filed the $750 million Shelf Prospectus with the
securities regulatory authorities in each of the provinces of Canada
(other than Quebec) and a Registration Statement filed with the United
States Securities and Exchange Commission. The $750 million Shelf
Prospectus allows Bellatrix to offer and issue common shares,
subscription receipts, warrants and units (comprising any combination
of the foregoing securities), by way of one or more prospectus
supplements at any time during the 25-month period that the $750
million Shelf Prospectus remains in place.

Pursuant to a prospectus supplement to the $750 million Shelf
Prospectus, on June 5, 2014, Bellatrix closed a bought deal offering of
18,170,000 common shares of the Company at a price of $9.50 per Common
Share for aggregate gross proceeds of $172.6 million through a
syndicate of underwriters. Net proceeds of $165.5 million received
from the Offering were utilized to temporarily reduce outstanding
indebtedness under the Company’s credit facilities, thereby freeing up
borrowing capacity that may be redrawn, from time to time, to fund the
Company’s ongoing capital expenditure program and for general corporate
purposes.

As at June 30, 2014, there was $577.4 million available on the $750
million Shelf Prospectus.

Total net debt levels of $363.4 million at June 30, 2014 decreased by
$32.1 million from $395.5 million at December 31, 2013. The decrease to
net debt was primarily as a result of proceeds received from the June
2014 bought deal financing, which were partially offset by capital
expenditures made as the Company executed its $290.2 million 2014
capital program. Total net debt levels at June 30, 2014 include the net
balance of a working capital deficiency of $40.4 million, which
incorporated $66.9 million in advances from joint venture partners, the
majority of which represents drilling obligations predominantly under
the Company’s joint venture obligations with TCA and Grafton, and under
the Daewoo and Devonian Partnership. Total net debt excludes
unrealized commodity contract assets and liabilities, deferred taxes,
finance lease obligations, deferred lease inducements and
decommissioning liabilities.

Funds flow from operations represents 51% of the funding requirements
for Bellatrix’s capital expenditures for the six months ended June 30,
2014.

As of June 30, 2014, the Company’s credit facilities are available on an
extendible revolving term basis and consist of a $75 million operating
facility provided by a Canadian bank and a $550 million syndicated
facility provided by nine financial institutions, subject to a
borrowing base test. On May 30, 2014, Bellatrix amended the credit
facility agreement.

Amounts borrowed under the credit facilities will bear interest at a
floating rate based on the applicable Canadian prime rate, U.S. base
rate, CDOR rate or LIBOR margin rate, plus between 0.8% to 3.75%,
depending on the type of borrowing and the Company’s senior debt to
EBITDA ratio. A standby fee is charged of between 0.405% and 0.84375%
on the undrawn portion of the credit facilities, depending on the
Company’s senior debt to EBITDA ratio. The credit facilities are
secured by a $1 billion debenture containing a first ranking charge and
security interest. Bellatrix has provided a negative pledge and
undertaking to provide fixed charges over its properties in certain
circumstances.

The revolving period for the revolving term credit facility will end on
May 30, 2017, unless extended for a further period of up to 3 years.
Should the facility not be extended, the outstanding balance is due
upon maturity. 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, 2014.

The Company’s credit facilities contain market standard terms and
conditions, and include, for instance, restrictions on asset
dispositions and hedging. Generally speaking, dispositions of
properties to which the Company is given lending value in the
determination of the borrowing base are not permitted unless the NPV
10% value attributed to all properties sold in a fiscal year does not
exceed 5% of the borrowing base in effect at the time of such
disposition, or unless there would be no borrowing base shortfall as a
result of such properties being sold. Hedging transactions must not be
done for speculative purposes, and the term of any hedging contract
cannot exceed 3 years for commodity swaps, interest rate or exchange
rate swaps. The aggregate amount hedged under all oil and gas
commodity swaps cannot exceed 70% of the Company’s average daily sales
volume for the first year of a rolling 3 year period, 60% for the
second year of such period or 50% for the third year of such period,
with the average daily sales volume being based on our production for
the previous fiscal quarter. The aggregate amount hedged under all
interest rate swaps cannot exceed 60% of the amount of the commitment
under the credit facilities, and the aggregate amount hedged under all
exchange rate swaps cannot exceed 60% of our US dollar revenue over the
previous 3 months.

Bellatrix’s credit facilities are subject to a number of covenants, all
of which were met as at June 30, 2014. Bellatrix calculates its
covenants quarterly. The calculation for each financial covenant is
based on specific definitions, are not in accordance with IFRS and
cannot be readily replicated by referring to Bellatrix’s Condensed
Consolidated Financial Statements. As at June 30, 2014, the major
financial covenants are:


                                                Position at June 30, 2014

    Total debt must not exceed 4.0(1) times EBITDA for the last     1.46x
    four fiscal quarters

    Senior debt must not exceed 3.5(1) times EBITDA for the last    1.46x
    four fiscal quarters

    EBITDA must not be less than 3.5 times interest expense for    10.72x
    the last four fiscal quarters

    (1) This covenant reflects the adjustment to the ratio as a result of
        the completion of a material acquisition.

In the absence of a material acquisition, total debt to trailing EBITDA
and senior debt to trailing EBITDA covenants must not exceed 3.5 and
3.0 times EBITDA, respectively. In the event of a material
acquisition, such covenants are relaxed for two fiscal quarters after
the close of the acquisition. Due to the material acquisition of Angle
in December 2013, total debt to trailing EBITDA and senior debt to
trailing EBITDA covenants were temporarily increased at June 30, 2014
to not exceed 4.0 and 3.5 times, respectively. Pending no material
acquisition, at September 30, 2014 total debt to trailing EBITDA and
senior debt to trailing EBITDA covenants will revert and must not
exceed 3.5 and 3.0 times EBITDA, respectively. Failing a financial
covenant may result in cancellation of the credit facilities and/or all
or any part of the outstanding loans with all accrued and unpaid
interest to be immediately due and payable. Including $0.5 million
of outstanding letters of credit that reduce the amount otherwise
available to be drawn on the syndicated facility, as at June 30, 2014,
approximately $301.5 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 revised 2014 capital
program of $515 million by utilizing cash flow, proceeds from asset
dispositions, and to the extent necessary, bank indebtedness.

As at July 31, 2014, Bellatrix had outstanding a total of 11,367,503
options exercisable at an average exercise price of $6.39 per share and
191,364,910 common shares.

Commitments

As at June 30, 2014, Bellatrix committed to drill 2 gross (1.2 net)
wells pursuant to farm-in agreements. Bellatrix expects to satisfy
these drilling commitments at an estimated net cost of approximately
$4.5 million.

In addition, Bellatrix entered into two joint operating agreements
during the 2011 year and an additional joint operation agreement during
2012. The agreements include a minimum commitment for the Company to
drill a specified number of wells each year over the term of the
individual agreements. The details of these agreements are provided in
the table below:


    Joint Operating          Feb. 1, 2011        Aug. 4, 2011 Dec. 14, 2012
    Agreement

    Commitment Term          2011 to 2015 2011 to 2016         2014 to 2018

    Minimum wells per year              3             5 to 10             2
    (gross and net)

    Minimum total wells                15                  40            10
    (gross and net)

    Estimated total cost           $ 56.3             $ 150.0       $  37.5
    ($000s)

    Remaining wells to drill            3                   9             7
    at June 30, 2014

    Remaining estimated            $ 11.3            $   33.8       $  26.5
    total cost ($000s)

Bellatrix also has certain drilling commitments relating to the Grafton
Joint Venture, the Daewoo and Devonian Partnership, and the Troika
Joint Venture. In meeting the drilling commitments under these
agreements, Bellatrix will satisfy some of the drilling commitments
under the joint operating agreements described above.


                                                    Daewoo and
    Agreement                         Grafton (2)     Devonian       Troika

    Commitment Term                  2013 to 2015 2013 to 2016 2013 to 2014

    Minimum total wells (gross) (1)            58           70           63

    Minimum total wells (net) (1)            10.5         30.4         31.5

    Estimated total cost  ($000s)
    (gross)(1)                            $ 244.0      $ 200.0      $ 240.0

    Estimated total cost  ($000s)
    (net)(1)                             $   44.0      $ 100.0      $ 120.0

    Remaining wells to drill at June
    30, 2014 (gross)                           35           33           25

    Remaining wells to drill at June
    30, 2014 (net)                            6.9         16.3         12.5

    Remaining estimated total cost
    ($000s) (gross) (1)                   $ 147.7      $ 131.6     $   95.2

    Remaining estimated total cost
    ($000s) (net) (1)                    $   29.0     $   65.8     $   47.6

    (1)      Gross and net estimated total cost values and gross and net
             minimum estimated
             total wells for the Troika and Grafton Joint Ventures
             represent Bellatrix's total
             capital and well commitments pursuant to the Troika and
             Grafton joint venture
             agreements.  Gross and net minimum total wells for the Daewoo
             and Devonian
             Partnership represent Bellatrix's total well commitments
             pursuant to the Daewoo
             and Devonian Partnership agreement.  Gross and net estimated
             total cost values
             for the Daewoo and Devonian Partnership represent Bellatrix's
             estimated cost
             associated with its well commitments under the Daewoo and
             Devonian Partnership
             agreement. Remaining estimated total cost (gross) for the
             Daewoo and Devonian
             Partnership is based on initial Daewoo Devonian Partnership
             gross capital divided
             by initial total gross capital including third parties. 

    (2)      During April 2014, Grafton elected to exercise an option to
             increase committed
             capital investment to the Grafton Joint Venture established
             during 2013 by an
             additional $50 million, for a total commitment of $250
             million, on the same terms
             and conditions as the previously announced Grafton Joint
             Venture. Specific well
             commitments associated with the increase are under
             determination and have
             not been incorporated into the commitments table.

.

The Company had the following liabilities as at June 30, 2014:


    Liabilities                                                   More than
    ($000s)           Total     1 Year     1-3 Years 3-5 Years      5 years

    Accounts
    payable and
    accrued              $         $   $             $         $
    liabilities (1) 142,678    142,678             -         -            -

    Advances from
    joint venture
    partners         66,942     66,942             -         -            -

    Long-term debt
    - principal (2) 323,007          -       323,007         -            -

    Commodity
    contract
    liability        25,612     25,612             -         -            -

    Decommissioning
    liabilities (3)  74,480          -         2,285     3,554       68,641

    Finance lease
    obligation       12,407      1,534         3,206     2,178        5,489

    Deferred lease
    inducements       3,169        333           666       666        1,504

                         $
    Total           648,295 $  237,099    $  329,164   $ 6,398    $  75,634

    (1)  Includes $0.8 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 three year facility, fully revolving until
         maturity, and extendable annually
         at the Company's option (subject to lender approval), provided
         that the term after any extension
         would not be more than three years.  Interest due on the bank
         credit facility is calculated based
         upon floating rates. 

    (3)  Amounts represent the inflated, discounted future abandonment and
         reclamation expenditures
         anticipated to be incurred over the life of the Company's
         properties (between 2017 and 2068).

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 June 30,
2014.

Business Prospects and 2014 Year Outlook

Bellatrix continues to develop its core assets and conduct exploration
programs utilizing its large inventory of geological prospects.

2014 cash flow forecasts for the year have been updated to reflect the
recent softening natural gas prices due to the current cooler summer
weather conditions. 2014 funds flow from operations expectations have
been lowered to approximately $350 million or $1.90 per basic share.
This represents a 144% increase over 2013 funds flow from operations of
$143.5 million or $1.27 per basic share.

Based on an assumed 2014 average Edmonton Light oil price of $96.85/bbl
and AECO $4.34/GJ, average 2014 royalty rates of 18% and estimated 2014
operating costs of $116.5 million or $7.75 boe/d, the Company expects
to exit 2014 with total net debt of approximately $390 million or
approximately 1.0 times total net debt to annualized estimated fourth
quarter 2014 funds flow from operations.

For the remainder of 2014, Bellatrix will be active in drilling with 10
to 12 rigs operating in its two core resource plays, the Cardium light
oil play (Bellatrix is the second largest land holder with 338 net
sections in the Cardium) and Mannville condensate rich gas play,
utilizing horizontal drilling multi-fracturing technology. A revised
net capital budget of $515 million has been set for fiscal 2014. Based
on the timing of proposed expenditures, downtime for anticipated plant
turnarounds and normal production declines, execution of the 2014
budget is anticipated to provide 2014 average daily production of
approximately 41,000 boe/d and an exit rate of approximately 48,000
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
Annual Information Form for the year ended December 31, 2013.

Critical Accounting Estimates and Accounting Policies

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, 2013 continue to be critical
in determining Bellatrix’s unaudited financial results as of June 30,
2014. There were no changes in accounting policies during the six
months ended June 30, 2014, except as noted below.

IFRIC 21 – “Levies”, which establishes guidelines for the recognition
and accounting treatment of a liability relating to a levy imposed by a
government. This standard is effective for annual periods beginning on
or after January 1, 2014 and was adopted by Bellatrix effective January
1, 2014. The adoption of IFRIC 21 had no impact on Bellatrix.

Amendments to “Offsetting Financial Assets and Financial Liabilities”
addressed within IAS 32 – “Financial Instruments: Presentation”, which
provides guidance regarding when it is appropriate and permissible for
an entity to disclose offsetting financial assets and financial
liabilities on a net basis. The amendments to this standard are
effective for annual periods beginning on or after January 1, 2014 and
were adopted by Bellatrix effective January 1, 2014. The adoption of
IAS 32 amendments had no impact on Bellatrix.

A summary of future accounting pronouncements is found in the Company’s
Management Discussion and Analysis for the year ended December 31,
2013, available at www.sedar.com or as part of the Company’s annual report on Form 40-F for the year
ended December 31, 2013, which may be found at www.sec.gov.

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 makes appropriate
provisions by charges to earnings when warranted by the circumstances.

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

Controls and Procedures

As a result of the Company’s market capitalization at June 30, 2014
exceeding US $700 million, Bellatrix is no longer considered an
“emerging growth company” under the Jumpstart Our Business Act (the
“JOBS Act”), and will require auditor attestation of the Company’s
internal controls over financial reporting at December 31, 2014.

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 April 1, 2014 and ended on June 30, 2014 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 second quarter
of 2014 and average production volumes of 36,342 boe/d during that
period, as well as the same level of debt outstanding as at June 30,
2014. Diluted weighted average shares are based upon the second
quarter of 2014. 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 Operations   Funds Flow  from
                                                    (1)     Operations(1)

                                           (annualized) Per Diluted Share

    Sensitivity Analysis                        ($000s)               ($)

    Change of US $1/bbl WTI                       4,100              0.02

    Change of $0.10/ mcf                          4,300              0.02

    Change of US $0.01 CDN/                       2,500              0.01
    US exchange rate

    Change in prime of 1%                         3,200              0.02

    (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 non-GAAP measures of
        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 quarters in 2014, 2013 and 2012.


    2014 - Quarter ended (unaudited)
    ($000s, except per share amounts)     March 31 June 30                 

    Revenues before royalties and risk
    management                             163,585 152,311                 

    Cash flow from operating activities     84,300  60,063                 

    Cash flow from operating activities
    per share                                                              

      Basic                                  $0.49   $0.34                 

      Diluted                                $0.48   $0.33                 

    Funds flow from operations (1)          77,642  71,014                 

    Funds flow from operations per share
    (1)                                                                    

      Basic                                  $0.45   $0.40                 

      Diluted                                $0.45   $0.39                 

    Net profit                              25,167  38,252                 

    Net profit per share                                                   

      Basic                                  $0.15   $0.22           

      Diluted                                $0.14   $0.21           

    Total net capital expenditures - cash  155,863 125,955           

    2013 - Quarter ended (unaudited)
    ($000s, except per share amounts)     March 31 June 30 Sept. 30 Dec. 31

    Revenues before royalties and risk
    management                              65,543  74,564   68,329  83,455

    Cash flow from operating activities     35,527  29,611   25,069  38,025

    Cash flow from operating activities
    per share                                                              

      Basic                                  $0.33   $0.27    $0.23   $0.30

      Diluted                                $0.30   $0.25    $0.21   $0.29

    Funds flow from operations (1)          37,545  36,563   30,002  39,349

    Funds flow from operations per share
    (1)                                                                    

      Basic                                  $0.35   $0.34    $0.28   $0.31

      Diluted                                $0.32   $0.31    $0.25   $0.30

    Net profit                               4,561  15,466   29,453  22,195

    Net profit per share                                                   

      Basic                                  $0.04   $0.14    $0.27   $0.17

      Diluted                                $0.04   $0.13    $0.25   $0.17

    Total net capital expenditures - cash   91,614  46,699   49,452  99,199

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

    Revenues before royalties and risk
    management                              58,191  50,714   48,126  62,283

    Cash flow from operating activities     24,056  28,458   24,807  32,007

    Cash flow from operating activities
    per share                                                              

      Basic                                  $0.22   $0.24    $0.23   $0.30

      Diluted                                $0.21   $0.22    $0.22   $0.28

    Funds flow from operations (1)          29,194  25,366   26,613  29,865

    Funds flow from operations per share
    (1)                                                                    

      Basic                                  $0.27   $0.24    $0.25   $0.28

      Diluted                                $0.25   $0.22    $0.23   $0.26

    Net profit (loss)                        9,172   9,963    (615)   9,251

    Net profit (loss) per share                                            

      Basic                                  $0.09   $0.09  ($0.01)   $0.09

      Diluted                                $0.08   $0.09  ($0.01)   $0.08

    Total net capital expenditures - cash   73,831  16,284   35,515  64,383

    (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
    (unaudited, expressed in Canadian dollars)

                                                                                         June 30,  December
                                                                                                        31,

    ($000s)                                                                                  2014      2013

    ASSETS                                                                                                 

    Current assets                                                                                         

       Restricted cash                                                                       $      $
                                                                                           24,428    38,148

       Accounts receivable (note 13)                                                      134,955
                                                                                                     80,306

       Deposits and prepaid expenses                                                        9,811    10,001

       Commodity contract asset (note 13)                                                       -       345

                                                                                          169,194   128,800

    Exploration and evaluation assets (note 3)                                            121,610   132,971

    Property, plant and equipment (note 4)                                              1,546,438 1,293,409

    Total assets                                                                                $        $
                                                                                        1,837,242 1,555,180

    LIABILITIES                                                                                            

    Current liabilities                                                                                    

       Accounts payable and accrued liabilities                                              $        $
                                                                                          142,678   137,465

       Advances from joint venture partners                                                66,942    99,380

       Current portion of finance lease obligation                                          1,534     1,495

       Current portion of deferred lease inducements                                          333       285

       Commodity contract liability (note 13)                                              25,612    17,278

                                                                                          237,099   255,903

    Long-term debt (note 5)                                                               323,007   287,092

    Finance lease obligation                                                               10,873    11,637

    Deferred lease inducements                                                              2,836     2,565

    Decommissioning liabilities                                                            74,480    67,075

    Deferred taxes (note 9)                                                                47,117    27,034

    Total liabilities                                                                     695,412   651,306

    SHAREHOLDERS' EQUITY                                                                                   

       Shareholders' capital                                                              996,122   824,065

       Contributed surplus                                                                 41,438    38,958

       Retained earnings                                                                  104,270    40,851

    Total shareholders' equity                                                          1,141,830   903,874

    Total liabilities and shareholders' equity                                                $          $
                                                                                        1,837,242 1,555,180


    COMMITMENTS (note 12)

    See accompanying notes to the condensed consolidated financial
    statements.

    BELLATRIX EXPLORATION LTD.  

    CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  

    (unaudited, expressed in Canadian dollars)         

                       Three months ended June 30,         Six months ended
                                                                   June 30,

    ($000s)                  2014             2013       2014          2013

    REVENUES                                                               

      Petroleum and    $  151,210        $  73,977 $  312,929    $  138,885
      natural gas
      sales

      Other income          1,101              587      2,967         1,222

      Royalties          (27,015)         (12,561)   (54,402)      (24,346)

      Total revenues      125,296           62,003    261,494       115,761

      Realized gain      (16,361)            (785)   (34,999)         5,717
      (loss) on
      commodity
      contracts

      Unrealized gain      14,996            5,992    (8,680)       (6,307)
      (loss) on
      commodity
      contracts

                          123,931           67,210    217,815       115,171

    EXPENSES                                                               

      Production           25,799           17,383     51,428        32,441

      Transportation        2,721            1,662      7,758         3,107

      General and           4,536            2,499     10,061         6,085
      administrative

      Share-based           2,328              241      4,837         1,691
      compensation
      (note 7)

      Depletion and        40,984           20,877     77,389        37,967
      depreciation
      (note 4)

      Gain on property    (9,399)                -   (28,513)         (250)
      dispositions and
      swaps (note 4)

                           66,969           42,662    122,960        81,041

    NET PROFIT BEFORE      56,962           24,548     94,855        34,130
    FINANCE AND TAXES

      Finance expenses      5,300            3,758      9,457         6,975
      (note 10)

    NET PROFIT BEFORE      51,662           20,790     85,398        27,155
    TAXES

    TAXES                                                                  

      Deferred tax         13,410            5,324     21,979         7,128
      expense (note 9)

    NET PROFIT AND         38,252           15,466     63,419        20,027
    COMPREHENSIVE
    INCOME

    Net profit per
    share (note 11)

      Basic                 $0.22            $0.14      $0.36         $0.19

      Diluted               $0.21            $0.13      $0.36         $0.18


    See accompanying notes to the condensed consolidated financial
    statements.


    BELLATRIX EXPLORATION LTD.  

    CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY  

    (unaudited, expressed in Canadian dollars)
    For the six months ended June 30,         

    ($000s)                                                 2014       2013

    SHAREHOLDERS' CAPITAL                                                  

      Common shares(note 6)                                                

        Balance, beginning of year                  $    824,065 $  371,576

        Issued for cash on exercise of share               4,062        191
        options    

        Issued for cash on equity issue, net of tax      172,615          -

        Share issue costs on equity issue and shelf      (5,667)          -
        prospectus, net of tax    

        Contributed surplus transferred on                 1,047         83
        exercised options    

        Balance, end of period                           996,122    371,850

    EQUITY COMPONENT OF CONVERTIBLE DEBENTURES                             

        Balance, beginning and end of period                   -      4,378

    CONTRIBUTED SURPLUS(note 7)                                            

        Balance, beginning of year                        38,958     37,284

        Share-based compensation expense                   3,003      1,726

        Adjustment of share-based compensation
        expense         

          for forfeitures of unvested share options        (250)      (146)

        Transfer to share capital for exercised          (1,047)       (83)
        options    

        Other                                                774          -

        Balance, end of period                            41,438     38,781

    RETAINED EARNINGS (DEFICIT)                                            

        Balance, beginning of year                        40,851   (32,132)

        Net profit                                        63,419     20,027

        Balance, end of period                           104,270   (12,105)

    TOTAL SHAREHOLDERS' EQUITY                      $  1,141,830 $  402,904

    See accompanying notes to the condensed consolidated financial
    statements.


    BELLATRIX EXPLORATION LTD.

    CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

    (unaudited, expressed in Canadian dollars)         

    For the three and six months ended June 30,

                        Three months ended June  Six months ended June 30,
                                            30,

    ($000s)                  2014          2013          2014         2013

    Cash provided by
    (used in):

    CASH FLOW FROM
    (USED IN)
    OPERATING
    ACTIVITIES

    Net profit         $   38,252    $   15,466      $ 63,419     $ 20,027

    Adjustments for:                                                      

      Depletion and        40,984        20,877        77,389       37,967
      depreciation

      Finance
      expenses (note          434           647           864        1,238
      10)

      Share-based
      compensation          2,328           241         4,837        1,691
      (note 7)

      Unrealized
      (gain) loss on     (14,996)       (5,992)         8,680        6,307
      commodity
      contracts

      Gain on
      property            (9,399)             -      (28,513)        (250)
      dispositions
      and swaps

      Deferred tax
      expense (note        13,410         5,324        21,979        7,128
      9)

      Decommissioning        (72)         (268)         (136)        (547)
      costs incurred

      Change in
      non-cash           (10,878)       (6,684)       (4,156)      (8,423)
      working capital
      (note 8)

                           60,063        29,611       144,363       65,138

    CASH FLOW FROM
    (USED IN)
    FINANCING
    ACTIVITIES

      Issuance of
      share capital       174,200             -       177,451          191
      (note 6)

      Issue costs on
      share capital       (7,597)             -       (7,563)            -
      (note 6)

      Settlement of
      restricted          (1,256)                     (1,256)
      awards (note 7)

      Advances from
      loans and           724,362       301,000     1,210,162      472,030
      borrowings

      Repayment of
      loans and         (736,473)     (257,825)   (1,174,247)    (411,075)
      borrowings

      Obligations
      under finance         (369)         (353)         (725)        (692)
      lease

      Deferred lease          390             -           319            -
      inducements

      Change in
      non-cash                303         (479)           113          237
      working capital
      (note 8)

                          153,560        42,343       204,254       60,691

    CASH FLOW FROM
    (USED IN)
    INVESTING
    ACTIVITIES

      Expenditure on
      exploration and     (1,342)       (1,269)       (2,142)      (6,961)
      evaluation
      assets

      Additions to
      property, plant   (133,226)      (45,447)     (288,068)    (131,354)
      and equipment

      Proceeds on
      sale of               8,613            16         8,392            1
      property, plant
      and equipment

      Change in
      non-cash           (87,668)      (25,254)      (66,799)       12,485
      working capital
      (note 8)

                        (213,623)      (71,954)     (348,617)    (125,829)

      Change in cash            -             -             -            -

      Cash, beginning           -             -             -            -
      of period

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

    Cash paid:                                                            

       Interest              $        $   2,895   $     6,891         $
                            3,411                                    4,212

       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 oil and gas company.

2. BASIS OF PREPARATION

a. Statement of compliance

These condensed consolidated financial statements (“interim financial
statements”) were authorized by the Board of Directors on August 5,
2014. 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 2013 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 2013 audited annual financial statements, except as noted below.

b. Change in accounting policies

IFRIC 21 – “Levies”, which establishes guidelines for the recognition
and accounting treatment of a liability relating to a levy imposed by a
government. This standard is effective for annual periods beginning on
or after January 1, 2014 and was adopted by Bellatrix effective January
1, 2014. The adoption of IFRIC 21 had no impact on Bellatrix.

Amendments to “Offsetting Financial Assets and Financial Liabilities”
addressed within IAS 32 – “Financial Instruments: Presentation”, which
provides guidance regarding when it is appropriate and permissible for
an entity to disclose offsetting financial assets and financial
liabilities on a net basis. The amendments to this standard are
effective for annual periods beginning on or after January 1, 2014 and
were adopted by Bellatrix effective January 1, 2014. The adoption of
IAS 32 amendments had no impact on Bellatrix.

c. Basis of measurement

The interim 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 interim financial statements have, in management’s opinion,
been properly prepared using careful judgment and reasonable limits of
materiality. These interim 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, 2013. The interim financial statement note
disclosures do not include all of those required by IFRS applicable for
annual financial statements. Accordingly, the interim financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto as at and for the year ended
December 31, 2013.

3. EXPLORATION AND EVALUATION ASSETS


    ($000s)                                                             

    Cost                                                                

    Balance, December 31, 2012                              $     38,177

    Acquisitions through business combinations, net               97,520

    Additions                                                     10,391

    Transfer to oil and natural gas properties                   (7,424)

    Disposals(1)                                                 (5,693)

    Balance, December 31, 2013                                   132,971

    Additions                                                      2,142

    Transfer to oil and natural gas properties                  (13,472)

    Disposals(1)                                                    (31)

    Balance, June 30, 2014                                  $    121,610

    (1) Disposals include swaps.

4. PROPERTY, PLANT AND EQUIPMENT


    ($000s)                                                      

                            Oil and            Office
                        natural gas     furniture and
                         properties         equipment               Total

    Cost                                                                 

    Balance,
    December 31,
    2012              $     851,108       $     2,802       $     853,910

    Acquisitions
    through
    business
    combinations,
    net                     498,371                 -             498,371

    Additions               298,288             9,270             307,558

    Transfer from
    exploration
    and
    evaluation
    assets                    7,424                 -               7,424

    Farmout wells            11,244                 -              11,244

    Disposals(1)           (37,408)             (487)            (37,895)

    Balance,
    December 31,
    2013                  1,629,027            11,585           1,640,612

    Additions               290,606             6,162             296,768

    Transfer from
    exploration
    and
    evaluation
    assets                   13,472                 -              13,472

    Farmout wells            29,257                 -              29,257

    Disposals(1)            (9,079)                 -             (9,079)

    Balance, June
    30, 2014          $   1,953,283       $    17,747       $   1,971,030

    Accumulated
    Depletion,
    Depreciation
    and
    Impairment
    losses                                                               

    Balance,
    December 31,
    2012              $     262,570       $     1,581       $     264,151

    Charge for
    time period              84,902               927              85,829

    Disposals(1)            (2,510)             (267)             (2,777)

    Balance,
    December 31,
    2013              $     344,962       $     2,241       $     347,203

    Charge for
    time period              76,050             1,339              77,389

    Balance, June
    30, 2014          $     421,012       $     3,580       $     424,592

    (1) Disposals
    include
    swaps.                                                               

    Carrying
    amounts                                                              

    At December
    31, 2013          $   1,284,065       $     9,344       $   1,293,409

    At June 30,
    2014              $   1,532,271       $    14,167       $   1,546,438

Bellatrix has included $1.1 billion (2013: $504.7 million) for future
development costs and excluded $70.2 million (2013: $39.3 million) for
estimated salvage from the depletion calculation for the three months
ended June 30, 2014. Facilities under construction associated capital
of $28.7 million was excluded from the depletable base for the
depletion calculation for the three months ended June 30, 2014.

In the three and six months ended June 30, 2014, Bellatrix recognized a
total net gain on dispositions of $9.4 million and $28.5 million,
respectively, relating to gains on wells drilled under the Grafton
Joint Venture and the Troika Joint Venture which were completed during
the three and six month periods ended June 30, 2014.

For the six months ended June 30, 2014, the Company capitalized $5.4
million (2013: $2.5 million) of general and administrative expenses,
and $2.1 million (2013: $0.7 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 $1 billion 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

Based upon the Company’s semi-annual borrowing base review for May 31,
2014, Bellatrix increased its borrowing base and credit facilities to
$625 million from $500 million. The bank syndicate lenders approved
the Company’s request to change the term of the credit facilities to a
3 year facility, fully revolving until maturity, and extendible
annually at the Company’s option (subject to lender approval), provided
that the term after any extension would not be more than 3 years.
Concurrently with such changes, the credit facilities were also amended
to include certain ongoing financial covenants that will require
quarterly compliance.

As of June 30, 2014, the Company’s credit facilities are available on an
extendible revolving term basis and consist of a $75 million operating
facility provided by a Canadian bank and a $550 million syndicated
facility provided by nine financial institutions.

Amounts borrowed under the credit facilities will bear interest at a
floating rate based on the applicable Canadian prime rate, U.S. base
rate, CDOR rate or LIBOR margin rate, plus between 0.8% to 3.75%,
depending on the type of borrowing and the Company’s senior debt to
EBITDA ratio. A standby fee is charged of between 0.405% and 0.84375%
on the undrawn portion of the credit facilities, depending on the
Company’s senior debt to EBITDA ratio. The credit facilities are
secured by a $1 billion debenture containing a first ranking charge and
security interest. Bellatrix has provided a negative pledge and
undertaking to provide fixed charges over its properties in certain
circumstances.

The revolving period for the revolving term credit facility will end on
May 30, 2017, unless extended for a further period of up to three
years. Should the facility not be extended, the outstanding balance is
due upon maturity. The borrowing base will be subject to
re-determination on or before May 31 and November 30 in each year prior
to maturity, with the next semi-annual redetermination occurring on or
before November 30, 2014.

As at June 30, 2014, the Company had outstanding letters of credit
totaling $0.5 million that reduce the amount otherwise available to be
drawn on the syndicated facility.

As at June 30, 2014, the Company had approximately $301.5 million or 48%
of unused and available bank credit under its credit facilities.
Bellatrix was fully compliant with all of its debt covenants.

6. SHAREHOLDER’S CAPITAL

Bellatrix is authorized to issue an unlimited number of common shares.
All shares issued are fully paid and have no par value. The common
shareholders are entitled to dividends declared by the Board of
Directors; no dividends were declared by the Board of Directors during
the six months ended June 30, 2014 or 2013.


                                       2014                          2013

                                          Amount                        Amount
                           Number         ($000s)        Number         ($000s)

    Common
    shares,
    opening
    balance             170,990,605     $ 824,065     107,868,774     $ 371,576

    Issued for
    cash on
    equity issue         18,170,000       172,615               -             -

    Share issue
    costs on
    equity issue
    and shelf                                                            

      prospectus,
      net of tax
      effect of
      $1.9
      million                     -       (5,667)               -             -

    Cancellation
    of shares             (137,486)             -               -             -

    Shares issued
    for cash on
    exercise of
    options               2,068,622         4,062          50,555           191

    Contributed
    surplus
    transferred
    on                                                                   

      exercised
      options                     -         1,047               -            83

    Balance, end
    of period           191,091,741     $ 996,122     107,919,329     $ 371,850

On June 5, 2014, Bellatrix closed a bought deal financing of 18,170,000
common shares at a price of $9.50 per common share for aggregate gross
proceeds of $172.6 million (net proceeds of $165.5 million after
transaction costs excluding deferred tax impacts).

7. SHARE-BASED COMPENSATION PLANS

The following table provides a summary of the Company’s share-based
compensation plans for the three and six months ended June 30, 2014:


    ($000s)                                                                          

                      Share        Deferred      Restricted     Performance
                    Options     Share Units          Awards          Awards         Total

    Expense
    for the
    three
    months
    ended
    June 30,
    2014 (1)      $     828       $     971       $     272       $     257     $   2,328

    Expense
    for the
    six
    months
    ended
    June 30,
    2014 (2)      $   1,641       $   1,839       $     854       $     503     $   4,837

    Liability
    balance,
    June 30,
    2014          $       -       $   5,884       $   1,191       $   1,276     $   8,351

    (1) The expense for share options is net of adjustments for forfeitures
        of $0.2 million, and capitalization of $0.6
        million.  The expense for restricted awards is net of
        capitalization of $0.3 million.  The expense for performance
        awards is net of capitalization of $0.2 million.

    (2) The expense for share options is net of adjustments for forfeitures
        of $0.3 million, and capitalization of $1.1 million.
        The expense for restricted awards is net of adjustments for
        forfeitures of $0.1 million and capitalization of $0.6 million.
        The expense for performance awards is net of capitalization of $0.3
        million.

The following table provides a summary of the Company’s share-based
compensation plans for the three and six months ended June 30, 2013:


    ($000s)                                                                            

                     Share        Deferred     Restricted     Performance
                   Options     Share Units         Awards          Awards         Total

    Expense        $   385       $   (144)       $      -       $       -     $     241
    (recovery)
    for the
    three
    months
    ended
    June 30,
    2013 (1)

    Expense        $   906       $     785       $      -       $       -     $   1,691
    for the
    six months
    ended
    June 30,
    2013 (2)

    Liability      $     -       $   2,513       $      -       $       -     $   2,513
    balance,
    June 30,
    2013

    (1) The expense for share options is net of adjustments for forfeitures
        of $0.1 million, and capitalization of $0.3 million. 

    (2) The expense for share options is net of adjustments for forfeitures
        of $0.1 million, and capitalization of $0.7 million. 

a. Share Option Plan

During the three and six months ended June 30, 2014, Bellatrix granted
2,718,000 (2013: nil) and 2,946,000 (2013: nil) share options,
respectively. 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 months ended June 30, 2014, and the weighted average
assumptions used in their determination are as noted below:


                                                                  2014

            Inputs:                                                   

            Share price                                       $   9.26

            Exercise price                                    $   9.26

            Risk free interest rate (%)                            1.2

            Option life (years)                                    2.8

            Option volatility (%)                                   44

            Results:                                                  

            Weighted average fair value of each share
            option granted                                    $   2.79

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

The weighted average trading price of the Company’s common shares on the
Toronto Stock Exchange (“TSX”) for the three and six months ended June
30, 2014 was $9.92 (2013: $5.91), and $9.39 (2013: $5.70),
respectively.

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

Share Options Continuity


                                     Weighted Average
                                       Exercise Price            Number

    Balance, December 31, 2013             $     4.75        11,182,963

    Granted                                $     9.20         2,946,000

    Exercised                              $     1.96       (2,068,622)

    Forfeited                              $     6.91         (483,502)

    Balance, June 30, 2014                 $     6.29        11,576,839

As of June 30, 2014, a total of 19,109,174 common shares were reserved
for issuance on exercise of share options, leaving an additional
7,532,335 available for future share option grants.


    Share Options Outstanding, June 30, 2014

                           Outstanding                                   Exercisable

                                  Weighted        Weighted
                                                   Average                             

                         At        Average       Remaining            At               

                                               Contractual
                                                      Life                             

    Exercise       June 30,       Exercise                      June 30,       Exercise
       Price           2014          Price         (years)          2014          Price

    $  1.07
    - $
    3.43          1,866,336       $   3.10             2.6     1,152,340       $   2.99

    $  3.44
    - $
    3.97          1,648,001       $   3.86             1.0     1,556,332       $   3.87

    $  3.98
    - $
    5.38          2,208,002       $   5.15             2.1     1,998,332       $   5.25

    $  5.39
    - $
    7.68          1,473,500       $   7.30             4.3        47,500       $   5.49

    $  7.69
    - $
    8.42          1,530,000       $   7.99             4.5             -              -

    $  8.43
    - $
    9.04            143,000       $   8.84             4.7             -              -

    $  9.05
    - $10.04      2,708,000       $   9.26             4.9             -              -

    $  1.07
    - $10.04     11,576,839       $   6.29             3.3     4,754,504       $   4.25

b. Deferred Share Unit Plan

During the six months ended June 30, 2014, the Company granted 113,610
(2013: 4,796) DSUs, and had 646,516 DSUs outstanding as at June 30,
2014 (2013: 413,320). $5.9 million (December 31, 2013: $4.0 million)
was included in accounts payable and accrued liabilities as at June 30,
2014 in relation to the DSUs.

c. Incentive Plan

On August 7, 2013, the Directors of Bellatrix approved an Incentive Plan
where the Company may grant Restricted Awards (“RAs”) and Performance
Awards (“PAs”) to officers, employees, and other service providers.
Unless approved by the TSX (or such other stock exchange on which the
common shares may be listed) and the shareholders, the Incentive Plan
does not provide for the issuance of common shares to holders of PAs or
RAs, but rather RAs and PAs are settled in cash in lieu of such common
shares.

During the six months ended June 30, 2014, the Company granted 572,850
(2013: nil) RAs, settled 158,265 (2013: nil) RAs, and had 899,085 RAs
outstanding as at June 30, 2014 (2013: nil). $1.2 million (December
31, 2013: $1.0 million) was included in accounts payable and accrued
liabilities as at June 30, 2014 in relation to the RAs.

During the three months ended June 30, 2014, the Company granted 411,150
(2013: nil) PAs, and had 863,850 PAs outstanding as at June 30, 2014
(2013: nil). $1.3 million (December 31, 2013: $0.4 million) was
included in accounts payable and accrued liabilities as at June 30,
2014 in relation to the PAs.

8. SUPPLEMENTAL CASH FLOW INFORMATION


    Change in
    Non-cash
    Working
    Capital                                                                         

                        Three months ended June 30,        Six months ended June 30,

      ($000s)                 2014             2013             2014            2013

    Changes in
    non-cash
    working
    capital
    items:                                                                          

      Restricted
      cash            $    (4,685)     $          -     $     13,720     $         -

      Accounts
      receivable          (31,273)            4,889         (54,649)         (3,227)

      Deposits
      and prepaid
      expenses               4,688               22              190         (2,934)

      Accounts
      payable and
      accrued
      liabilities         (52,877)         (34,639)            2,335          15,415

      Advances
      from joint
      venture
      partners            (14,096)          (2,689)         (32,438)         (4,955)

                      $   (98,243)     $   (32,417)     $   (70,842)     $     4,299

    Changes
    related to:                                                                     

      Operating
      activities      $   (10,878)     $    (6,684)     $    (4,156)     $   (8,423)

      Financing
      activities               303            (479)              113             237

      Investing
      activities          (87,668)         (25,254)         (66,799)          12,485

                      $   (98,243)     $   (32,417)     $   (70,842)     $     4,299

9. 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 June 30,
2014, Bellatrix had approximately $1.4 billion in tax pools available
for deduction against future income. Included in this tax basis are
estimated non-capital loss carry forwards of approximately $157.1
million that expire in years through 2030.

10. FINANCE INCOME AND EXPENSES


                          Three months ended June
                          30,                           Six months ended June 30,

    ($000s)                      2014          2013            2014          2013

    Finance expense                                                              

      Interest on
      long-term debt        $   4,866     $   2,460       $   8,593     $   4,441

      Interest on
      convertible
      debentures                    -           651               -         1,296

      Accretion on
      convertible
      debentures                    -           431               -           849

      Accretion on
      decommissioning
      liabilities                 434           216             864           389

                                  434           647             864         1,238

    Finance expense         $   5,300     $   3,758       $   9,457     $   6,975

11. PER SHARE AMOUNTS

The calculation of basic earnings per share for the three and six months
ended June 30, 2014 was based on a net profit of $38.3 million (2013:
$15.5 million) and a net profit of $63.4 million (2013: $20.0 million),
respectively.


                        Three months ended June
                                            30,       Six months ended June 30,

                             2014          2013            2014            2013

    Basic common
    shares
    outstanding       191,091,741   107,919,329     191,091,741     107,919,329

    Fully
    dilutive
    effect of:                                                                 

      Share
      options
      outstanding      11,576,839     9,173,560      11,576,839       9,173,560

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

    Fully diluted
    common shares
    outstanding       202,668,580   126,914,318     202,668,580     126,914,318

    Weighted
    average
    shares
    outstanding       177,847,190   107,919,329     174,754,132     107,900,781

    Dilutive
    effect of
    share options
    and
    convertible
    debentures
    (1)                 3,128,220    13,346,005       2,654,515      13,137,885

    Diluted
    weighted
    average
    shares
    outstanding       180,975,410   121,265,334     177,408,647     121,038,666

    (1)   For the three and six months ended June 30, 2014, a total of
          3,128,220 and 2,654,515 share options were included
          in the calculation as they were dilutive.

          For the three and six months ending June 30, 2013, a total of
          3,524,576 and 3,316,456 share options, respectively,
          were included in the calculation as they were dilutive.
          Additionally, 9,821,429 and 9,821,429 common shares issuable
          pursuant to the conversion of the convertible debentures were
          included in the calculation for the three and six month
          periods ending June 30, 2013 as they were also dilutive.

12. COMMITMENTS

As at June 30, 2014, Bellatrix committed to drill 2 gross (1.2 net)
wells pursuant to farm-in agreements. Bellatrix expects to satisfy
these drilling commitments at an estimated cost of approximately $4.5
million.

In addition, Bellatrix entered into two joint operating agreements
during the 2011 year and an additional joint operation agreement during
2012. The agreements include a minimum commitment for the Company to
drill a specified number of wells each year over the term of the
individual agreements. The details of these agreements are provided in
the table below:


    Joint
    Operating
    Agreement           Feb. 1, 2011       Aug. 4, 2011       Dec. 14, 2012

    Commitment
    Term                2011 to 2015       2011 to 2016        2014 to 2018

    Minimum wells
    per year
    (gross and
    net)                           3            5 to 10                   2

    Minimum total
    wells (gross
    and net)                      15                 40                  10

    Estimated
    total cost
    ($000s)                   $ 56.3            $ 150.0             $  37.5

    Remaining
    wells to
    drill at June
    30, 2014                       3                  9                   7

    Remaining
    estimated
    total cost
    ($000s)                   $ 11.3           $   33.8             $  26.5

Bellatrix also has certain drilling commitments relating to the Grafton
Joint Venture, the Daewoo and Devonian Partnership, and the Troika
Joint Venture. In meeting the drilling commitments under these
agreements, Bellatrix will satisfy some of the drilling commitments
under the joint operating agreements described above.


                                                Daewoo and
    Agreement               Grafton (2)           Devonian           Troika

    Commitment Term        2013 to 2015       2013 to 2016     2013 to 2014

    Minimum total
    wells (gross) (1)                58                 70               63

    Minimum total
    wells (net) (1)                10.5               30.4             31.5

    Estimated total
    cost  ($000s)
    (gross)(1)               $    244.0         $    200.0       $    240.0

    Estimated total
    cost  ($000s)
    (net)(1)                 $     44.0         $    100.0       $    120.0

    Remaining wells to
    drill at June 30,
    2014 (gross)                     35                 33               25

    Remaining wells to
    drill at June 30,
    2014 (net)                      6.9               16.3             12.5

    Remaining
    estimated total
    cost ($000s)
    (gross) (1)              $    147.7         $    131.6       $     95.2

    Remaining
    estimated total
    cost ($000s) (net)
    (1)                      $     29.0         $     65.8       $     47.6

    (1)    Gross and net estimated total cost values and gross and net
           minimum estimated total wells for the
           Troika and Grafton Joint Ventures represent Bellatrix's total
           capital and well commitments pursuant
           to the Troika and Grafton joint venture agreements.  Gross and
           net minimum total wells for the
           Daewoo and Devonian Partnership represent Bellatrix's total well
           commitments pursuant to the
           Daewoo and Devonian Partnership agreement.  Gross and net
           estimated total cost values for the
           Daewoo and Devonian Partnership represent Bellatrix's estimated
           cost associated with its well
           commitments under the Daewoo and Devonian Partnership agreement.
           Remaining estimated total
           cost (gross) for the Daewoo and Devonian Partnership is based on
           initial Daewoo Devonian
           Partnership gross capital divided by initial total gross capital
           including third parties. 

    (2)    During April 2014, Grafton elected to exercise an option to
           increase committed capital investment
           to the Grafton Joint Venture established during 2013 by an
           additional $50 million, for a total
           commitment of $250 million, on the same terms and conditions as
           the previously announced
           Grafton Joint Venture. Specific well commitments associated with
           the increase are under
           determination and have not been incorporated into the
           commitments table.

13. FINANCIAL RISK MANAGEMENT

a. Credit Risk

As at June 30, 2014, 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             $    56,984          $    17,762       $  74,746

    Amounts due
    from
    government
    agencies                       468                  695           1,163

    Revenue and
    other accruals              51,493                8,148          59,641

    Cash call
    receivables                      -                   21              21

    Less:
    Allowance for
    doubtful
    accounts                         -                (616)           (616)

    Total accounts
    receivable             $   108,945          $    26,010       $ 134,955

Amounts due from government agencies include GST and royalty
adjustments. Accounts payable due to same partners includes amounts
which may be available for offset against certain receivables.

Cash calls 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 liabilities as at June
30, 2014:


                                                                                        More
    Liabilities                             < 1                           3-5           than
    ($000s)                 Total          Year       1-3 Years         Years        5 years

    Accounts
    payable and
    accrued
    liabilities (1)     $ 142,678     $ 142,678       $       -       $     -       $      -

    Advances from
    joint venture
    partners               66,942        66,942               -             -              -

    Long-term debt
    - principal (2)       323,007             -         323,007             -              -

    Commodity
    contract
    liability              25,612        25,612               -             -              -

    Decommissioning
    liabilities (3)        74,480             -           2,285         3,554         68,641

    Finance lease
    obligation             12,407         1,534           3,206         2,178          5,489

    Deferred lease
    inducements             3,169           333             666           666          1,504

    Total               $ 648,295     $ 237,099       $ 329,164       $ 6,398       $ 75,634

    (1)   Includes $0.8 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 three year facility, fully revolving
          until maturity, and extendable annually at the Company's
          option (subject to lender approval), provided that the term after
          any extension would not be more than three years.
          Interest due on the bank credit facility is calculated based upon
          floating rates. 

    (3)   Amounts represent the inflated, discounted future abandonment and
          reclamation expenditures anticipated to be
          incurred over the life of the Company's properties (between 2017
          and 2068).

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 June 30, 2014, the Company has entered into commodity price risk
management arrangements as follows:


    Type            Period       Volume            Price            Price       Index
                                                   Floor          Ceiling

    Crude          January          500       $ 93.30          $ 93.30            WTI
    oil            1, 2014        bbl/d               US               US
    fixed          to Dec.
                  31, 2014

    Crude          January        1,500       $    94.00       $    94.00         WTI
    oil            1, 2014        bbl/d              CDN              CDN
    fixed          to Dec.
                  31, 2014

    Crude          January          500       $ 95.00          $ 95.00            WTI
    oil            1, 2014        bbl/d               US               US
    fixed          to Dec.
                  31, 2014

    Crude          January        1,500       $    95.22       $    95.22         WTI
    oil            1, 2014        bbl/d              CDN              CDN
    fixed          to Dec.
                  31, 2014

    Crude          January          500       $    98.30       $    98.30         WTI
    oil            1, 2014        bbl/d              CDN              CDN
    fixed          to Dec.
                  31, 2014

    Crude          January        1,000       $    99.50       $    99.50         WTI
    oil            1, 2014        bbl/d              CDN              CDN
    fixed          to Dec.
                  31, 2014

    Crude          January          500       $    99.60       $    99.60         WTI
    oil            1, 2014        bbl/d              CDN              CDN
    fixed          to Dec.
                  31, 2014

    Natural        January       20,000       $ 3.30 CDN       $ 3.30 CDN        AECO
    gas            1, 2014         GJ/d
    fixed          to Dec.
                  31, 2014

    Natural        January       20,000       $ 3.60 CDN       $ 3.60 CDN        AECO
    gas            1, 2014         GJ/d
    fixed          to Dec.
                  31, 2014

    Natural        July 1,       15,000       $ 3.71 CDN       $ 3.71 CDN        AECO
    gas            2014 to         GJ/d
    fixed         Dec. 31,
                      2014

    Natural       February       10,000       $ 3.79 CDN       $ 3.79 CDN        AECO
    gas            1, 2014         GJ/d
    fixed          to Dec.
                  31, 2014

    Natural       February       10,000       $ 3.80 CDN       $ 3.80 CDN        AECO
    gas            1, 2014         GJ/d
    fixed          to Dec.
                  31, 2014

    Natural       February       15,000       $ 3.85 CDN       $ 3.85 CDN        AECO
    gas            1, 2014         GJ/d
    fixed          to Dec.
                  31, 2014

    Natural       February       10,000       $ 3.84 CDN       $ 3.84 CDN        AECO
    gas            1, 2014         GJ/d
    fixed          to Dec.
                  31, 2014

    Natural       March 1,       10,000       $ 4.14 CDN       $ 4.14 CDN        AECO
    gas            2014 to         GJ/d
    fixed         Dec. 31,
                      2014

14. FAIR VALUE

The Company’s financial instruments as at June 30, 2014 include
restricted cash, accounts receivable, deposits, commodity contract
asset, accounts payable and accrued liabilities, advances from joint
venture partners, deferred lease inducements, finance lease
obligations, and long-term debt. The fair value of accounts receivable,
deposits, accounts payable and accrued liabilities approximate their
carrying amounts due to their short-terms to maturity.

The fair value of commodity contracts is determined by discounting the
difference between the contracted price and published forward price
curves as at the balance sheet date, using the remaining contracted
petroleum and natural gas volumes. The fair value of commodity
contracts as at June 30, 2014 was a net liability of $25.6 million
(December 31, 2013: $16.9 million net liability). The commodity
contracts are classified as level 2 within the fair value hierarchy.

Long-term bank debt bears interest at a floating market rate and the
credit and market premiums therein are indicative of current rates;
accordingly the fair market value approximates the carrying value.

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 of Bellatrix trade on the Toronto Stock Exchange (“TSX”) and on
the NYSE MKT under the symbol BXE.

SOURCE Bellatrix Exploration Ltd.


Source: PR Newswire



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