BNK Petroleum Inc. Announces 3rd Quarter 2011 results

CALGARY, Nov. 10, 2011 /PRNewswire/ - All amounts are in U.S. Dollars unless otherwise indicated:

    

    Third Quarter   First Nine Months  
    2011 2010 % 2011 2010 %
               
Earnings (Loss):            
$ Thousands ($274) ($1,464) 81% $18 ($3,895) P
$ per common share $0.00 ($0.01)   $0.00 ($0.04) P
assuming dilution            
               
Funds from operations:            
$ Thousands $3,330 ($808)   $6,281 ($17,129)  
$ per common share $0.02 ($0.01)   $0.04 ($0.16)  
               
Capital Expenditures $10,771 $7,639 41% $22,515 $23,556 (4)%
               
Average Production (Boepd) 1,868 1,098 70% 1,503 1,114 35%
Average Product Price per Barrel $46.81 $37.67 24% $46.79 $40.43 16%
Average Netback per Barrel $28.27 $19.97 42% $27.56 $21.13 30%
               
    9/30/2011   12/31/2010   9/30/2010  
               
Cash and Cash Equivalents $41,957   $62,062   $10,115  
Working Capital $46,154   $63,503   $(15,849)  

BNK's President and Chief Executive Officer, Wolf Regener commented:

"BNK incurred a net loss of $.3 million in the third quarter of 2011 on a 70% increase in average third quarter production and a 111% increase in oil and gas revenues net of royalties compared to the same period in 2010.  Included in third quarter results were a $2.6 million unrealized currency loss due to the weakening of the Canadian dollar relative to the US dollar and higher general and administrative costs versus the third quarter of last year of $2.4 million. General and administrative expenses increased due to higher professional fees (primarily legal fees in connection with corporate restructuring incurred to significantly minimize the Company's short and long term tax liability), increased salaries and wages, higher travel costs and higher public relations costs.

Third quarter results benefited from other income of $1.4 million from management fee income and $1.8 million from unrealized gains resulting from financial hedges on crude oil and natural gas.

During the third quarter in Oklahoma the Company completed fracture stimulations of 29 gross stages on two wells that it operates and benefited from a successful fracture stimulation of 12 stages on a non-operated well.  During the quarter fracture stimulations began on a third well with 12 stages.  We are very pleased with the production we are achieving in the Woodford wells in Oklahoma as production has been averaging approximately 2,200 barrels as day in recent weeks.

Cash and working capital totaled $42 million and $46 million respectively at September 30, 2011.

As a result of a review of its reserves effective August 1 of its Tishomingo shale gas field the Company's US lender, Amegy Bank recently increased the borrowing base against these assets to $32 million from $23.8 million. The Company has currently borrowed $20 million against this credit facility.

Through the first nine months of 2011 BNK earned net income of $18,000 versus a loss of $3.9 million through the first nine months of 2010.  Oil and gas revenues net of royalties increased $5.8 million or 60% aided by a 35% increase in average production per day and a 16% increase in average product prices.

In Poland the Company as Manager for Saponis Investments Sp z o.o. completed drilling the third well (Starogard S-1) in August 2011. Completion of the Lebork S-1 well was initiated in mid-September. The fracture stimulations were not successful in placing the programmed quantities and concentrations of proppant.  The Company plans to use a new fracture stimulation design in the spring of 2012 to re-stimulate and test the Lebork well,  The Wytowno S-1 and Starogard S-1 wells are scheduled to be completed in the spring of 2012 after the Lebork S-1 re-stimulation and results of the analysis of the cored interval at Starogard are received.

On its wholly owned Indiana concessions (Bytow, Trzebielino and Darlowo) operations must be commenced to drill three wells by September 2012.In that regard a drilling rig has been contracted and the Company is planning on beginning to drill the first well in the first quarter of 2012.

In Germany the Company is continuing the bidding process for the 2D seismic operations on its concessions to provide the necessary information for its drilling program and has initiated a public relations campaign to communicate its commitment to the environment, safety and open dialogue.

In Spain in addition to its Arquetu concession the Company has recently been awarded two new concessions (Urraca in September totaling 234,000 acres and Sedano this month totaling 86,000 acres).

In other areas of Europe (including France) the Company has made concession applications and awaits their potential grant. The Company also explores for shale gas opportunities in other areas of the world."

THIRD QUARTER HIGHLIGHTS:

  • Oil and gas revenues net of royalties increased 112%
  • Average net-back per barrel increased 42% to $28.27 a barrel
  • Cash and working capital at September 30, 2011 totaled $42 million and $46 million respectively
  • Average daily production increased 70% to 1,868 boepd
  • Capital expenditures totaled $10.8 million of which $8.4 million was in Oklahoma, $1.6 million was in Poland and $0.8 in other countries.
  • Acquired a new concession in Spain totaling 234,292 acres
  • As manager of Saponis completed drilling its third well in Poland

Third Quarter 2011 to Third Quarter 2010

Oil and gas revenues net of royalties totaled $6,537,000 in the third quarter versus $3,080,000 in the third quarter of 2010. Oil revenues increased $1,741,000 or 105% as oil production per day increased 76% to 432boepd while average oil prices increased $12.05 a barrel or 16% to $85.46 a barrel.  Natural gas liquids (NGL's) revenues increased $1,604,000 or 121% to $2,930,000 as NGL production increased 45% to 675boepd while NGL prices increased 52% to $47.15 a barrel.  Natural gas revenues increased $895,000 or 108% to $1,720,000 as average natural gas prices rose $.23 a barrel to $4.10 while natural gas production increased 2,245 metric cubic feet per day (mcf/d) to 4,564 or 97%.

Other income of $1,423,000 consisted of management fees recorded as operator of Saponis Sp z o.o.

Exploration and evaluation expenses totaled $258,000 in the quarter and relates to pre-concession expenses related to new ventures.

Production and operating expenses increased $616,000 or 58% to $1,678,000 due to a 70% increase in production between quarters.

Depletion and depreciation expenses increased $876,000 or 97% to $1,781,000 due to increased production, a higher reserve base on which the reserve percentage is applied and increased depreciation.

General and administrative expenses increased $2,358,000 or 119% due to higher legal costs primarily incurred in restructuring the corporate  entities, higher salary and wage costs, other professional fees, and higher salary and wage expense.

Finance income increased to $2,226,000 from $1,151,000 or 93% due to projected gains on the hedging of crude oil and natural gas.

Finance expense increased 541% or $2,371,000 due to a $2,594,000 unrealized currency loss in the third quarter due to the weakening of the Canadian dollar relative to the US dollar.

FIRST NINE MONTHS 2011 VERSUS FIRST NINE MONTHS 2010 HIGHLIGHTS

  • Average production per day increased 35% to 1,503boepd
  • Oil and gas revenues net of royalties increased 60% to $15,599,000 from $9,750,000 in the first nine months of 2010
  • Average net-back per barrel increased 30% to $27.56 a barrel
  • Earnings were $18,000 versus a loss of $3,895,000 through the first nine months of 2010
  • Cash from operations excluding changes in non-cash working capital increased to a positive $374,000 from a negative $8,500,000 through the first nine months of 2010
  • Capital expenditures totaled $22,515,000 versus $23,556,000 in 2010 (including the $12,000,000 expenditure in the second quarter of 2010 to purchase the overriding royalty and the net profits interest from its former lender which was recorded as an increase in property, plant & equipment).

Oil and gas revenues net of royalties totaled $15,599,000 through the first nine months of 2011 versus $9,750,000 through the first nine months of 2010. Oil revenues increased $2,986,000 or 65% as oil production per day increased 39% to 306 boepd while average oil prices increased $14.14 a barrel or 18% to $90.74 a barrel.  Natural gas liquids (NGL's) revenues increased $2,702,000 or 56% to $7,536,000 as NGL production increased 23% to 597boepd while NGL prices increased 27% to $46.25 a barrel.  Natural gas revenues increased $1,214,000 or 42% to $4,072,000 as average natural gas prices declined $.11 an mcf to $4.15 while natural gas production increased 1,142 metric cubic feet per day (mcf/d) to 3,598 or 46%.

Other income totaled $3,214,000 through the first nine months of 2011 versus none in 2010 and was the result of $2,038,000 in management fee income and $1,176,000 from the sale of seismic data in Oklahoma.

Exploration and evaluation expenses declined $2,433,000 in the comparative nine month periods due to increased Black Warrior write-offs through the first nine months of 2010.

Production and operating expenses increased 29% commensurate with the 35% increase in production.

Depletion and depreciation expense increased $1,645,000 or 62% due to increased production, a higher reserve base on which the depletion rate is applied and increased depreciation primarily on European assets.

General and administrative expenses increased $4,528,000 in the comparative periods due to higher legal costs, mainly due to restructuring,and other professional fees (management fees, accounting and public relations fees), higher salary and wage and recruiting expenses as well as higher travel costs.

Finance income increased $867,000 or 69% due to higher unrealized gains resulting from the financial hedging of crude oil and natural gas.

Finance expense increased 14% to $2,026,000 as increased foreign exchange losses of $1,265,000 due to the weakening of the Canadian dollar versus the US dollar more than offset lower interest expense of $645,000 due to lower debt levels and lower borrowing rates.

Key Financial and operating data follow.

BNK PETROLEUM INC.  
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION  
(Unaudited, Expressed in Thousands of United States Dollars)  
      September 30,   December 31,    
      2011   2010    
Assets              
  Cash and cash equivalents   $ 41,957 $ 62,062    
  Trade and other receivables     19,450   18,398    
  Deposits and prepaid expenses     2,284   757    
  Fair value of commodity contracts     1,267   322    
Total current assets     64,958   81,539    
               
Non-current assets              
  Property, plant and equipment     147,002   132,413    
  Exploration and evaluation assets     7,757   2,345    
  Fair value of commodity contracts     826   -    
Total non-current assets     155,585   134,758    
               
Total Assets   $ 220,543 $ 216,297    
               
Liabilities              
  Trade and other payables   $ 18,804 $ 18,036    
Total current liabilities     18,804   18,036    
               
Non-current liabilities              
  Loans and borrowings     19,604   19,486    
  Asset retirement obligations     1,709   1,730    
  Warrants     80   205    
Total non-current liabilities     21,393   21,421    
               
Equity              
  Share capital     247,207   246,240    
  Contributed surplus     14,032   11,511    
  Deficit     (80,893)   (80,911)    
  Total equity     180,346   176,840    
Total Equity and Liabilities   $ 220,543 $ 216,297    

  BNK PETROLEUM INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited, expressed in Thousands of  United States dollars, except per share amounts)
         
    Third Quarter   First Nine Months
    2011   2010   2011   2010
                 
Oil and natural gas revenue, net of royalties $ 6,537   $ 3,080 $ 15,599   $ 9,750
Gathering income   404   464   1,354   2,406
Other income   1,423   -   3,214   -
    8,364   3,544   20,167   12,156
                 
Exploration and evaluation expenditures   258   1,774   1,593   4,026
Production and operating expenses   1,678   1,062   4,291   3,322
Depletion and depreciation   1,781   905   4,299   2,654
General and administrative expenses   4,338   1,980   10,064   5,536
    8,055   5,721   20,247   15,538
                 
Operating income (loss)   309   (2,177)   (80)   (3,382)
                 
Finance income   2,226   1,151   2,124   1,257
Finance expense   (2,809)   (438)   (2,026)   (1,770)
Net finance income (expense)   (583)   713   98   (513)
                 
Net income (loss) and comprehensive income (loss) $ (274)   $ (1,464)   $ 18   $ (3,895)
                 
Net income (loss) per share                
  Basic and Diluted $ 0.00   $ (0.01) $ 0.00   $ (0.04)

BNK Petroleum Inc.
Third Quarter 2011
($000 except as noted)
 
          3rd Quarter   First Nine Months
          2011 2010   2011 2010
Oil revenue before royalties   $ 3,396 1,654   7,591 4,605
Gas revenue before royalties     1,720 825   4,072 2,858
NGL revenue before royalties     2,930 1,326   7,536 4,834
Oil and Gas revenue     8,046 3,805   19,199 12,297
                   
Cash Flow provided (used) by operating activities 1,201 (1,409)   374 (8,512)
Capital expenditures   (10,771) (7,639)   (22,515) (23,556)
Cash proceeds of stock options exercised 192 183   621 183
Repayment of long-term debt     - -   - (7,427)
                   
                   
Statistics:                  
          3rd Quarter   First Nine Months
        2011 2010   2011 2010
Average natural gas production (mcf/d)   4,564 2,319   3,598 2,456
Average NGL  production (Boepd)   675 466   597 485
Average Oil production (Bopd)   432 245   306 220
Average production (Boepd)     1,868 1,098   1,503 1,114
Average natural gas price ($/mcf)   $4.10 $3.87   $4.15 $4.26
Average NGL price ($/bbl)     $47.15 $30.95   $46.25 $36.48
Average oil price ($/bbl)     $85.46 $73.41   $90.74 $76.60
                   
Average price per barrel     $46.81 $37.67   $46.79 $40.43
Royalties per barrel     8.78 7.18   8.77 8.38
Operating expenses per barrel     9.76 10.52   10.46 10.92
Netback per barrel       $28.27 $19.97   $27.56 $21.13

The information outlined above is extracted from and should be read in conjunction with the Company's unaudited financial statements for the three and nine months ended September 30, 2011 and the related management's discussion and analysis thereof, copies of which are available under the Company's profile at www.sedar.com.

Non-GAAP Measures

Funds from operations and funds from operations per common share are not defined by GAAP in Canada and are referred to as non-GAAP measures.  Funds from operations are based on cash flow from operating activities as per the statement of cash flows before changes in non-cash working capital.  Funds from operations per common share is calculated based on the weighted average number of common shares outstanding consistent with the calculation of net earnings (loss) per share.

For more details on non-GAAP measures, refer to BNK's "Management's Discussion and Analysis.

Non-IFRS Information

Netback per barrel and its components are calculated by dividing revenue, royalties and operating expenses by the Company's sales volume during the period.  Netback per barrel is a non-IFRS measure but it is commonly used by oil and gas companies to illustrate the unit contribution of each barrel produced.  This is a useful measure for investors to compare the performance of one entity with another.  The non-IFRS measures referred to above do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures used by other companies.

The Company also uses the "barrels" (bbls) or "barrels of oil equivalent" (boe) reference in this report to reflect natural gas liquids and oil production and sales.  All boe conversions are derived by converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil, representing the approximate energy equivalency.

Caution Regarding Forward-Looking Information

Certain statements contained in this news release constitute "forward-looking information" as such term is used in applicable Canadian securities laws, including information regarding the proposed timing and expected results of exploratory work, commencement of drilling, and concession applications.  Forward-looking information is based on plans and estimates of management at the date the information is provided and certain factors and assumptions of management, including that all required permits and approvals, funding from co-venturers and the necessary labor and equipment will be obtained, provided or available, as applicable, when required. Forward looking information is subject to a variety of risks and uncertainties and other factors that could cause plans, estimates, timing and actual results to vary materially from those projected in such forward-looking information.  Factors that could cause the forward-looking information in this news release to change or to be inaccurate include, but are not limited to, the risk that permits, approvals, equipment and/or funding are delayed or available only on terms that are not acceptable to the Company, political and currency risks and other risks associated with exploration and development of oil and gas projects, including those set forth in the Company's management's discussion and analysis and annual information form filed under the Company's profile on www.sedar.com.

About BNK Petroleum Inc.

BNK Petroleum Inc. is an international oil and gas exploration and production company focused on finding and exploiting large, predominately unconventional oil and gas resource plays. Through various affiliates and subsidiaries, the Company owns and operates shale gas properties and concessions in the United States, Poland, Germany and Spain. Additionally the Company is utilizing its technical and operational expertise to identify and acquire additional unconventional projects outside of North America. The Company's shares are traded on the Toronto Stock Exchange under the stock symbol BKX.

SOURCE BNK Petroleum Inc.



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