August 9, 2018 - 10:09 PM EDT
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BNK Petroleum Inc. Announces Second Quarter 2018 Results

All amounts are in U.S. Dollars unless otherwise indicated:

TSX ticker symbol; BKX
OTCQX ticker symbol; BNKPF

CAMARILLO, California, Aug. 10, 2018 /PRNewswire/ --

SECOND QUARTER HIGHLIGHTS

  • Average production for the second quarter of 2018 was 2,100 BOEPD, an increase of 116% compared to second quarter 2017 average production of 970 BOEPD.  The increase was primarily due to the Glenn 16-2H and WLC 14-1H wells that were part of the Company's 2018 drilling program as well as two wells that came into production in the second half of 2017 and some prior period adjustments, partially offset by the 2017 impact of offset fracture operations by another operator
  • Funds from operations was $3.4 million in the second quarter 2018 compared to $1.1 million in the second quarter of 2017.  The increase was mainly due to a 116% increase in production combined with a 44% increase in oil prices partially offset by realized losses from commodity contracts in the first quarter of 2018
  • Revenue, net of royalties was $6.9 million in the second quarter of 2018 compared to $2.5 million for second quarter of 2017, an increase of 178%, as production increased by 116% and average prices increased 50% between the quarters
  • General & administrative expenses decreased by 13% for the second quarter of 2018 compared to the second quarter of 2017.  The decrease relates primarily to management's continued efforts to reduce costs throughout the Company
  • Average netback from operations for the second quarter of 2018 was $35.60 per barrel, an increase of 67% from the prior year second quarter due to higher prices in 2018
  • Net loss for the second quarter of 2018 was approximately $0.8 million compared to a net income of $56,000 for the second quarter of 2017 due to unrealized losses of $1.4 million from hedged commodity contracts in the first quarter of 2018 compared to an unrealized gain of $0.6 in second quarter 2017
  • At June 30, 2018, cash totaled $1.4 million

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

"We are excited that the results of our 2018 drilling program has led to a substantial increase in production and almost a 200% increase in our funds from operations for the second quarter of 2018 compared to the prior year second quarter.  The Glenn 16-2H well came into production in late March and the WLC 14-1H well started production in May.  The total cost of each of these wells were both under our estimated $5.7 million budget.  We expect to continue the successful results of our 2018 development drilling program with the Brock 4-2H well which is expected to commence drilling around August 15th.  The Company will be operating the Brock 4-2H well with a 77% working interest in the well.  A major oil company with offset operations to the field owns the remaining 23% working interest.  The Company will also have a 36% working interest in a partner-operated well targeting the Caney formation, with drilling operations expected to begin in September.  This well is located in the section directly east of BNK's Brock 9-2H well.

Our net revenue increased by 178% in the second quarter 2018 as production increased by 116% and average prices increased by 50% compared to the prior year quarter.  In addition, we generated funds from operations of $3.4 million in the second quarter of 2018, which was a 198% increase from the second quarter 2017 amount of $1.1 million.

Average netbacks from operations for the second quarter of 2018 were $35.60 per boe, an increase of 67% compared to the prior year due to higher prices and increased production.  Netback after adjustments, which include the impact of price adjustments from commodity contracts and prior period adjustments on natural gas and NGL volumes sold as well as processing costs, were $24.97 per boe for the second quarter of 2018 compared to $27.99 per boe in the prior year second quarter.

In the second quarter of 2018, the Company incurred a net loss of $0.8 million compared to net income of $56,000 in the second quarter 2017.  This is primarily due to an unrealized loss on financial commodity contracts of $1.4 million in the second quarter of 2018, compared to an unrealized gain of $0.6 million in the second quarter of 2017."


Second Quarter


First Six Months



2018

2017

%

2018

2017

%








Net Income (Loss):







$ Thousands

$(801)

$56

-

$(1,295)

$1,040

-

$ per common share

$(0.00)

$0.00

-

$(0.01)

$0.00

-

assuming dilution














Capital Expenditures

$3,652

$940

289%

$11,582

$11,484

1%








Average Production (Boepd)

2,100

970

116%

1,783

862

107%

Average Price per Barrel

$54.31

$36.16

50%

$52.15

$38.46

36%

Average Netback from

operations per Barrel

$35.60

$21.30

67%

$33.86

$23.26

46%

Average Netback after

adjustments per Barrel

$24.97

$27.99

(11%)

$25.72

$30.14

(15%)









June

2018


March

2018


December

2017









Cash and Cash Equivalents

$  1,389


$ 1,024


$   521


Working Capital

$ (3,444)


$(5,058)


$  (537)


 

Second Quarter 2018 versus Second Quarter 2017

Oil and gas gross revenues totaled $6,866,000 in the quarter versus $2,473,000 in the second quarter of 2017.  Oil revenues increased $5,080,000 or 190% as oil production increased by 102% to 1,288 boepd and average oil prices increased by $20.06 per barrel or 44% to $66.17.  Natural gas revenues increased $513,000 or 298% to $685,000 as natural gas production increased 320% to 3,328 mcfpd which was partially offset by an average natural gas price decrease of $0.12/mcf or 5% to $2.26/mcf.  Natural gas production for the second quarter of 2018 included 2,104 mcfpd related to prior period adjustments.  Natural gas liquids (NGLs) revenues increased $243,000 or 71% as NGL production increased 29% to 257 boepd and average NGL prices increased 33% to $25.01.  NGL production for the second quarter of 2018 included 24 boepd related to prior period adjustments.

Average second quarter 2018 production per day increased 116% from the second quarter of 2017 due to two additional wells added to production in 2018 and two wells added in 2017.  Second quarter 2018 production also included 375 boepd related to prior period adjustments.

Production and operating expenses increased to $1,356,000 due to higher production.  Production and operating costs on a boe basis decreased by 17% to $5.59/boe due to an increase in production which lowers the fixed operating cost per barrel partially offset by increased production taxes due to a rate increase in 2018 which increased operating costs by $0.90/boe.

Depletion and depreciation expense increased $1,303,000 or 105% due to an increase in production in the second quarter of 2018.

General and administrative expenses decreased $129,000 or 13% due to continued cost cutting efforts in the second quarter of 2018.

Stock based compensation increased by $150,000 or 349% due to the timing of stock awards granted to employees.

Finance income decreased $1.2 million in the second quarter of 2018 compared to the prior year quarter due to unrealized and realized gains on commodity contracts in the second quarter of 2017.

Finance expense increased $2.0 million in the second quarter of 2018 compared to the prior year quarter primarily due to unrealized and realized losses on commodity contracts in the second quarter of 2018 offset by reduced interest expense on the credit facility in 2018.

Capital expenditures of $3,652,000 were incurred in the second quarter of 2018 relating to the 2018 drilling program.

FIRST SIX MONTHS 2018 HIGHLIGHTS

  • Average production for the first six months of 2018 was 1,783 BOEPD, an increase of 107% compared to prior year first six months average production of 862 BOEPD.  The increase was primarily due to the Glenn 16-2H and WLC 14-1H wells that were part of the Company's 2018 drilling program as well as two wells that came into production in the second half of 2017 and some prior period adjustments partially offset by the 2017 impact of offset fracture operations by another operator
  • Funds from operations was $5.6 million in the first six months of 2018 compared to $2.0 million in the first six months of 2017.  The increase was mainly due to a 107% increase in production combined with a 35% increase in oil prices partially offset by realized losses from commodity contracts in the first six months of 2018
  • Revenue, net of royalties was $11.8 million for first six months of 2018 compared to $4.7 million for the first six months of 2017, an increase of 150%, due to higher prices in 2018 and increased production
  • General & administrative expenses decreased by 2% for the first six months of 2018 compared to the first six months of 2017.  The decrease relates primarily to management's continued efforts to reduce costs throughout the Company partially offset by advisor fees in 2018
  • Average netback from operations for the first six months of 2018 was $33.86 per barrel, an increase of 46% from the prior year period due to higher prices in 2018
  • Net loss for the first six months of 2018 was $1.3 million compared to net income of $1.0 million for the first six months of 2017.  The 2018 amount included an unrealized loss on financial commodity contracts of $2.2 million and the 2017 amount included an unrealized gain on commodity contracts of $2.2 million
  • Cash totaled $1.4 million at June 30, 2018

First Six Months of 2018 versus First Six Months of 2017

Gross oil and gas revenues totaled $11,800,000 in the first six months of 2018 versus $4,650,000 in the first six months of 2017.  Oil revenues were $13,224,000 in the first six months versus $5,079,000 in the same period of 2017, an increase of 160% as average oil prices increased 35% or $16.72 a barrel coupled by an increase in oil production of 92%.  Natural gas revenues increased $732,000 or 222%, due to an average natural gas production increase of 267% in the first six months of 2018 offset by a decrease in natural gas prices of 12%.  Natural gas production for the first six months of 2018 included 1,244 mcfpd related to prior period adjustments.  NGL revenue increased $470,000, or 79%, due to an increase in NGL production of 47% and an average NGL price increase of 22% in the first six months of 2018.  NGL production for the first six months of 2018 included 15 boepd related to prior period adjustments.

Average production per day for the first six months of 2018 increased 107% from the prior year comparable period due to two additional wells added to production in 2018 and two wells added in 2017.  The production for the first six months of 2018 also included 222 boepd related to prior period adjustments.

Production and operating expenses increased 129% for the first six months of 2018 due to an increase in production.  Operating expenses averaged $6.18 per BOE for the first six months of 2018 compared to $6.54 per BOE for the same period in 2017.  The per BOE operating expense decrease for 2018 is due to an increase in production which lowers the fixed operating cost per barrel partially offset by increased production taxes due to a rate increase in 2018.

Depletion and depreciation expense increased $2,100,000 due to increased production.

General and administrative expenses decreased $43,000 primarily due to management's continued efforts to reduce costs throughout the Company which were partially offset by advisor fees in 2018.

Finance income decreased $3.2 million due to unrealized and realized gains on financial commodity contracts in 2017.

Finance expense increased $3.2 million due to unrealized and realized losses on commodity contracts in 2018 offset by reduced interest expense on the credit facility in 2018.

BNK PETROLEUM INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited, Expressed in Thousands of United States Dollars)

($000 except as noted)






June 30


December 31


2018


2017





Current Assets





Cash

$1,389


$521


Trade and other receivables

3,030


2,510


Other current assets

363


563


4,782


3,594





Non-current assets





Property, plant and equipment

154,646


147,195


154,646


147,195





Total Assets

$159,428


$150,789





Current Liabilities





Trade and other payables

$5,382


$3,132


Fair value of commodity contracts

2,844


999


8,226


4,131





Non-current liabilities





Loans and borrowings

29,536


24,484


Asset retirement obligations

1,081


950


Fair value of commodity contracts

1,328


951


31,945


26,385





Equity





Share capital

289,540


289,522


Contributed surplus

22,667


22,406


Deficit

(192,950)


(191,655)

Total Equity

119,257


120,273





Total Equity and Liabilities

$159,428


$150,789

 

BNK PETROLEUM INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, expressed in Thousands of United States dollars, except per share amounts)

($000 except as noted)








Second Quarter


First Six Months



2018


2017


2018


2017










Oil and natural gas revenue, net

$

6,866


2,473


11,798


4,650

Other income


1


75


19


76



6,867


2,548


11,817


4,726










Production and operating expenses


1,356


594


2,343


1,021

Depletion and depreciation expense


2,541


1,238


4,295


2,195

General and administrative expenses


867


996


1,890


1,933

Stock based compensation


193


43


222


87



4,957


2,871


8,750


5,236










Finance income


-


1,212


-


3,249

Finance expense


(2,687)


(638)


(4,312)


(1,107)











Net income (loss) and comprehensive

income (loss) from continuing

operations

$

(777)


251


(1,245)


1,632


Net loss and comprehensive loss from

discontinued operations


(24)


(195)


(50)


(592)


Net income (loss)


(801)


56


(1,295)


1,040


Net income (loss) per share

$

(0.00)


0.00


(0.01)


0.01


 

BNK PETROLEUM INC.

SECOND QUARTER 2018

(Unaudited, expressed in Thousands of United States dollars, except as noted)





Second Quarter

First Six Months



2018

2017


2018

2017

Oil revenue before royalties

$

7,758

2,678


13,224

5,079

Gas revenue before royalties


685

172


1,061

329

NGL revenue before royalties


585

342


1,063

593

Oil and Gas revenue


9,028

3,192


15,348

6,001








Funds from operations


3,400

1,140


5,561

2,026

Additions to property, plant & equipment


(3,652)

(940)


(11,582)

(11,484)















Statistics:








2nd Quarter

First Six Months



2018

2017


2018

2017

Average Oil production (Bopd)


1,288

638


1,139

592

Average natural gas production (mcf/d)


3,328

793


2,467

673

Average NGL  production (Boepd)


257

200


233

158

Average production (Boepd)


2,100

970


1,783

862

Average oil price ($/bbl)


$66.17

$46.11


$64.13

$47.41

Average natural gas price ($/mcf)


$2.26

$2.38


$2.38

$2.70

Average NGL price ($/bbl)


$25.01

$18.80


$25.21

$20.72








Average price (Boe)


$54.31

$36.16


$52.15

$38.46

Royalties (Boe)


13.12

8.13


12.11

8.66

Operating expenses (Boe)


5.59

6.73


6.18

6.54

Netback from operations (Boe)


$35.60

$21.30


$33.86

$23.26

Price adjustment from commodity

contracts (Boe)


 

(3.85)

 

6.69


 

(3.85)

 

6.69

Netback including commodity contracts

(Boe)


31.75

27.99


30.28

30.14

Prior period adjustments (Boe)


(6.78)

-


(4.56)

-

Netback after adjustments (Boe)


$24.97

$27.99


$25.72

$30.14

 

The information outlined above is extracted from and should be read in conjunction with the Company's unaudited financial statements for the three and six months ended June 30, 2018 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

Netback from operations, netback including commodity contracts, netback after adjustments, net operating income and funds from operations (collectively, the "Company's Non-GAAP Measures") are not measures recognized under Canadian generally accepted accounting principles ("GAAP") and do not have any standardized meanings prescribed by GAAP. 

The Company's Non-GAAP Measures are described and reconciled to the GAAP measures in the management's discussion and analysis which are available under the Company's profile at www.sedar.com.

Cautionary Statements

In this news release and the Company's other public disclosure:

(a) 

The Company's natural gas production is reported in thousands of cubic feet ("Mcfs"). The Company also uses references to barrels ("Bbls") and barrels of oil equivalent ("Boes") to reflect natural gas liquids and oil production and sales. Boes may be misleading, particularly if used in isolation. A Boe conversion ratio of 6 Mcf:1 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.



(b) 

Discounted and undiscounted net present value of future net revenues attributable to reserves do not represent fair market value.



(c) 

Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.



(d) 

The Company discloses peak and 30-day initial production rates and other short-term production rates.  Readers are cautioned that such production rates are preliminary in nature and are not necessarily indicative of long-term performance or of ultimate recovery.

 

Caution Regarding Forward-Looking Information

This release contains forward-looking information including information regarding the proposed timing and expected results of exploratory and development work including production from the Company's Tishomingo field, Oklahoma acreage, availability of funds from the Company's reserves based loan facility, expected hedging levels and the Company's strategy and objectives. The use of any of the words "target", "plans", "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. 

Such forward-looking information is based on management's expectations and assumptions, including that the Company's geologic and reservoir models and analysis will be validated, that indications of early results are reasonably accurate predictors of the prospectiveness of the shale intervals, that previous exploration results are indicative of future results and success, that expected production from future wells can be achieved as modeled, declines will match the modeling, future well production rates will be improved over existing wells, that rates of return as modeled can be achieved, that recoveries are consistent with management's expectations, that additional wells are actually drilled and completed, that design and performance improvements will reduce development time and expense and improve productivity, that discoveries will prove to be economic, that anticipated results and estimated costs will be consistent with managements' expectations, that all required permits and approvals and the necessary labor and equipment will be obtained, provided or available, as applicable, on terms that are acceptable to the Company, when required, that no unforeseen delays, unexpected geological or other effects, equipment failures, permitting delays or labor or contract disputes are encountered, that the development plans of the Company and its co-venturers will not change, that the demand for oil and gas will be sustained, that the Company will continue to be able to access sufficient capital through financings, credit facilities, farm-ins or other participation arrangements to maintain its projects, that the Company will continue in compliance with the covenants under its reserves-based loan facility and that the borrowing base will not be reduced, that funds will be available from the Company's reserves based loan facility when required to fund planned operations, that the Company will not be adversely affected by changing government policies and regulations, social instability or other political, economic or diplomatic developments in the countries in which it operates and that global economic conditions will not deteriorate in a manner that has an adverse impact on the Company's business and its ability to advance its business strategy.

Forward looking information involves significant known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: any of the assumptions on which such forward looking information is based vary or prove to be invalid, including that the Company's geologic and reservoir models or analysis are not validated, anticipated results and estimated costs will not be consistent with managements' expectations, the risks associated with the oil and gas industry (e.g. operational risks in development, exploration and production; delays or changes in plans with respect to exploration and development projects or capital expenditures; the uncertainty of reserve and resource estimates and projections relating to production, costs and expenses, and health, safety and environmental risks including flooding and extended interruptions due to inclement or hazardous weather), the risk of commodity price and foreign exchange rate fluctuations, risks and uncertainties associated with securing the necessary regulatory approvals and financing to proceed with continued development of the Tishomingo Field, the Company or its subsidiaries is not able for any reason to obtain and provide the information necessary to secure required approvals or that required regulatory approvals are otherwise not available when required, that unexpected geological results are encountered, that completion techniques require further optimization, that production rates do not match the Company's assumptions, that very low or no production rates are achieved, that the Company will cease to be in compliance with the covenants under its reserves-based loan facility and be required to repay outstanding amounts or that the borrowing base will be reduced pursuant to a borrowing base re-determination and the Company will be required to repay the resulting shortfall, that the Company is unable to access required capital, that funding is not available from the Company's reserves based loan facility at the times or in the amounts required for planned operations, that occurrences such as those that are assumed will not occur, do in fact occur, and those conditions that are assumed will continue or improve, do not continue or improve and the other risks identified in the Company's most recent Annual Information Form under the "Risk Factors" section, the Company's most recent management's discussion and analysis and the Company's other public disclosure, available under the Company's profile on SEDAR at www.sedar.com.

With respect to estimated reserves, the evaluation of the Company's reserves is based on a limited number of wells with limited production history and includes a number of assumptions relating to factors such as availability of capital to fund required infrastructure, commodity prices, production performance of the wells drilled, successful drilling of infill wells, the assumed effects of regulation by government agencies and future capital and operating costs. All of these estimates will vary from actual results. Estimates of the recoverable oil and natural gas reserves attributable to any particular group of properties, classifications of such reserves based on risk of recovery and estimates of future net revenues expected therefrom, may vary. The Company's actual production, revenues, taxes, development and operating expenditures with respect to its reserves will vary from such estimates, and such variances could be material.  In addition to the foregoing, other significant factors or uncertainties that may affect either the Company's reserves or the future net revenue associated with such reserves include material changes to existing taxation or royalty rates and/or regulations, and changes to environmental laws and regulations. 

Although the Company has attempted to take into account important factors that could cause actual costs or results to differ materially, there may be other factors that cause actual results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. The forward-looking information included in this release is expressly qualified in its entirety by this cautionary statement. Accordingly, readers should not place undue reliance on forward-looking information.  The Company undertakes no obligation to update these forward-looking statements, other than as required by applicable law.

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. Additionally the Company is utilizing its technical and operational expertise to identify and acquire additional unconventional projects. The Company's shares are traded on the Toronto Stock Exchange under the stock symbol BKX and on the OTCQX under the stock symbol BNKPF.

For Further Information: Wolf E. Regener, President and Chief Executive Officer, +1 (805) 484-3613, Email: [email protected], Website: www.bnkpetroleum.com


Source: PR Newswire (August 9, 2018 - 10:09 PM EDT)

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