BNK Petroleum Inc. (TSX: BKX):
|$ per common share assuming dilution||$||(.02||)||-||L|
|Average production per day (Boepd)||1,654|
|Average Product Price per Barrel||$||38.55|
|Average Netback per Barrel||$||18.08|
|Cash and Cash Equivalents||$||32,255|
BNK’s President and CEO Wolf Regener commented:
“First quarter results reflect our expanding investment in our European operations. Capital expenditures increased 150% to $10.8 million with over 90% of the total spent in Europe, primarily Poland.
“In the first quarter the Company incurred a net loss of $3.5 million versus a loss of $115,000 in the first quarter of 2011. Included in the first quarter loss were non-cash expenses of $2.1 million relating to depletion, and unrealized losses on financial commodity contracts which were partially offset by unrealized gains on foreign exchange translations.
“Production increased 25% in the comparative quarters due to the positive effect of completion activity primarily on previously drilled wells throughout 2011.
“General and administrative expenses increased $2.2 million between quarters due to higher salary expense resulting from increased headcount, higher legal expenses substantially incurred to develop our European operations, increased management fees in Europe, public relations expenses incurred in Europe and higher accounting fees. Other legal costs of $.6 million were incurred in the first quarter to position the Company’s concessions to facilitate farm-outs, joint ventures and potential future sales of concessions.
“Average netbacks declined 31% between quarters to $18.08 a barrel primarily due to a 16% decline in average product prices as average natural gas prices declined 35%, NGL prices declined 16% while average per barrel crude oil prices increased 9%. In addition one time work-over expenses represented 33% of the decline, without which netbacks would have been $20.67 a barrel.
“As previously announced the Miszewo T-1 well on the Trzebielino concession which is held by the Company's wholly owned subsidiary, Indiana Investments Sp. z o.o. (“Indiana”), was drilled to a total depth of 4,840 meters. The target zones are deeper as the lower portion of the middle Silurian is thicker than originally projected. Indiana has been informed that the deepening of the well requires an Environmental Decision (“ED”), and accordingly a decision was made to temporarily suspend the well pending receipt of the ED and to move the rig to the Gapowo B-1 well location on the Bytow concession. Drilling at that location is expected to begin within two weeks. If the ED is obtained prior to the completion of the Gapowo B-1 well, the drilling rig will be mobilized back to the Miszewo T-1 well to drill an additional 260 meters and evaluate the primary targets. If a favorable ED is not obtained within the anticipated time frame, the Miszewo T-1 well will remain suspended pending completion of the Environmental Impact Assessment currently in progress and scheduled for completion late in the third quarter of 2012.
“Based on samples obtained from the Miszewo T-1 well it appears the shale is darker with notably higher gas shows than were evident in other wells the Company has drilled in Poland. The data collected from the well is validating the Company’s geological model which predicts the Ordovician and Cambrian shales thickening and having higher organic content as the basin deepens.
“Also in the 1st quarter BNK’s advisors Macquarie Capital Markets Canada Ltd. and TD Bank Europe Limited began the process of assembling the data room pursuant to the Company’s objective to identify and evaluate partners for the development of its 100% owned Polish and Spanish projects.
"In response to lower natural gas and ethane prices and the current market environment, the Company has prioritized its planned capital expenditures for the balance of 2012 to conserve cash while continuing to advance our key objectives in order to exit 2012 in a solid financial position. Our principal focus is maintaining our European exploration projects and, in the U.S., testing of the high oil content Caney formation. Evaluation of the shales on the Company's 100% owned Indiana concessions in Poland is continuing and drilling of a horizontal Caney formation test well is scheduled for early in the third quarter. The Company also plans to participate in several non-operated Woodford shale wells in the second half of 2012. We are very pleased with the level of interest and progress to date in the farmdown process on our 100%-owned Poland and Spain concessions.”
FIRST QUARTER HIGHLIGHTS
- Capital expenditures increased 150% to $10.8 million primarily due to expenditures incurred in Poland relating to drilling the Miszewo T-1 well, 2D seismic work and preparation work for the Gapowo B-1 well.
- Comparative revenues increased 8% to $5.3 million
- Loss of $3.5 million versus a loss of $115,000 from the first quarter of 2011 due to higher general and administrative and other legal restructuring expenses, and lower foreign exchange gains
- Cash and working capital totaled $32.2 million and $28.1 million respectively at March 31, 2012
- Production per day increased 25% from the first quarter of 2011
- Average net-backs per barrel declined 31% to $18.08 primarily due to falling natural gas and NGL prices and one-time work-over costs
- Efforts continue to identify and evaluate potential farm-out partners
- Yearend reserves decreased 15% to $269 million using an estimated present value of 10% on future revenues
- Proved and probable reserves decreased 9% to $36.1 million
First Quarter 2012 versus First Quarter 2011
Oil and gas revenues totaled $5,336,000 in the quarter versus $4,959,000 in the first quarter of 2011. Oil revenues increased $395,000 or 19% as oil production per day increased 8% to 276 boepd while average oil prices increased $8.07 per barrel or 9% to $99.90. Natural gas liquids (NGL's) revenues increased $102,000 or 5% as NGL production increased 24% to 679 boepd while average NGL prices fell 16% or $7.18 a barrel to $37.11. Natural gas revenues decreased $145,000 or 13% to $1,003,000 as natural gas production increased by 1,061 metric cubic feet per day (mcf/d) or 34% to 4,193 while average natural gas prices fell $1.44 an mcf or 35% to $2.63. Due to wells being shut-in when offset operators were performing fracture stimulations, production was negatively affected by approximately 75 boepd during the first quarter.
Average production per day increased 25% from the first quarter of 2011 due to positive results of fracture stimulating 66 gross stages in 2011 and the addition of one new producing well. No stages were fracture stimulated in the first quarter of 2012.
Other income consisting of gathering revenue and management income increased $91,000 as a higher management fee accrual of $190,000 offset a reduction in gathering fee revenue of $99,000. Exploration and evaluation expenditures declined $591,000 due to BNK paying $500,000 in liquidated damages in the first quarter of 2011 as a result from its decision to not drill a third well in the Black Warrior acreage in Alabama.
Production and operating expenses increased $690,000 to $1,993,000 due to $390,000 in work-over expenses relating to two wells coupled with increased production. Absent the work-over expenses production and operating expenses would have increased 23% commensurate with the 25% increase in average production.
Depletion and depreciation expense increased $644,000 or 54% due to a higher exhaustion factor applied against an increased capital base.
General and administrative expenses increased $2,217,000 or 141% due to higher salary and benefit related expenses of $864,000 as comparative quarter-end employee headcount increased from 22 to 37, higher legal expenses of $406,000 primarily related to its European entities and related projects, higher accounting and management fees of $436,000, higher public relations expenses of $286,000 and other increases of $225,000 primarily related to travel, rent and other expenses.
Share based compensation declined $184,000 or 41% due to a greater percentage of options becoming fully vested.
Legal restructuring expenses of $600,000 were incurred in the first quarter in the Company’s continued effort to properly position the Company’s concessions to facilitate farm-outs, joint ventures and potential future sales of concessions. Finance income declined $845,000 or 62% to $519,000 primarily due to lower foreign exchange gains resulting from fluctuations between the Canadian dollar and the US dollar.
Finance expense declined $439,000 or 34% to $839,000 primarily due to lower unrealized losses on financial commodity contracts and lower losses on warrant revaluations.
Capital expenditures of $10,772,000 were incurred in the first quarter and reflect $5,663,000 spent in drilling the Miszewo T-1 well, $2,875,000 in seismic work spent amongst the three Indiana concessions, $673,000 in drilling costs incurred at the Gapowo B-1 well, $142,000 in miscellaneous Capex in Poland, $1,079,000 spent in Oklahoma and $340,000 in other European countries.
|BNK Petroleum Inc.|
|($000 except as noted)|
|($000’s)||March 31||December 31||March 31|
|Trade and other receivables||12,643||11,509||19,009|
|Other current assets||3,085||3,047||1,036|
|Total Current Assets||47,983||55,052||78,575|
|Property, plant and equipment||149,810||150,313||134,770|
|Exploration and evaluation assets||24,656||14,911||3,220|
|Other non-current assets||1,735||2,239||-|
|Total Non-current assets||176,201||167,463||137,990|
|Trade and other payables|
|Other current liabilities||-||-||308|
|Total Current Liabilities||19,848||15,355||17,132|
|Loans and borrowings||23,414||23,353||19,518|
|Other non-current liabilities||2,074||2,031||2,243|
|Total Equity and Liabilities|
|BNK Petroleum Inc.|
|($000 except as noted)|
|Three months ended March 31|
|Oil and gas revenue net of royalties|
|Exploration and evaluation expenditures||52||643|
|Production and operating expenses||1,993||1,303|
|Depletion and depreciation||1,833||1,189|
|General and administrative expenses||3,788||1,571|
|Share based compensation||270||454|
|Legal restructuring expenses||600||-|
|Net Finance Income||(320||)||86|
|Net loss and comprehensive loss for the period|
|Loss per share|
|BNK Petroleum Inc.|
|($000 except as noted)|
|Oil revenue before royalties|
|Gas revenue before royalties||1,003||1,148|
|NGL revenue before royalties||2,294||2,192|
|Oil and Gas revenue||5,802||5,450|
|Cash flow provided (used) by operating activities||(4,397||)||2,811|
|Additions to property, plant & equipment||(10,772||)||(4,310||)|
|Cash Proceeds of Stock Options Exercised||19||382|
|Average natural gas production (mcf/d)||4,193||3,132|
|Average NGL production (Boepd)||679||550|
|Average Oil production (Bopd)||276||255|
|Average production (Boepd)||1,654||1,327|
|Average natural gas price ($/mcf)|
|Average NGL price ($/bbl)||37.11||44.29|
|Average oil price ($/bbl)||99.90||91.83|
|Average price per barrel|
|Royalties per barrel||7.23||8.56|
|Operating expenses per barrel||13.24||10.91|
|Netback per barrel *|
* Netback per barrel in 1st quarter would be $20.67 absent onetime workover expenses.
The information outlined above is extracted from and should be read in conjunction with the Company's unaudited financial statements for the three months ended March 31, 2012 and the related management's discussion and analysis thereof, copies of which are available under the Company's profile at www.sedar.com.
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, anticipated timing of commencement of drilling of the wells referred to, the timing and prospect for obtaining a favorable environmental decision required to deepen the Miszewo well, plans to conserve cash and management's expectation that these will allow the Company to exit 2012 is a solid financial position. 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 will be obtained when required and on the terms required to proceed with its programs as planned, funding from co-venturers and farmouts and the necessary labor and equipment will be obtained, provided or available, as applicable, when required and on terms that are acceptable to the Company. 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 or farmouts 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 a U.S. based 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.