Bankers Petroleum Announces 2014 Third Quarter Financial and Operational Results

Netback of US$45.78/bbl and Q4 Average Production to Date 22,000 bopd

CALGARY, Nov. 7, 2014 /CNW/ - Bankers Petroleum Ltd. ("Bankers" or the "Company") (TSX: BNK, AIM: BNK) is pleased to provide its 2014 third quarter financial and operational results. 

During the quarter, Bankers achieved a netback of US$45.78 per barrel. All amounts listed in this news release are in US dollars unless otherwise stated.

Highlights for the quarter ended September 30, 2014 are summarized below:

Operational Highlights:

• Average oil production for the three months ended September 30, 2014 was 21,865 barrels of oil per day (bopd), 6% higher as compared to 20,630 bopd in the previous quarter and 18% higher than 18,541 bopd in the third quarter of 2013.  For the nine months ended September 30, 2014, average oil production was 20,809 bopd, 17% higher than 17,787 bopd for the same period in 2013.
• Oil sales for the third quarter of 2014 averaged 21,994 bopd, a 2% increase compared to 21,620 bopd for the previous quarter and 20% increase compared to 18,332 bopd for the third quarter of 2013.  Crude oil inventory at September 30, 2014 decreased to 342,500 barrels, 11,500 barrels lower than 354,000 barrels at June 30, 2014.  Oil sales for the nine months ended September 30, 2014 were 20,696 bopd, an increase of 17% from 17,655 bopd for the comparable 2013 period.
• Capital expenditures in the third quarter of 2014 were $88 million.  The Company drilled 45 wells during the quarter, comprised of 44 horizontal production wells and the Company's first multi-lateral well in the main area of the Patos-Marinza oilfield.  Capital expenditures were $72 million for the previous quarter and $66 million for the third quarter of 2013. 

Product Margin Highlights:

• For the three and nine months ended September 30, 2014, operating costs and sales and transportation costs, originating from Albanian-based companies and their employees, were $43 million ($21.41/bbl) and $113 million ($20.03/bbl), respectively, compared to $39 million ($23.29/bbl) and $116 million ($24.15/bbl) for the same periods in 2013. 
• Net operating income (netback) in the third quarter of 2014 was $93 million ($45.78/bbl) compared to $106 million ($53.89/bbl) and $83 million ($49.05/bbl) in the previous quarter and third quarter of 2013, respectively.  Net operating income for the nine months ended September 30, 2014 was $291 million ($51.53/bbl), a 29% increase compared to $225 million ($46.69/bbl) in the comparable 2013 period.

Financial Highlights:

• Revenue for the third quarter of 2014 was $159 million ($78.55/bbl) compared to $171 million ($86.68/bbl) in the previous quarter and $147 million ($86.96/bbl) in the third quarter of 2013.  Field price realization represented 77% of the Brent oil benchmark price ($101.93/bbl) for the third quarter of 2014 compared to 79% of the Brent oil price ($109.67/bbl) in the previous quarter and 79% of the Brent oil price ($110.29/bbl) in the third quarter of 2013.  The reduction as a percentage of Brent compared to the previous quarter was mainly due to commencement of domestic sales during the quarter.
• Royalties to the Albanian Government and related entities during the third quarter of 2014 were $23 million (14% of revenue) compared to $25 million (15% of revenue) in the previous quarter and $25 million (17% of revenue) for the third quarter of 2013.  For the nine months ended September 30, 2014, royalties were $70 million (15% of revenue) compared to $70 million (17% of revenue) for the comparable period in 2013.
• Funds generated from operations for the third quarter of 2014 were $85 million ($0.32 per share) compared to $94 million ($0.36 per share) for the previous quarter and $71 million ($0.28 per share) for the third quarter of 2013.  Funds generated from operations for the nine months period ended September 30, 2014 were $261 million, a 32% increase from $198 million for the same period in 2013.
• The Company continues to maintain a strong financial position at September 30, 2014, with cash of $88 million and working capital of $190 million.  At September 30, 2014, the Company had drawn $104 million of its $224 million approved credit facilities.  Working capital for December 31, 2013 and September 30, 2013 was $134 million and $122 million, respectively.
• In August 2014, Bankers commenced delivery of crude oil to the domestic refinery, under new ownership and management.  The temporary contract enables the restart of the refinery to test the commercial viability of the refinery system.  Bankers agreed to sell oil to an affiliate of this domestic refinery on a monthly basis until December 31, 2014 at 73% of Dated Brent (FOB Vlore equivalent) plus $40/tonne or approximately $6/bbl recovery against a delinquent accounts receivable balance.  All sales are fully secured by letters of credit.  Bankers is in the process of reviewing its sales contracts for the 2015 calendar year and volume commitments for next year will be determined in the fourth quarter of 2014.

Fiscal Terms Mitigation:

• Bankers and the Government of Albania have worked together to reach an agreement on mitigation of the 2014 fiscal changes. Terms of the agreement have been approved by Albpetrol Sh.A, the Albanian National Agency for Natural Resources (AKBN), and were ratified by the Council of Ministers on November 2, 2014. The agreement is structured to allow excise and any applicable carbon and circulation taxes to be deducted from revenue and eligible for inclusion in the cost recovery pool for the Patos-Marinza concession as Petroleum Costs to determine the Company's taxable position. This mechanism enables the near term impact on cash flow to be fully offset through deferred and reduced profit tax burden which keeps the net asset value of the project whole and the economics of future investment consistent with the pre-2013 fiscal regime.

Outlook

In the fourth quarter of 2014, the Company will remain focused on its three part strategy to deliver steady and reliable growth through the development drilling program, expanding product margins through surface-level improvements and continuing to validate the polymer and water flood projects through expansion into new areas of the field.

The fourth quarter average production to date is 22,000 bopd from the Patos-Marinza oilfield, 1% higher than the third quarter average of 21,865 bopd. Nine (9) wells were converted to polymer injection late in the third quarter completing the planned conversions for the year.  The Company continues to monitor the progress of the twenty-one (21) polymer and water-flood patterns in the field.  The results are meeting expectations and additional conversions are being planned for the 2015 program.

Our infrastructure projects in the fourth quarter focus primarily on cost reduction initiatives. The Company expects to electrify sixty (60) to seventy-five (75) wells in the quarter, aimed at reducing energy costs. Construction of a water disposal line will continue in the fourth quarter and will be completed by early 2015 to reduce infield trucking volumes and costs.

The Company also commenced activity in Kuçova during the third quarter with reactivation of three (3) wells and drilling of the first horizontal well in the field.  The well was cored and logged prior to drilling the horizontal lateral for reservoir evaluation and production testing.

Bankers intends to announce its 2015 Capital Budget and Work Program on Friday, December 12, 2014. The Company anticipates maintaining a similar activity level in 2015 with a continued focus on production growth, polymer and water flood pilot expansion and cost improvements. The 2015 program will be funded with cash flow generated in 2015 supplemented with existing cash and credit facilities.

Supporting Documents

The full Management Discussion and Analysis (MD&A), Financial Statements and updated November corporate presentation are available on www.bankerspetroleum.com. The MD&A and Financial Statements will also be available on www.sedar.com.

 

Caution Regarding Forward-looking Information       

Information in this news release respecting matters such as the expected future production levels from wells, future prices and netback, work plans, anticipated total oil recovery of the Patos-Marinza and Kuçova oilfields constitute forward-looking information.  Statements containing forward-looking information express, as at the date of this news release, the Company's plans, estimates, forecasts, projections, expectations, or beliefs as to future events or results and are believed to be reasonable based on information currently available to the Company.

Exploration for oil is a speculative business that involves a high degree of risk.  The Company's expectations for its Albanian operations and plans are subject to a number of risks in addition to those inherent in oil production operations, including: that Brent oil prices could fall resulting in reduced returns and a change in the economics of the project; availability of financing; delays associated with equipment procurement, equipment failure and the lack of suitably qualified personnel; the inherent uncertainty in the estimation of reserves; exports from Albania being disrupted due to unplanned disruptions; and changes in the political or economic environment.

Production and netback forecasts are based on a number of assumptions including that the rate and cost of well takeovers, well reactivations and well recompletions of the past will continue and success rates will be similar to those rates experienced for previous well recompletions/reactivations/development; that further wells taken over and recompleted will produce at rates similar to the average rate of production achieved from wells recompletions/reactivations/development in the past; continued availability of the necessary equipment, personnel and financial resources to sustain the Company's planned work program; continued political and economic stability in Albania; the existence of reserves as expected; the continued release by Albpetrol of areas and wells pursuant to the Plan of Development and Addendum; the absence of unplanned disruptions; the ability of the Company to successfully drill new wells and bring production to market; and general risks inherent in oil and gas operations.

Forward-looking statements and information are based on assumptions that financing, equipment and personnel will be available when required and on reasonable terms, none of which are assured and are subject to a number of other risks and uncertainties described under "Risk Factors" in the Company's Annual Information Form and Management's Discussion and Analysis, which are available on SEDAR under the Company's profile at www.sedar.com.

There can be no assurance that forward-looking statements will prove to be accurate.  Actual results and future events could differ materially from those anticipated in such statements.  Readers should not place undue reliance on forward-looking information and forward looking statements.

About Bankers Petroleum Ltd.

Bankers Petroleum Ltd. is a Canadian-based oil and gas exploration and production company focused on developing large oil and gas reserves.  In Albania, Bankers operates and has the full rights to develop the Patos-Marinza heavy oilfield, has a 100% interest in the Kuçova oilfield, and a 100% interest in Exploration Block "F".  Bankers' shares are traded on the Toronto Stock Exchange and the AIM Market in London, England under the stock symbol BNK.

SOURCE Bankers Petroleum Ltd.

For further information: David French, President and Chief Executive Officer, 403-513-6930; Doug Urch, Executive VP, Finance and Chief Financial Officer, 403-513-2691; Laura Bechtel, Investor Relations Analyst, 403-513-3428; Email: investorrelations@bankerspetroleum.com, Website: www.bankerspetroleum.com; AIM NOMAD: Canaccord Genuity Limited, Henry Fitzgerald-O'Connor, +44 0 207 523 8000; AIM BROKER: FirstEnergy Capital LLP, Hugh Sanderson / David van Erp, +44 0 207 448 0200