BNK Petroleum Inc. Announces 3rd Quarter 2014 Results
Camarillo, California (ots/PRNewswire) - All amounts are in U.S. Dollars unless otherwise indicated:
THIRD QUARTER HIGHLIGHTS:
- Revenue, net of royalties was $5.4 million for third quarter of 2014 and netbacks were $52.14 per BOE, with revenue increasing 230% compared to the third quarter of 2013 due to an increase in production - Average production was 971 barrels of oil equivalent per day (BOEPD) for the third quarter, an increase of 222% due to production from the Caney wells drilled at the end of 2013 and in 2014 - The Hartgraves 1-5H well, which started production in October, had a production rate for the last 10 days of 620 BOEPD and the average initial production (IP) rate for the first 26 days was 536 BOEPD - Net loss was $299,000 for the third quarter of 2014 compared to a net loss of $2,445,000 in the third quarter of 2013 - In July, the Company closed a $100 million credit facility with Morgan Stanley and borrowed the initial commitment amount of $15.9 million during the third quarter - Cash flow from operating activities was $2.9 million for the third quarter of 2014 compared to negative cash flow from operating activities of $0.3 million in the third quarter of 2013 - Cash and working capital totaled $26.8 million and $14.0 million respectively at September 30, 2014 - Capital expenditures decreased 37% to $22.1 million due to the prior year US drilling program
BNK's President and Chief Executive Officer, Wolf Regener, commented:
"Our current field production is about 1,600 barrels of oil equivalent per day (BOEPD) including the two new Caney wells from our 2014 US drilling program. The Wiggins 11-2H well, which went into production in September and the Hartgraves 1-5H well, which started producing in early October, subsequent to the end of the quarter. The Hartgraves 1-5H well has a 26 day IP rate of 536 BOEPD, of which 351 barrels is oil and for the last 10 days has averaged 620 BOEPD, of which 393 barrels are oil. The well was completed with our largest hydraulic stimulation to date and the initial data indicates that this should be one of the best Caney wells we have drilled. The performance of the Hartgraves well demonstrates the results of the continued optimization of our drilling and completion procedures.
"The first well in our 2014 drilling program, Wiggins 11-2H, had an initial 30 day IP rate of 323 BOEPD as the well experienced a sudden steep decline from its early IP rate with a significantly slower decline thereafter. Based on the results of the Wiggins 11-2H well, as referenced above, we made several modifications in our lateral placement, completion design and flowback procedures when we drilled the more productive Hartgraves 1-5H well.
"We are currently re-drilling the lateral portion of the Emery 17-1H well which is our third well in the 2014 drilling program, after the drill string became stuck. We expect to initiate completion operations on this well in November.
"The Wiggins 12-8H and the Barnes 7-2H wells both continue their strong performance with combined average production of approximately 500 BOEPD in the third quarter 2014. These wells have been on production for 9 and 11 months respectively.
"In the third quarter, we borrowed the initial commitment amount of $15.9 million from our $100 million credit facility. We expect additional commitment amounts will become available due to drilling the additional Caney development.
"The Company intends to continue drilling Caney wells subject to receiving additional commitment amounts from our credit facility. By year-end, we are projecting that the Company will have 2 additional wells on production and have a year-end production exit rate between 2,300 to 2,600 BOEPD.
"We are fortunate that while the price of oil has declined our netbacks are still quite robust. We are estimating that with the price of WTI at $75 a barrel, NGL prices of $28 a barrel, gas at $4 an MCF and using our 3rd quarter operating expense numbers our netbacks would be approximately $39 a barrel. At $85 WTI, with the same assumptions as above, our netbacks are estimated to be over $44 a barrel.
"If the price of oil falls further and the Company slows down the development of the field, the Company's acreage is secure as 93% of the 15,900 acres are already held by production.
"For the first nine months of 2014, the Company generated positive cash flow from operations of $8.2 million compared to negative operating cash flow of $8.9 million in the same period of 2013. Our netbacks for the first nine months increased by more than 150% compared to the same period in 2013, which allowed the Company to generate positive operating cash flow due to the higher oil content in the Caney production mix. In addition, we generated gross revenues of almost $21 million for the first nine months of the year.
"The Company is currently performing a reservoir analysis on the Gapowo B-1 horizontal well in Poland. Information from the downhole pressure gauges and the fracture stimulation and flowback will be incorporated into the full reservoir analysis. As previously announced, the Company intends to begin its efforts to joint venture with a suitable partner after completing the reservoir analysis.
"In the third quarter of 2014, the Company incurred a net loss of $299,000 compared to a net loss of $2,445,000 in the third quarter of 2013. Oil and gas revenue, net of royalties was $5.4 million in the third quarter of 2014, an increase of $3.8 million, or 230%, compared to the prior year quarter.
"Average netbacks for the third quarter 2014 were $52.14, an increase of 4% compared to the prior year quarter due to an increase of 3% in average prices in the third quarter 2014.
"Production increased 222% in the third quarter 2014 compared to the third quarter 2013 due to the Caney wells drilled at the end of 2013 and in 2014 and the Woodford sale in April 2013.
"Capital expenditures decreased from $34.9 million in the third quarter 2013 to $22.1 million in the third quarter 2014 due to the prior year drilling program in the US.
"Through the first nine months of 2014, the Company generated net income of $150,000 compared to a loss of $8.7 million in the first nine months of 2013. Oil and gas gross revenues increased by 151% to $20.9 million due to an increase in average prices due to the higher percentage of oil from the Caney formation in the production mix."
Third Quarter First Nine Months 2014 2013 % 2014 2013 % Net Income (Loss): $ Thousands $(299) $(2,445) - $150 $(8,694) - $ per common share $0.00 $(0.02) - $0.00 $(0.06) - assuming dilution Capital Expenditures $22,082 $34,908 (37%) $57,746 $45,270 28% Average Production (boepd) 971 302 222% 980 743 32% Average Product Price per Barrel $74.80 $72.81 3% $80.05 $40.97 95% Average Netback per Barrel $52.04 $50.13 4% $57.46 $22.87 145% September June December 2014 2014 2013 Cash and Cash Equivalents $26,808 $32,266 $17,159 Working Capital $13,973 $18,720 $18,854
Third Quarter 2014 versus Third Quarter 2013
Gross oil and gas revenues totaled $6,682,000 in the third quarter 2014 versus $2,023,000 in the third quarter of 2013. Oil revenues were $5,978,000 in the third quarter versus $1,705,000 in the third quarter of 2013, an increase of 251% as oil production increased 280% due to the additional Caney wells drilled. Average oil prices decreased 8% or $8.38 a barrel for the quarter. Natural gas revenues increased $249,000 or 247%, as natural gas production increased 211% mainly due to the additional Caney wells drilled. Average natural gas prices per mcf increased 12% compared to the third quarter of 2013. Natural Gas Liquid (NGL) revenue increased $137,000 or 63% to $354,000 as average production increased 81% to 127 BOEPD due to the additional Caney wells drilled while average NGL prices decreased 10% to $30.32 a barrel.
Production and operating expenses increased $521,000 between quarters due to the additional Caney wells added at the end of 2013 and in 2014.
Depletion and depreciation expense increased $1,164,000 between quarters due to increased production and a higher depletion base due to the Caney wells.
General and administrative expenses decreased $198,000 between quarters primarily due to lower salary and benefit costs.
Finance income increased $1,077,000 due to realized and unrealized gains on financial commodity contracts in 2014. Finance expense increased $140,000 primarily due to interest expense on the credit facility.
Capital expenditures of $22,082,000 were incurred in the third quarter of 2014 primarily related to the 2014 drilling program in the US and the Gapowo B-1 well in Poland.
FIRST NINE MONTHS 2014 HIGHLIGHTS
- Revenue, net of royalties was $17.0 million for first nine months of 2014 and netbacks were $56.14 per BOE, an increase in revenue of 151% compared to the first nine months of 2013 due to more oil in the production mix from the Caney wells - Average production was 980 BOEPD for the first nine months, an increase of 32% as increased production from the Caney wells drilled at the end of 2013 and in 2014 was offset by the loss of production from the Woodford sale in April 2013 - Net income was $150,000 for the first nine months of 2014 compared to a loss of $8,694,000 in first nine months of 2013 - In July, the Company closed a $100 million credit facility with Morgan Stanley and borrowed the initial commitment amount of $15.9 million during the third quarter - Completed an equity financing for total net proceeds of approximately $30.8 million - Cash flow from operating activities was $8,185,000 for the first nine months of 2014 compared to negative cash flow from operating activities of $8,942,000 in the first nine months of 2013 - Capital expenditures increased 28% to $57.7 million primarily due to the completion of the 2013 U.S. drilling program, the startup of the 2014 U.S. drilling program and the Gapowo B-1 well in Poland - In the second quarter, the Company entered into financial derivative transactions with Morgan Stanley as part of the hedging requirements of the $100 million credit facility. These transactions also meet the Company's risk management strategy to manage commodity price fluctuations and stabilize cash flows for future exploration and development programs
First Nine Months of 2014 versus First Nine Months of 2013
Gross oil and gas revenues totaled $20,882,000 in the first nine months of 2014 versus $8,311,000 in the first nine months of 2013. Oil revenues were $18,363,000 in the first nine months versus $4,433,000 in the same period of 2013, an increase of 314% as production increased 301% due to the higher oil content from the Caney wells and average oil prices increased 3% or $2.94 a barrel. Natural gas revenues decreased $416,000 or 27%, due to a decrease in natural gas production of 47% due to the Woodford asset sale in April 2013 which was partially offset by an average natural gas price increase of 37% in the first nine months of 2014. NGL revenue decreased $943,000, or 40%, due to a decrease in NGL production of 50% due to the Woodford sale in April 2013 which was partially offset by an average NGL price increase of 19% in the first nine months of 2014.
Management fees and other income decreased due to lower management fees compared to the prior year.
Production and operating expenses decreased 6% for the first nine months of 2014 due to a reduced well count due to the Woodford sale in 2013 and reduced gathering costs offset by operating costs for the additional Caney wells in 2014.
Depletion and depreciation expense increased $2,521,000 due to increased production and a higher depletion base due to the Caney wells.
General and administrative expenses decreased $973,000 primarily due to lower payroll and related costs and lower legal, accounting and consulting expenses.
Finance income increased $1,073,000 due to realized and unrealized gains on financial commodity contracts in 2014. Finance expense decreased $9,888,000 primarily due to 2013 interest expense of $7.5 million, which included $3.5 million for the amortization of deferred financings costs and $2.5 million of pre-payment penalties, and a realized loss on financial commodity contracts of $2.5 million as these contracts were all settled in April 2013.
BNK PETROLEUM INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited, Expressed in Thousands of United States Dollars) September 30, December 31, 2014 2013 Current assets Cash and cash equivalents $ 26,808 $ 17,159 Investments in marketable securities - 25,056 Trade and other receivables 5,813 7,268 Deposits and prepaid expenses 1,367 1,243 Fair value of commodity contracts 565 34,553 50,726 Non-current assets Long-term receivables - 433 Investments in joint ventures 3,721 2,787 Fair value of commodity contracts 276 - Property, plant and equipment 119,810 94,663 Exploration and evaluation assets 63,925 36,194 187,732 134,077 Total assets $ 222,285 $ 184,803 Current liabilities Trade and other payables $ 20,580 $ 31,872 20,580 31,872 Non-current liabilities Loans and borrowings 15,420 100 Asset retirement obligations 1,326 1,192 16,746 1,292 Equity Share capital 279,830 247,782 Contributed surplus 19,843 18,721 Deficit (114,714) (114,864) Total equity 184,959 151,639 Total equity and liabilities $ 222,285 $ 184,803
BNK PETROLEUM INC. CONDENSED 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 2014 2013 2014 2013 Oil and natural gas revenue, net $ 5,428 $ 1,647 $ 16,967 $ 6,758 Gathering income - - - 331 Other income 114 442 319 961 Gain on sale of assets - (129) - 9,618 5,542 1,960 17,286 17,668 Exploration and evaluation expenditures 12 - 148 57 Production and operating expenses 772 251 1,992 2,113 Depletion and depreciation 1,884 720 5,578 3,057 General and administrative expenses 3,025 3,223 8,957 9,930 Share based compensation 439 140 1,130 589 Loss from investments in joint ventures 166 29 (73) 94 Restructuring expenses 438 - 438 595 6,736 4,363 18,170 16,435 Finance income 1,143 66 1,181 108 Finance expense (248) (108) (147) (10,035) Net income (loss) and comprehensive income (loss) $ (299) $ (2,445) $ 150 $ (8,694) Net income (loss) per share Basic and Diluted $ (0.00) $ (0.02) $ 0.00 $ (0.06)
BNK PETROLEUM INC. THIRD QUARTER 2014 ($000 except as noted) Third Quarter First Nine Months 2014 2013 2014 2013 Oil revenue before royalties $ 5,978 1,705 18,363 4,433 Gas revenue before royalties 350 101 1,098 1,514 NGL revenue before royalties 354 217 1,421 2,364 Gross Oil and Gas revenue 6,682 2,023 20,882 8,311 Cash Flow from (used) by operating activities 2,889 (258) 8,185 (8,942) Additions to property, plant & equipment (17,637) (34,789) (30,124) (43,882) Additions to exploration and evaluation assets (4,445) (119) (27,622) (1,388) Statistics: Third Quarter First Nine Months 2014 2013 2014 2013 Average natural gas production (mcf/d) 1,024 329 906 1,714 Average NGL production (Boepd) 127 70 144 287 Average Oil production (Bopd) 673 177 682 170 Average production (Boepd) 971 302 977 743 Average natural gas price ($/mcf) $3.72 $3.33 $4.44 $3.24 Average NGL price ($/bbl) $30.32 $33.84 $36.10 $30.22 Average oil price ($/bbl) $96.60 $104.98 $98.65 $95.71 Average price per barrel $74.80 $72.81 $78.29 $40.97 Royalties per barrel 14.02 13.65 14.68 7.68 Operating expenses per barrel 8.64 9.03 7.47 10.42 Netback per barrel $52.14 $50.13 $56.14 $22.87
The information outlined above is extracted from and should be read in conjunction with the Company's unaudited financial statements for the nine months ended September 30, 2014 and the related management's discussion and analysis thereof, copies of which are available under the Company's profile at http://www.sedar.com.
Netback per barrel, 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. Management of the Company believes that such measures are relevant for evaluating returns on each of the Company's projects as well as the performance of the enterprise as a whole. The Company's Non-GAAP Measures may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable to similar non-GAAP measures as reported by such organizations. The Company's Non-GAAP Measures should not be construed as alternatives to net income, cash flows related to operating activities, or other financial measures determined in accordance with GAAP, as an indicator of the Company's performance.
Netback per barrel and its components are calculated by dividing revenue less 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. However, non-IFRS measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures used by other companies.
Net operating income is similarly a non-GAAP measure that represents revenue net of royalties and operating expenses. The Company believes that net operating income is a useful supplemental measure to analyze operating performance and provides an indication of the results generated by the Company's principal business activities prior to the consideration of other income and expenses.
Funds from operations is a non-GAAP measure that represents cash provided by (used in) operating activities, as per the consolidated statements of cash flows, before changes in non-cash working capital. The Company considers this a key measure as it demonstrates its ability to generate the funds necessary for future growth after taking into account the short-term fluctuations in the collection of accounts receivable and the payment for accounts payable.
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 Boe 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) This news release contains 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 Lower Caney and upper Sycamore formations on the Company's Oklahoma acreage, the effect of design and performance improvements on future productivity, the anticipated timing of commencement and completion of drilling and fracture-stimulations in connection with the Company's Caney drilling program, the advancement of the Company's European projects, including the Company's Gapowo B-1 shale gas well in Poland, and including expected results from the planned reservoir analysis, future well stimulations, and expected productivity from future wells, planned capital expenditure programs and cost estimates, availability of funds from the Company's reserves based loan facility 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 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), 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 and other shale basins in the United States and Europe, 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 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 http://www.sedar.com.
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, Poland and Spain. 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.