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BNK Petroleum Inc. Announces 3rd Quarter 2015 Results
Camarillo, California (ots/PRNewswire) - All amounts are in U.S. Dollars unless otherwise indicated:
THIRD QUARTER HIGHLIGHTS:
- Average production was 1,554 barrels of oil equivalent per day (BOEPD) for the third quarter of 2015, an increase of 60% compared to the third quarter 2014 production of 971 BOEPD due to the completion of the Nickel Hill 36-3H well and the remaining portion of the Emery 17-1H well in 2015 - Subsequent to the end of the quarter, Morgan Stanley reaffirmed the Company's current outstanding borrowing base of $24.4 million and the credit facility was modified to enable the Company to request a quick redetermination of the borrowing base when the price of oil improves by 10% above current levels - Net income was $4.2 million for the third quarter of 2015 compared to a net loss of $299,000 in the third quarter of 2014 due primarily to realized and unrealized gains on commodity hedges - Positive cash flow from operating activities was $1.7 million for the third quarter of 2015 compared to $2.9 million in the third quarter of 2014 despite a decrease in average prices of 58% over the same time period - General & administrative expenses decreased by 45% and operating expenses on a per barrel basis decreased by 42% for the third quarter of 2015 compared to the third quarter of 2014 due to the Company's global cost cutting efforts initiated at the beginning of the year - Revenue, net of royalties was $3.5 million for the third quarter of 2015 compared to $5.4 million in the third quarter of 2014 due to lower prices in 2015 partially offset by production increases - Average netbacks were $19.24 per BOE for the quarter, a decrease of 63% compared to the third quarter of 2014 due to lower prices in 2015 partially offset by lower operating costs per barrel. If the realized gains from the commodity contracts are included, the average netbacks for the quarter increase by more than $9/barrel to $28.50 per BOE - Cash and working capital totaled $2.3 million and $5.4 million respectively at September 30, 2015 - Capital expenditures decreased 96% to $966,000 million due to the prior year drilling program in the U.S. and Poland
BNK's President and Chief Executive Officer, Wolf Regener commented:
"Our third quarter production increased to 1,554 BOEPD, an increase of 60% compared to the prior year third quarter, due to the fracture stimulation of the previously drilled Nickel Hill 36-3H well and the remaining stages in the Emery 17-1H well in the second quarter of 2015. Our wells have been performing well. Comparing the actual production to the proved developed producing production forecast from the 2014 year end NI51-101 report shows that actual production is outperforming the forecast by about 18 percent.
"Earlier this week, Morgan Stanley reaffirmed our credit facility at its current outstanding borrowing base of $24.4 million and modified our credit facility to give us an extra borrowing base redetermination so that we can request a quick redetermination of our borrowing base once oil prices have increased by 10% from current levels. We appreciate Morgan Stanley modifying this agreement which allows us to utilize an internally prepared Reserve Report for this extra redetermination. Morgan Stanley also agreed to evaluate the request within ten business days which will enable us to get a quick response to our higher borrowing base request once oil prices improve.
"Our global cost cutting efforts that were initiated at the beginning of the year have continued to show significant cost reductions with general and administrative expenses decreasing by 45% during the third quarter of 2015 compared to the prior year third quarter. In addition, the Company's per barrel operating costs for the third quarter of 2015 were $5.02, a 42% decrease from the third quarter of 2014.
"These costs reductions helped the Company to maintain positive cash flow from operations of $1.7 million for the third quarter of 2015 despite a decrease in average prices of 58% compared to the prior year third quarter. Cash flow from operations in the third quarter of last year were $2.9 million.
"The Company recorded net income of $4.2 million in the third quarter of 2015 compared to a net loss of $299k in the third quarter of 2014. The 2015 net income was due to realized gains of $1.3 million on settlement of commodity contracts during the quarter as well as unrealized gains on commodity contracts of $4.3 million as the Company marked its commodity contracts to market as oil prices decreased during the third quarter.
"Average netbacks for the third quarter 2015 were $19.24, a decrease of 63% compared to the prior year third quarter due to the 58% average price decrease. If we include the impact of the realized gains from the commodity contracts, our average netbacks for the third quarter would be $28.50, which is a decrease of 47% compared to the 2014 third quarter.
"Capital expenditures decreased to $1.0 million in the third quarter 2015, compared to $22.1 million in the third quarter 2014, due to the prior year drilling and completion of the Gapowo B-1 well in Poland and the start of drilling in the U.S. in 2014
"The Company completed the abandonment and reclamation of the Gapowo B1-A and Lebork S-1 wells in Poland during the quarter for a total cost of less than $0.6 million. All of the Poland wells that were previously drilled by the Company have now been plugged and abandoned."
Third Quarter First Nine Months 2015 2014 % 2015 2014 % Net Income (Loss): $ Thousands $4,197 $(299) - $(221) $150 - $ per common share $0.03 $(0.00) - $(0.00) $0.00 - assuming dilution Capital Expenditures $966 $22,082 (96%) $9,532 $57,746 (83%) Average Production (boepd) 1,554 971 60% 1,432 977 47% Average Price per Barrel $31.65 $74.80 (58%) $35.75 $78.29 (54%) Average Netback per Barrel $19.24 $52.14 (63%) $22.37 $56.14 (60%) Average Price per Barrel including Commodity Contracts $40.91 $76.25 (46%) $43.09 $78.78 (45%) Average Netback per Barrel including Commodity Contracts $28.50 $53.59 (47%) $29.71 $56.63 (48%) September June December 2015 2015 2014 Cash and Cash Equivalents $2,283 $3,748 $12,035 Adjusted Working Capital* $5,402 $2,310 $663 * Adjusted working capital excludes the current portion of long-term debt.
Third Quarter 2015 versus Third Quarter 2014
Oil and gas gross revenues totaled $4,525,000 in the third quarter 2015 versus $6,682,000 in the third quarter of 2014. Oil revenues were $3,693,000 in the third quarter 2015 versus $5,978,000 in the third quarter of 2014, a decrease of 38% as average oil prices decreased 54% or $52.19 a barrel for the quarter, partially offset by an increase in production of 34%. Natural gas revenues increased $70,000 or 20%, as natural gas production increased 76% which was partially offset by a 32% decrease in average natural gas prices compared to the third quarter of 2014. Natural Gas Liquid (NGL) revenue increased $58,000 or 16% to $412,000 as average production increased 176% which was partially offset by an average NGL price decrease of 58%.
Production and operating expenses decreased $55,000 between quarters. These costs declined from the prior year quarter even though total production increased by 60% due to the Company's costs cutting efforts during 2015.
Depletion and depreciation expense increased $419,000 between quarters due to increased production and a higher depletion base due to the Caney wells that were drilled and completed at the end of 2014 and into 2015.
General and administrative expenses decreased $1,375,000 between quarters due to the Company's cost cutting efforts which resulted in lower salary and benefit costs, director fees, legal and professional fees and travel costs.
Finance income increased $4,469,000 due to realized and unrealized gains on financial commodity contracts in 2015. Finance expense increased $409,000 primarily due to interest expense on the credit facility.
Capital expenditures of $966,000 were incurred in the third quarter of 2015 primarily related to the U.S. and Spain.
FIRST NINE MONTHS 2015 HIGHLIGHTS
- Average production was 1,432 barrels of oil equivalent per day (BOEPD) for the first nine months of 2015, an increase of 47% compared to the first nine months of 2014 production of 977 BOEPD due to the completion of the Nickel Hill 36-3H well and the remaining portion of the Emery 17-1H well in 2015 - General & administrative expenses decreased by 34% and operating expenses on a per barrel basis decreased by 33% for the first nine months of 2015 compared to the first nine months of 2014 due to the Company's global cost cutting efforts initiated at the beginning of 2015 - Revenue, net of royalties was $10.7 million for the first nine months of 2015 compared to $17.0 million in the first nine months of 2014 due to lower prices in 2015 partially offset by production increases - Average netbacks were $22.37 per BOE for the first nine months of 2015, a decrease of 60% compared to the first nine months of 2014 due to lower prices in 2015 partially offset by lower operating costs per barrel. If the realized gains from the commodity contracts are included, the average netbacks for the first nine months increase by more than $7/barrel to $29.71 per BOE - Net loss was $221,000 for the first nine months of 2015 compared to net income of $150,000 in first nine months of 2014 - Cash flow from operating activities was $4,542,000 for the first nine months of 2015 compared to cash flow from operating activities of $8,185,000 in the first nine months of 2014 - Capital expenditures decreased by 83% to $9.5 million in the first nine months of 2015 primarily due to the prior year drilling and completion of the Gapowo well in Poland - In February 2015, the Company obtained an additional $8.5 million under the Company's $100 million credit facility to fund the drilling of Caney wells in Oklahoma. Total borrowing under the facility is now at $24.4 million
First Nine Months of 2015 versus First Nine Months of 2014
Oil and gas gross revenues totaled $13,977,000 in the first nine months of 2015 versus $20,882,000 in the first nine months of 2014. Oil revenues were $11,812,000 in the first nine months of 2015 versus $18,363,000 in the first nine months of 2014, a decrease of 36% as average oil prices decreased 51% or $50.30 a barrel for the period, partially offset by an increase in production of 31%. Natural gas revenues increased $51,000 or 5%, in the first nine months of 2015 as natural gas production increased 78% which was partially offset by a 41% decrease in average natural gas prices compared to the first nine months of 2014. NGL revenue decreased $405,000, or 29%, due to a decrease in NGL prices of 62% which was partially offset by an average NGL production increase of 86% in the first nine months of 2015.
Production and operating expenses decreased $31,000 or 2% for the first nine months of 2015 compared to the prior year first nine months even though total production increased by 47% due to the Company's costs cutting efforts during 2015.
Depletion and depreciation expense increased $757,000 due to increased production and a higher depletion base due to the Caney wells that were drilled and completed at the end of 2014 and into 2015.
General and administrative expenses decreased $3,001,000 due to the Company's cost cutting efforts during 2015 which resulted in lower salary and benefit costs, director fees, legal and professional fees and travel costs.
Finance income increased $4,077,000 due to realized and unrealized gains on financial commodity contracts in 2015. Finance expense increased $1,630,000 primarily due to interest expense on the credit facility.
BNK PETROLEUM INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited, Expressed in Thousands of United States Dollars) September 30, December 31, 2015 2014 Current assets Cash and cash equivalents $ 2,283 $ 12,035 Trade and other receivables 3,104 3,938 Deposits and prepaid expenses 1,141 1,304 Fair value of commodity contracts 3,630 2,037 10, 158 19,314 Non-current assets Fair value of commodity contracts 2,029 1,248 Property, plant and equipment 137,900 134,942 Exploration and evaluation assets 8,427 7,925 148, 356 144,115 Total assets $ 158,514 $ 163,429 Current liabilities Trade and other payables $ 4,756 $ 18,651 Loans and borrowings - 15,401 4, 756 34,052 Non-current liabilities Loans and borrowings 23,932 - Asset retirement obligations 1,273 1,355 25, 205 1,355 Equity Share capital 279,859 279,859 Contributed surplus 21,257 20,505 Deficit (172,563) (172,342) Total equity 128,553 128,022 Total equity and liabilities $ 158,514 $ 163,429 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 2015 2014 2015 2014 Oil and natural gas revenue, net $ 3,470 $ 5,428 $ 10,705 $ 16,967 Other income 580 114 625 319 4,050 5,542 11,330 17,286 Exploration and evaluation expenditures - 12 44 148 Production and operating expenses 717 772 1,961 1,992 Depletion and depreciation 2,303 1,884 6,335 5,578 General and administrative expenses 1,650 3,025 5,956 8,957 Share based compensation 138 439 496 1,130 Loss from investments in joint ventures - 166 - (73) Restructuring expenses - 438 240 438 4,808 6,736 15,032 18,170 Finance income 5,612 1,143 5,258 1,181 Finance expense (657) (248) (1,777) (147) Net income (loss) and comprehensive income (loss) $ 4,197 $ (299) $ (221) $ 150 Net income (loss) per share Basic and Diluted $ 0.03 $ (0.00) $ 0.00 $ 0.00 BNK PETROLEUM INC. THIRD QUARTER 2014 ($000 except as noted) Third Quarter First Nine Months 2015 2014 2015 2014 Oil revenue before royalties $ 3,693 5,978 $ 11,812 18,363 Gas revenue before royalties 420 350 1,149 1,098 NGL revenue before royalties 412 354 1,016 1,421 Gross Oil and Gas revenue $ 4,525 6,682 $ 13,977 20,882 Cash Flow from by operating activities 1,680 2,889 4,542 8,185 Additions to property, plant & equipment (685) (17,637) (9,081) (30,124) Additions to exploration and evaluation assets (281) (4,445) (451) (27,622) Statistics: Third Quarter First Nine Months 2015 2014 2015 2014 Average natural gas production (mcf/d) 1,799 1,024 1,613 906 Average NGL production (Boepd) 350 127 268 144 Average Oil production (Bopd) 904 673 895 682 Average production (Boepd) 1,554 971 1,432 977 Average natural gas price ($/mcf) $2.54 $3.72 $2.61 $4.44 Average NGL price ($/bbl) $12.78 $30.32 $13.88 $36.10 Average oil price ($/bbl) $44.41 $96.60 $48.35 $98.65 Average price per barrel $31.65 $74.80 $35.75 $78.29 Royalties per barrel 7.39 14.02 8.37 14.68 Operating expenses per barrel 5.02 8.64 5.01 7.47 Netback per barrel $19.24 $52.14 $22.37 $56.14
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, 2015 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, netback per barrel including commodity contracts, net operating income funds from operations and adjusted working capital (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. Netbacks including Commodity Contracts and its components are calculated by dividing revenue and realized gains from commodity contracts, less royalties and operating expenses by the Company's sales volume during the period. Netback per barrel is a non-GAAP measure but it is commonly used by oil and gas companies to illustrate the unit contribution of each barrel produced. However, non-GAAP measures do not have any standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures used by other companies and should not be used to make comparisons.
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 calculated as cash from operating activities before change in non-cash operating 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.
Adjusted working capital is current assets minus current liabilities excluding the current portion of long term debt. The Company believes that this measure provides a more complete understanding of its operating working capital and the funds available to meet its current liquidity requirements.
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) This news release may contain 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 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.