Mr. John Wright reports

PETROBANK REPORTS Q3 2011 FUNDS FLOW FROM OPERATIONS OF $147.5 MILLION

Petrobank Energy & Resources Ltd. has released its 2011 third quarter financial and operating results highlighted by funds flow from operations of $1.37 per diluted share.

Petrobank's results include the financial and operating results of PetroBakken Energy Ltd., 59 per cent owned by Petrobank at Sept. 30, 2011. PetroBakken announced third quarter financial and operating results on Nov. 8, 2011.

All financial statements have been prepared in accordance with international financial reporting standards (IFRS) including comparative figures pertaining to Petrobank's 2010 results. A reconciliation of comparative figures is provided in the notes to the unaudited interim consolidated financial statements for the period ended Sept. 30, 2011.

In this report, quarterly comparisons are third quarter 2011 compared with third quarter 2010 unless otherwise noted. The results of Petrominerales Ltd., previously majority owned by Petrobank, have been separately disclosed as discontinued operations up until Dec. 31, 2010, the date the shares of the business unit were distributed to Petrobank shareholders.

Highlights

Third quarter 2011 financial overview

• Net income from continuing operations, adjusted for gains on derivative financial liabilities, for the three months ended Sept. 30, 2011, of $4.7-million decreased $17.6-million compared with the same period in the prior year. The decrease is primarily due to a foreign exchange loss in the third quarter of 2011, compared with a gain in the comparative period, partially offset by higher revenue as a result of higher pricing.
• PetroBakken's production averaged 39,074 barrels of oil equivalent (boe) per day in the third quarter of 2011, representing an 11-per-cent increase compared with the second quarter of 2011. The increase in production over the second quarter was the result of a combination of restoring production that was shut in due to the extended spring breakup and production additions from new wells that were put on production in the latter part of the third quarter.
• PetroBakken's operating netback (excluding hedging activity) of $50.04 per boe in the third quarter decreased 12 per cent compared with the second quarter of 2011, and increased 15 per cent over the prior year period. The decrease over the second quarter was primarily a result of lower pricing that more than offset decreased royalty and production expenses.
• Capital expenditures were $302.6-million in the third quarter, up 4 per cent from a year ago. The increase is attributable to PetroBakken's drilling program, partially offset by decreased spending at its heavy oil business unit, which acquired Baytex Energy Corp.'s 50-per-cent working interest in the Kerrobert project for $18.1-million in the third quarter of the prior year. PetroBakken drilled 96 (70.1 net) wells in the third quarter. Capital expenditures for the heavy oil business unit totalled $30.8-million in the third quarter, including $20.0-million on facilities, drilling and completion expenditures.

Heavy oil business unit operational highlights

• The Kerrobert expansion project is in the production start-up phase, with all wells capable of production and 11 of the 12 well pairs on combustion.
• Drilling and facilities construction at the Dawson demonstration project started in the third quarter and the company anticipates that the preignition heating cycle (PIHC) will begin by the end of the year.
• The Energy Resources Conservation Board (ERCB) has scheduled the May River project hearing for March 6, 2012.
• In early October, the company suspended all field operations at the Conklin demonstration project.

Kerrobert project

At the Kerrobert expansion project, the company has successfully put nine of the 10 new well pairs to air injection and has increased air injection rates over the quarter. One of the air injection wells is currently not operational; however, the company continues to operate the associated production well as the reservoir is being heated by surrounding air injection wells. All of the company's technical measurements confirm that it has achieved high temperature combustion. There are increasing temperatures at the toes of the production wells and along the well bores, and the company has produced upgraded oil. The project's central processing facility is operating normally. All of these characteristics are positive milestones for the Kerrobert expansion.

Early-stage production has been low and inconsistent, with third quarter 2011 average production of approximately 30 barrels of oil per day at Kerrobert. The company is mainly producing cold, heavy native oil which is difficult to move down the well bore and tends to produce sporadically as it is pumped to the surface. The company has taken a controlled approach to manage air injection and production to initiate combustion and increase reservoir pressure across a much broader area. It believes this approach will maximize combustion front development and reservoir recovery. Based on its experience with the two pilot wells, as the initial cold native oil production transitions to hot upgraded THAI oil production, the company expects production rates to greatly improve. However, the company's operating approach may extend the time frame for achieving normalized production rates.

The company's operational plan at Kerrobert is to continue to increase air injection rates, build out the combustion front, increase the overall pressure in the reservoir and increase production of upgraded THAI oil.

Dawson project

During the third quarter the company began the fieldwork and drilling at its Dawson demonstration project. It has drilled and completed two horizontal production wells and one of the air injection wells on time and on budget. The second air injection well will be completed by year-end 2011. The surface facilities from the Kerrobert demonstration project have been relocated to Dawson and are ready to be installed. The company is also moving some non-essential equipment from the Conklin demonstration project to the Dawson site. PIHC is expected to begin in December and air injection will begin in early 2012.

The environmental assessment and regulatory application associated with the Dawson commercial project are near completion. The applications to the ERCB and Alberta Environment are expected to be submitted later this year. The company expects that the regulatory review cycle could take up to 18 months.

Conklin demonstration project

The company has suspended operations at its Conklin demonstration project which was being used as a field-scale testing site for enhancements to the THAI process. All the testing that was scheduled for Conklin was completed, leading to the decision to suspend operations. Once its May River project has been approved by regulators, the company will evaluate whether to integrate the Conklin facilities into its May River project or abandon the site. Once the site is fully suspended, operating costs and maintenance capital at the company's Conklin project are expected to be reduced to a minimal amount with savings of approximately $1.0-million each month compared with continuing operations.

May River project

Petrobank's May River project continues to move toward the company's ERCB hearing on March 6, 2012. Pending the outcome of the ERCB hearing, which is expected approximately three months after the hearing date, the company will update the May River project development schedule and proceed with its internal project approval and sanctioning processes.

Plover property

As previously reported, earlier this year the company acquired more undeveloped land along the Kerrobert trend in Saskatchewan. The company has been evaluating third party 3-D seismic surveys on this land over the last several months. Three stratigraphic wells are expected to be drilled in first quarter 2012 to better define the resource.

Petrobank's liquidity and capital resources

Petrobank and PetroBakken manage their capital structure independently, generate their own cash flows and have the ability to finance their operations through numerous means, including the issuance of secured and unsecured debt as well as equity financing. Petrobank's capital resources are focused on financing corporate and heavy oil business unit expenditures. At Sept. 30, 2011, on a stand-alone basis, independent of PetroBakken, Petrobank had bank debt of $58.8-million, a working capital deficit of $17.5-million and committed credit capacity of $141.2-million. The availability of Petrobank's $200-million credit facility was reduced to $100-million at Sept. 30, 2011, based on the value of Petrobank's ownership in PetroBakken. The company expects the reduction to be temporary, with future increases in availability subject to PetroBakken's share price. The company's near-term capital spending is expected to decrease significantly once its Dawson demonstration project is completed at the end of 2011. Other capital projects will largely be dependent on regulatory approvals which, as previously mentioned, are expected in mid-2012 for the May River project and 2013 for the Dawson commercial project. The company's current sources of capital are expected to be more than adequate for its planned projects through the end of 2012. Petrobank expects to release formal 2012 capital expenditure guidance in mid-December.

Based on Petrobank's current ownership and PetroBakken's current annual dividend of 96 cents per PetroBakken share, Petrobank expects to receive $105-million of dividends annually from PetroBakken, paid monthly. Petrobank can also raise funds by selling a portion of its ownership in PetroBakken or other corporate assets.

Petrobank currently expects to finance its HBU capital expenditure program with available credit, cash from operations and dividends received from PetroBakken.

Executive appointments

Petrobank is pleased to announce the promotion and appointment of Chad Magus as controller effective Oct. 1, 2011. Mr. Magus joined Petrobank in 2004 and was most recently Petrobank's manager of reporting and planning and leads a team responsible for all accounting functions. He has contributed to Petrobank's many strategic initiatives and gained significant transactional, tax, operational and financial experience. Mr. Magus is a chartered accountant.

Petrobank has also appointed Dwight Mervold as vice-president, operations and production, effective Nov. 1, 2011. Mr. Mervold's career spans more than 24 years, including positions in the field and management responsibilities for heavy oil and natural gas production with a number of Canadian energy companies. Mr. Mervold is a member of the Association of Professional Engineers, Geologists and Geophysicists of Alberta.

Summary of financial and operating results

The associated table provides a summary of Petrobank's financial and operating results for the three- and nine-month periods ended Sept. 30, 2011, and 2010. Unaudited condensed interim consolidated financial statements with management's discussion and analysis (MD&A) will be available on the company's website and on the SEDAR website.

                      SUMMARY OF RESULTS (1)
            (In thousands of dollars except where indicated)

                                      Three months ended Sept. 30,
                                             2011             2010
Financial
Oil and natural gas sales
from continuing operations               $272,346         $228,537
Funds flow from continuing
operations (2)                            147,452          139,324
Per share
Basic ($)                                    1.39             1.31
Diluted ($)                                  1.37             1.30
Adjusted net income
from continuing operations
(2) (3)                                     4,742           22,311
Per share
Basic ($)                                    0.04             0.21
Diluted ($)                                  0.04             0.21
Adjusted net income
attributable to Petrobank
shareholders (2) (3) (4)                    4,742           74,916
Per share
Basic ($)                                    0.04             0.71
Diluted ($)                                  0.04             0.69
Capital expenditures (5)
PetroBakken                               271,861          241,309
Heavy oil business unit
(HBU)                                      30,772           49,385
Total capital expenditures
from continuing operations                302,633          290,694
Total assets                            6,852,270        7,723,767
Operations
PetroBakken operating
netback ($/boe) (2) (6)
Crude oil and NGL sales
price ($/bbl) (7)                           84.61            68.43
Natural gas sales price
($/Mcf) (7)                                  4.01             3.82
Oil equivalent sales price
(7)                                         75.37            60.63
Royalties                                   12.20             8.64
Production expenses                         13.13             8.38
Operating netback (2) (6)
(8)                                         50.04            43.61
Average daily production (6)
PetroBakken -- oil and NGL
(bbl)                                      33,112           33,230
PetroBakken -- natural gas
(Mcf)                                      35,776           41,193
Total conventional (boe)
(6)(9)                                     39,074           40,095


                                      Nine months ended Sept. 30, 
                                             2011            2010
Financial
Oil and natural gas sales
from continuing operations               $828,595        $750,197
Funds flow from continuing
operations (2)                            464,276         481,410
Per share
Basic ($)                                    4.37            4.64
Diluted ($)                                  4.27            4.50
Adjusted net income (loss)
from continuing operations
(2) (3)                                    22,570         (38,805)
Per share
Basic ($) (loss)                             0.21           (0.37)
Diluted ($) (loss)                           0.20           (0.37)
Adjusted net income
attributable to Petrobank
shareholders (2) (3) (4)                   22,570         143,927
Per share
Basic ($)                                    0.21            1.39
Diluted ($)                                  0.20            1.28
Capital expenditures (5)
PetroBakken                               692,352         549,113
Heavy oil business unit
(HBU)                                     140,668          83,971
Total capital expenditures
from continuing operations                833,020         633,084
Total assets                            6,852,270       7,723,767
Operations
PetroBakken operating
netback ($/boe) (2) (6)
Crude oil and NGL sales
price ($/bbl) (7)                           87.17           71.97
Natural gas sales price
($/Mcf) (7)                                  4.11            4.31
Oil equivalent sales price (7)              77.98           64.71
Royalties                                   12.36            9.17
Production expenses                         12.73            7.92
Operating netback (2) (6) (8)               52.89           47.62
Average daily production (6)
PetroBakken -- oil and NGL
(bbl)                                      32,965          35,229
PetroBakken -- natural gas
(Mcf)                                      34,030          39,473
Total conventional (boe)
(6) (9)                                    38,636          41,808

Notes
(1) Petrominerales Ltd. has been presented as discontinued 
operations in the comparative period as this business unit 
was distributed to Petrobank shareholders at Dec. 31, 2010.
(2) Non-GAAP (generally accepted accounting principles) 
measure. See non-GAAP measures section on the company's
website.
(3) Net income has been adjusted for the IFRS accounting 
effects of changes in the gain on derivative financial 
liability. For the three and nine months ended Sept. 30, 2011, 
adjusted net income includes a $10.6-million and $71.7-million 
reduction (2010 -- $58.8-million increase and $17.7-million 
decrease) for this gain. Management considers adjusted net 
income a better measure of the company's economic performance 
period over period. 
(4) Net income attributable to Petrobank shareholders for the 
three and nine months ended Sept. 30, 2010, includes the 
operating results of Petrominerales.
(5) Includes expenditures on property, plant and equipment, 
exploration and evaluation, and other intangible assets.
(6) Six thousand cubic feet of natural gas is equivalent 
to one barrel of oil equivalent (boe). 
(7) Net of transportation expenses.
(8) Excludes hedging activities.
(9) HBU bitumen and heavy oil volumes are excluded from 
average daily production as Conklin and Kerrobert operations 
are considered to be in the exploration and evaluation phase 
and accordingly are capitalized.

Investor conference call

Management of Petrobank will be holding a conference call for investors, financial analysts, media and any interested persons on Tuesday, Nov. 15, 2011, at 9 a.m. Mountain Standard Time (11 a.m. Eastern Standard Time) to discuss Petrobank's third quarter financial and operating results. The investor conference call details are as follows:

Live call dial-in numbers:  416-695-6616/800-952-6845

Replay dial-in numbers:  905-694-9451/800-408-3053

Replay pass code:  4657181

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