Mr. Wolf Regener reportts

BNK PETROLEUM INC. ANNOUNCES 1ST QUARTER 2014 RESULTS

BNK Petroleum Inc. has released its first-quarter 2014 results.

BNK's president and chief executive officer, Wolf Regener, commented:

"Due to our successful drilling program in the Caney formation of the Tishomingo field during the past nine months, the company was able to generate positive net income for the first quarter 2014, less than one year after the sale of substantially all of the company's production in April of last year. Due to higher oil content in the production mix of the Caney formation, we increased our netbacks more than 200 per cent compared to the 2013 first quarter, which helped us to achieve profitability with 43-per-cent-lower average total production. In addition, we generated positive cash flow from operations of almost $3.0-million and revenue of $5.5-million for the quarter.

"A significant portion of our recently completed equity offering, where the company received net proceeds of $31-million, will be used to start our 2014 drilling program in the United States. BNK has recently signed a drilling rig contract and expects to take possession in late May, when the rig will move to the first of two locations that have already been built. Once drilled, these two locations will result in 1.93 net wells to the company.

"The last wells drilled and hydraulically fractured in our prior-year U.S. drilling program, the Wiggins 12-8H and the Barnes 7-2H, have continued to perform well. The Barnes 7-2H well was shut in in mid-March to complete the fracture stimulation of the remaining 15 per cent of the lateral. Production from the Barnes 7-2H well came back on-line in mid-April, and the well is returning to production rates in line with previous levels, but with a proportionate production increase due to the additional 15 per cent.

"Current, company-wide production is about 1,150 barrels of oil equivalent per day, excluding production from the Leila 31-2H well, where the company had fracture stimulated the remaining 87.5 per cent of the lateral in April, 2014. The well is currently flowing back the fracture stimulation fluid. Early flow-back data is comparable to previous company drilled Caney wells. In addition, the company is working on putting in place a reserve-based loan facility, after which the full year's drilling program can be determined.

"After successfully drilling and casing the horizontal re-entry of the Gapowo B-1 well in Poland during the first quarter, the company began fracture stimulating the lateral on May 8, 2014. The stimulation was delayed by a number of days due to issues with subcontractors' equipment, which has since been rectified. The plan is to fracture stimulate approximately one-third of the 5,900 feet of lateral and immediately flow back the fracture stimulation fluid and then test the stimulated portion of the lateral.

"In the first quarter of 2014, the company generated net income of $250,000 and positive cash flow from operating activities of almost $3-million compared to a net loss of $5.3-million and positive cash flow from operations of $268,000 in the first quarter 2013. Oil and gas revenue, net of royalties, was $5.5-million in the first quarter of 2014, an increase of $1.3-million, or 29 per cent, compared to the prior year quarter.

"Average netbacks for the first quarter 2014 were $57.36, an increase of 204 per cent compared to the prior-year quarter due to the significantly higher levels of oil in the production mix of the Caney formation. Oil accounted for 68 per cent of 2014 production in the Caney versus 15 per cent of 2013 production from the Woodford formation, which was sold in April, 2013.

"Capital expenditures increased to $13.0-million in the first quarter 2014 due to the completion of the prior-year drilling program in the U.S. and the drilling and casing of the re-entry of the Gapowo B-1 well in Poland. Capital expenditures in the first quarter of 2013 were $2.5 -million."

First-quarter highlights

Net income was $250,000 for the first quarter of 2014 and cash flow from operations was $3.0-million.

Revenue, net of royalties, was $5.5-million for the first quarter of 2014, an increase of 29 per cent compared with the first quarter of 2013.

Average netbacks per barrel increased 204 per cent to $57.36 primarily due to higher oil production in 2014 and higher natural gas and natural gas liquids prices in 2014.

The company completed an equity financing in March, 2014, for total net proceeds of approximately $31-million (including the overallotment option proceeds received in April).

Capital expenditures increased 420 per cent to $13.0-million, primarily due to the completion of the 2013 United States drilling program and the drilling of the Gapowo B-1 well in Poland.

Cash and working capital totalled $47.4-million and $37.2-million, respectively, at March 31, 2014.

First-quarter 2014 against first-quarter 2013

Oil and gas gross revenues totalled $6.77-million in the quarter against $5,228,000 in the first quarter of 2013. Oil revenues increased $3,678,000 or 183 per cent as oil production per day increased 166 per cent to 651 barrels of oil equivalent per day, while average oil prices increased $5.88 per barrel or 6 per cent to $97.15. Natural gas liquids revenues decreased $1,335,000 or 67 per cent as NGL production decreased 77 per cent to 166 barrels of oil equivalent per day, while average NGL prices increased 43 per cent or $13.38 a barrel to $44.73. Natural gas revenues decreased $800,000 or 66 per cent to $413,000 as natural gas production decreased by 3,441 cubic feet per day or 80 per cent to 870 thousand cubic feet per day, while average natural gas prices increased $2.14 per thousand cubic feet or 68 per cent to $5.27.

Average production per day decreased 43 per cent from the first quarter of 2013 due to the sale of the Woodford assets in April, 2013, partially offset by 2014 production from the Caney formation.

The company also sold its gathering system in April, 2013, so it no longer generates gathering revenue. Gathering revenue was $330,000 in the first quarter of 2013. Production and operating expenses decreased $866,000 to $533,000 due to the lower number of wells in 2014 resulting from the Woodford sale in 2013.

Depletion and depreciation expense decreased $46,000 or 2 per cent due to a decrease in the capital base from the Woodford sale.

General and administrative expenses decreased $536,000 or 15 per cent due to cost cutting that resulted in lower legal, consulting, management and professional fees, partially offset by higher director fees.

Share-based compensation increased $227,000 or 210 per cent due to additional stock grants in 2014.

Finance expense decreased $3,462,000 or 98 per cent to $57,000 primarily due to $2.5-million of unrealized losses on financial commodity contracts and $994,000 of interest expense in 2013.

Capital expenditures of $12,954,000 were incurred in the first quarter of 2014 primarily related to the completion of the prior-year drilling program in the U.S. and the Gapowo B-1 well in Poland.

   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS        				
(expressed in thousands of United States dollars, except per-share amounts)  
                                 
                                               Three months ended March 31,
                                                      2014             2013

Oil and gas revenue, net of royalties               $5,501           $4,248
Other income                                           202              553
                                                     5,703            4,801
Exploration and evaluation expenditures                100               54
Production and operating expenses                      533            1,399
Depletion and depreciation                           1,808            1,854
General and administrative expenses                  2,930            3,466
Share-based compensation                               335              108
Loss (gain) on equity investments                     (291)              23
Legal restructuring expenses                             -                -
                                                     5,415            6,904
Finance income                                          19              302
Finance (expense)                                      (57)          (3,519)
Net income (loss)
and comprehensive income (loss) for the period         250           (5,320)
Net income (loss) per share                           0.00            (0.04)

The information outlined herein is extracted from and should be read in conjunction with the company's unaudited financial statements for the three months ended March 31, 2014, and the related management's discussion and analysis thereof, copies of which are available under the company's profile at SEDAR.

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