Mr. John Wright reports

PETROBANK REPORTS Q2 2013 FINANCIAL RESULTS AND OPERATIONAL UPDATE

Petrobank Energy & Resources Ltd. is releasing its 2013 second quarter financial and operating results, and providing an update on its 2013 expenditure guidance.

The consolidated financial statements as at and for the three and six months ended June 30, 2013, and June 30, 2012, represent the operations of the assets and liabilities transferred to Petrobank pursuant to the corporate reorganization with PetroBakken Energy Ltd. (now renamed Lightstream Resources Ltd.) completed Dec. 31, 2012. These assets and liabilities previously comprised the Petrobank stand-alone operating segment in the company's 2012 financial disclosure.

In this report, quarterly comparisons are the second quarter of 2013, compared with the second quarter of 2012, unless otherwise noted. All financial figures are unaudited and in Canadian dollars unless otherwise noted.

Overview

Second quarter 2013 financial and operating highlights:

• Average production at the Kerrobert THAI project was 135 barrels of oil per day in the second quarter of 2013, a decrease from 205 barrels of oil per day in the first quarter of 2013, and 236 barrels of oil per day in the second quarter of 2012. Kerrobert THAI production averaged 160 barrels of oil per day in July, 2013, based on field estimates.
• Petrobank reported expenditures on exploration and evaluation assets of $3.1-million in the second quarter of 2013, compared with $4.4-million in the second quarter of 2012. This decrease is primarily due to a reduction in capitalized costs related to the Kerrobert project.
• The company repurchased 158,800 Petrobank shares under its outstanding normal course issuer bid at a total cost of $70,311 (44 cents per share).

Operational update

Kerrobert THAI project

Second quarter 2013 production averaged 135 barrels of oil per day, a decrease from first quarter 2013 production of 205 barrels of oil per day and 236 barrels of oil per day in the second quarter of 2012. July, 2013, production was 160 barrels of oil per day based on field estimates. The decrease in production from the first quarter of 2013 was primarily due to certain producing wells being shut in for the majority of the quarter and an increase in unsold oil at the production facility due to timing of rail transportation availability.

Petrobank is disappointed that it has not been able to increase production at its Kerrobert THAI project over the last year. The company constantly reviews technology, reservoir and operational concerns. After several months of analysis, it believes that its biggest challenge is to form a well-structured THAI combustion front at the top of the reservoir which results in gravity drainage of the heated, upgraded heavy oil into the horizontal production wells. It believes that permeability channels have been created in the reservoir that flow from the upper combustion zone to the bottom of the reservoir. Injected air preferentially follows these channels rather than staying at the top of the reservoir, slowing the formation of a large THAI combustion zone.

The company is currently testing two strategies to help expand its combustion zone. As previously discussed, it has initiated water co-injection in several wells. The water is intended to alter the relative permeability in the channels to redirect air flow, keep air at the top of the reservoir and to help transfer heat horizontally across the reservoir. It has also drilled two multi-THAI air injection wells associated with two separate horizontal production wells. Petrobank's multi-THAI patent involves the drilling of one or more injection wells along a horizontal production well to expand the combustion zone and to have a larger portion of the reservoir draining into the production well. Steam preheating has started on these injection wells and the company intends to initiate air injection in September. Additional production from the multi-THAI wells is expected to start in the fall.

Over the next several months, the company intends to re-evaluate options to increase production at Kerrobert and reduce costs. In the short term, it may reduce costs by shutting in low-volume wells that require workovers. In the medium term, it may drill more multi-THAI wells and consider other techniques to help injected air stay at the top of the reservoir and form a broader THAI combustion zone. With these changes, it may take longer for us to reach break-even production levels.

Saskatchewan conventional cold production

At June 30, 2013, Petrobank had four conventional cold production wells operating on its Kerrobert trend lands that were producing a total of approximately 50 barrels of oil per day. The company drilled and completed two horizontal wells in its Luseland area in July and it expects the new wells to contribute additional production volumes in the coming months.

Dawson demonstration project

At Dawson, the company commenced cold production operations from both horizontal THAI production wells in late 2012, and the wells produced at a combined rate of approximately 10 barrels of oil per day in the second quarter of 2013. The company has currently shut in these wells to reduce costs as they have not produced at economic rates. It has also submitted an application to the Alberta energy regulator (AER) to initiate two cyclic steam stimulation (CSS) cycles with its THAI production wells. If approved by AER, the company believes that CSS will be more effective in preconditioning the reservoir for THAI as CSS should result in more voidage than conventional cold production.

Business operations update

As the company evolves its operations at Kerrobert, Petrobank remains focused on generating long-term value for its shareholders. Recognizing that it may take longer to reach break-even production levels at Kerrobert, the company is taking several steps to steward its working capital while increasing production and lowering expenses. In the short term, it plans to reduce expenditures at Kerrobert and other projects. Over the next several months, it will evaluate alternatives to increase production at its Kerrobert THAI project and consider other value enhancing activities that take advantage of its strong capital position, attractive asset base and significant experience with combustion techniques.

Liquidity and capital resources

At June 30, 2013, Petrobank had cash and cash equivalents of $30.6-million, investments in marketable securities of $44.7-million and a net working capital surplus (including cash and marketable securities) of $71.0-million. The company's focus in 2013 is to steward its capital to maintain financial flexibility to pursue future projects and acquisition opportunities while positioning the company to benefit from its strong capital base. It expects to finance its 2013 expenditures with cash on hand and sales revenue from production.

Outlook and guidance

With the first half of the year completed, the company is updating its 2013 guidance to reflect slight changes to its planned activities. The company is currently forecasting 2013 capital expenditures of $16-million, a decrease of $7-million from its previous guidance. Other expenditures, including operating costs, maintenance capital, and general and administrative costs, are forecasted to be $26-million in 2013, a decrease of an additional $7-million from the company's original budget. In total, Petrobank is expecting expenditures to be approximately $42-million in 2013, a reduction of $14-million from its original expectations. Petrobank has taken these steps to conserve capital in recognition of lower-than-expected Kerrobert THAI production rates and to focus capital on maximizing the value of our assets. The company will continue to look for opportunities to reduce expenditures further until it has reached self-sustaining production levels. It expects to end 2013 with more than $50-million of positive net working capital and no debt, assuming June 30, 2013, valuations for the company's marketable securities.

                     SUMMARY OF FINANCIAL RESULTS
         (in thousands of dollars, except per-share amounts)

                              Three months ended     Six months ended
                                         June 30,             June 30,

                                 2013       2012      2013       2012

Net loss (income)            $  4,151   $  4,282  $  7,159   $(42,009)
Per share, basic and                                                     
diluted                      $   0.04   $   0.04  $   0.07   $  (0.43)
Expenditures on exploration                                                 
assets                          3,050      4,448    11,472     21,954
Total assets                  147,249    337,185   147,249    337,185

We seek Safe Harbor.