Mr. John Wright reports

PETROBANK ANNOUNCES Q1 2014 FINANCIAL AND OPERATING RESULTS

Petrobank Energy and Resources Ltd. has released its first quarter 2014 financial and operating results.

Comparisons presented in this press release are the first quarter of 2014 compared with the first quarter of 2013, unless otherwise noted.

Overview

Q1 financial and operating highlights

• Average production at the Kerrobert THAI project was 335 barrels of oil per day in Q1 2014 compared with 222 bopd in fourth quarter 2013 and 202 bopd in Q1 2013. Kerrobert THAI production averaged 345 bopd in April, 2014.
• The company operates two cold conventional heavy oil wells which produced approximately 50 bopd combined in Q1 2014. These cold wells currently produce approximately 75 bopd.
• At Dawson, the company initiated steam injection in one of the two horizontal THAI wells in late December, 2013, and in the second well in mid-February, 2014. Initial production is expected in second quarter 2014 with each well expected to produce for approximately nine months before starting a second steam and production cycle.
• The company recognized a non-cash accounting impairment related to its Kerrobert THAI project of $900,000, reflecting assessed fair value less costs of disposal at March 31, 2014.
• Petrobank reported expenditures on exploration assets of $5.8-million in Q1 2014 compared with $8.4-million in Q1 2013. The decrease was primarily related to a decrease in capitalized precommercial operating costs at the Kerrobert project, and reduction in expenditures on land, seismic and exploration, partially offset by an increase in expenditures at the Dawson project for cyclic steam stimulation (CSS) operations.
• At March 31, 2014, the company had $42.0-million of positive working capital and no debt, including 3.5 million Lightstream Resources Ltd. shares, which earn a four-cent-per-share monthly cash dividend based on Lightstream's current dividend policy. At March 31, 2014, the Lightstream shares were valued at $5.62 per share compared with $7.23 per share on May 8, 2014.

Plan of arrangement with Touchstone Exploration Inc.

On April 30, 2014, Petrobank and Touchstone Exploration received approval from the Court of Queen's Bench of Alberta for the combination of Petrobank and Touchstone, to be effected by way of a plan of arrangement under the Business Corporations Act (Alberta). Shareholder approval for the arrangement was received on April 28, 2014.

Under the terms of the arrangement agreement dated March 6, 2014, between Petrobank and Touchstone, the arrangement will become effective after all of the conditions to closing are satisfied or waived. Touchstone and Petrobank are currently working to bring about the satisfaction of all remaining closing conditions. Full details regarding the terms of the arrangement are set out in the joint management information circular and proxy statement dated March 28, 2014, which is available on SEDAR.

Operational update

Kerrobert THAI project and Saskatchewan conventional cold production

First quarter 2014 Kerrobert THAI production averaged 335 bopd, an increase from 222 bopd in Q4 2013 and 202 bopd in the Q1 2013. April, 2014, production was 345 bopd based on field estimates.

As announced in late 2013, Petrobank is committed to eliminating the negative field operating netbacks at the Kerrobert THAI project by mid-2014. This may include investing small amounts of capital to test new processes to increase production and reducing costs by shutting in low-volume wells that require workovers. The company is planning to test steam injection in the near future at one of its air injection wells. It is the company's intention to suspend THAI operations in the event the negative netback cannot be eliminated by the end of the first half of 2014. The company has also filed a regulatory approval application to test steam-assisted gravity drainage (SAGD) operations at one of the THAI wells. The company will continue to evaluate the economics, opportunities and challenges with SAGD as it awaits regulatory approval.

Petrobank currently has two conventional cold production wells operating. These wells averaged approximately 50 bopd combined in Q1 2014 and are currently producing approximately 75 bopd combined.

Dawson project

At Dawson, the company commenced CSS operations at one of the two horizontal THAI production wells in late-December, 2013, and initiated steaming operations at the second well in mid-February, 2014. First production is expected in second quarter 2014. The company is planning a nine-month production cycle followed by a second steam and production cycle. If these two CSS wells are successful, Petrobank intends to prepare and submit an application for full field CSS development at Dawson.

Liquidity and capital resources

At March 31, 2014, the company had positive working capital of $42.0-million, including $45.9-million of cash and marketable securities, and no third party debt. The company owns 3.5 million Lightstream shares and is receiving monthly cash dividends of four cents per share based on Lightstream's current dividend rate. At March 31, 2014, the Lightstream shares were valued at $5.62 per share compared with $7.23 per share on May 8, 2014.

Current capital resources are expected to be adequate for planned 2014 expenditures. Petrobank will announce revised 2014 capital and operating plans once the arrangement is completed.

Summary of financial results

The table provides a summary of Petrobank's financial results for the three months ending March 31, 2014, and 2013. Unaudited consolidated financial statements with management's discussion and analysis will be available on the company's website and SEDAR.

                 SUMMARY OF FINANCIAL RESULTS
               (In thousands, except per share)

                                   Three months ended March 31,   
                                               2014       2013   

Net (loss)                                   (3,967)    (3,008)      
Per share -- basic and diluted                (0.04)     (0.03)        
Expenditures on exploration assets            5,811      8,422       
Total assets                                 92,952    155,183

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