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BNK Petroleum Inc
Symbol C : BKX
Shares Issued 232,722,625
Close 2018-08-09 C$ 0.415
Recent Sedar Documents

BNK Petroleum loses $801,000 (U.S.) in Q2

2018-08-10 00:12 ET - News Release

Mr. Wolf Regener reports

BNK PETROLEUM INC. ANNOUNCES SECOND QUARTER 2018 RESULTS

BNK Petroleum Inc. has released its second quarter 2018 results.

All amounts are in U.S. dollars unless otherwise indicated.

Second quarter highlights:

  • Average production for the second quarter of 2018 was 2,100 barrels of oil equivalent per day (boepd), an increase of 116 per cent compared with second quarter 2017 average production of 970 boepd. The increase was primarily due to the Glenn 16-2H and WLC 14-1H wells, which were part of the company's 2018 drilling program, as well as two wells that came into production in the second half of 2017, and some prior-period adjustments, partially offset by the 2017 impact of offset fracture operations by another operator.
  • Funds from operations were $3.4-million in the second quarter of 2018 compared with $1.1-million in the second quarter of 2017. The increase was mainly due to a 116-per-cent increase in production, combined with a 44-per-cent increase in oil prices, partially offset by realized losses from commodity contracts in the first quarter of 2018.
  • Revenue, net of royalties, was $6.9-million in the second quarter of 2018 compared with $2.5-million for second quarter of 2017, an increase of 178 per cent, as production increased by 116 per cent and average prices increased 50 per cent between the quarters.
  • General and administrative expenses decreased by 13 per cent for the second quarter of 2018 compared with the second quarter of 2017. The decrease relates primarily to management's continued efforts to reduce costs throughout the company.
  • Average netback from operations for the second quarter of 2018 was $35.60 per barrel, an increase of 67 per cent from the prior-year second quarter due to higher prices in 2018.
  • Net loss for the second quarter of 2018 was approximately $800,000 compared with a net income of $56,000 for the second quarter of 2017, due to unrealized losses of $1.4-million from hedged commodity contracts in the first quarter of 2018 compared with an unrealized gain of $600,000 in second quarter of 2017.
  • At June 30, 2018, cash totalled $1.4-million.

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

"We are excited that the results of our 2018 drilling program has led to a substantial increase in production and almost a 200-per-cent increase in our funds from operations for the second quarter of 2018 compared to the prior-year second quarter. The Glenn 16-2H well came into production in late March, and the WLC 14-1H well started production in May. The total cost of each of these wells were both under our estimated $5.7-million budget. We expect to continue the successful results of our 2018 development drilling program with the Brock 4-2H well, which is expected to commence drilling around Aug. 15. The company will be operating the Brock 4-2H well with a 77-per-cent working interest in the well. A major oil company with offset operations to the field owns the remaining 23-per-cent working interest. The company will also have a 36-per-cent working interest in a partner-operated well targeting the Caney formation, with drilling operations expected to begin in September. This well is located in the section directly east of BNK's Brock 9-2H well.

"Our net revenue increased by 178 per cent in the second quarter of 2018 as production increased by 116 per cent and average prices increased by 50 per cent compared to the prior-year quarter. In addition, we generated funds from operations of $3.4-million in the second quarter of 2018, which was a 198-per-cent increase from the second quarter 2017 amount of $1.1-million.

"Average netbacks from operations for the second quarter of 2018 were $35.60 per boe, an increase of 67 per cent compared to the prior year, due to higher prices and increased production. Netback after adjustments, which include the impact of price adjustments from commodity contracts and prior-period adjustments on natural gas and NGL volumes sold, as well as processing costs, were $24.97 per boe for the second quarter of 2018 compared to $27.99 per boe in the prior-year second quarter.

"In the second quarter of 2018, the company incurred a net loss of $800,000 compared to net income of $56,000 in the second quarter of 2017. This is primarily due to an unrealized loss on financial commodity contracts of $1.4-million in the second quarter of 2018, compared to an unrealized gain of $600,000 in the second quarter of 2017."

                                                  Second quarter  First six months
                                                   2018     2017     2018     2017
Net income (loss)
$ thousands                                       $(801)     $56  $(1,295)  $1,040
$ per common share                               $(0.00)   $0.00   $(0.01)   $0.00
assuming dilution                                                                 
Capital expenditures                             $3,652     $940  $11,582  $11,484
Average production (boepd)                        2,100      970    1,783      862
Average price per barrel                         $54.31   $36.16   $52.15   $38.46
Average netback from operations per barrel       $35.60   $21.30   $33.86   $23.26
Average netback after adjustments per barrel     $24.97   $27.99   $25.72   $30.14

                                                      June, 2018       March, 2018    December, 2017
                                                                                                   
Cash and cash equivalents                                 $1,389            $1,024              $521
Working capital                                          $(3,444)          $(5,058)            $(537)

Second quarter of 2018 versus second quarter of 2017

Oil and gas gross revenues totalled $6,866,000 in the quarter versus $2,473,000 in the second quarter of 2017. Oil revenues increased $5.08-million or 190 per cent as oil production increased by 102 per cent to 1,288 boepd and average oil prices increased by $20.06 per barrel or 44 per cent to $66.17. Natural gas revenues increased $513,000 or 298 per cent to $685,000 as natural gas production increased 320 per cent to 3,328,000 cubic feet per day, which was partially offset by an average natural gas price decrease of 12 cents per thousand cubic feet (mcf) or 5 per cent to $2.26 per mcf. Natural gas production for the second quarter of 2018 included 2,104,000 cubic feet per day related to prior-period adjustments. Natural gas liquids (NGLs) revenues increased $243,000 or 71 per cent as NGL production increased 29 per cent to 257 boepd and average NGL prices increased 33 per cent to $25.01. NGL production for the second quarter of 2018 included 24 boepd related to prior-period adjustments.

Average second quarter 2018 production per day increased 116 per cent from the second quarter of 2017, due to two additional wells added to production in 2018 and two wells added in 2017. Second quarter 2018 production also included 375 boepd related to prior-period adjustments.

Production and operating expenses increased to $1,356,000 due to higher production. Production and operating costs on a barrel-of-oil-equivalent basis decreased by 17 per cent to $5.59 per barrel of oil equivalent (boe) due to an increase in production which lowers the fixed operating cost per barrel, partially offset by increased production taxes due to a rate increase in 2018, which increased operating costs by 90 cents per boe.

Depletion and depreciation expense increased $1,303,000 or 105 per cent due to an increase in production in the second quarter of 2018.

General and administrative expenses decreased $129,000 or 13 per cent due to continued cost-cutting efforts in the second quarter of 2018.

Stock-based compensation increased by $150,000 or 349 per cent due to the timing of stock awards granted to employees.

Finance income decreased $1.2-million in the second quarter of 2018 compared with the prior-year quarter due to unrealized and realized gains on commodity contracts in the second quarter of 2017.

Finance expense increased $2.0-million in the second quarter of 2018 compared with the prior-year quarter, primarily due to unrealized and realized losses on commodity contracts in the second quarter of 2018, offset by reduced interest expense on the credit facility in 2018.

Capital expenditures of $3,652,000 were incurred in the second quarter of 2018, relating to the 2018 drilling program.

Highlights for the first six months of 2018:

  • Average production for the first six months of 2018 was 1,783 boepd, an increase of 107 per cent compared with prior-year average production of 862 boepd. The increase was primarily due to the Glenn 16-2H and WLC 14-1H wells, which were part of the company's 2018 drilling program, as well as two wells that came into production in the second half of 2017, and some prior-period adjustments, partially offset by the 2017 impact of offset fracture operations by another operator.
  • Funds from operations were $5.6-million in the first six months of 2018 compared with $2.0-million in the first six months of 2017. The increase was mainly due to a 107-per-cent increase in production, combined with a 35-per-cent increase in oil prices, partially offset by realized losses from commodity contracts in the first six months of 2018.
  • Revenue, net of royalties, was $11.8-million for first six months of 2018 compared with $4.7-million for the first six months of 2017, an increase of 150 per cent, due to higher prices in 2018 and increased production.
  • General and administrative expenses decreased by 2 per cent for the first six months of 2018 compared with the first six months of 2017. The decrease relates primarily to management's continued efforts to reduce costs throughout the company, partially offset by adviser fees in 2018.
  • Average netback from operations for the first six months of 2018 was $33.86 per barrel, an increase of 46 per cent from the prior-year period due to higher prices in 2018.
  • Net loss for the first six months of 2018 was $1.3-million compared with net income of $1.0-million for the first six months of 2017. The 2018 amount included an unrealized loss on financial commodity contracts of $2.2-million, and the 2017 amount included an unrealized gain on commodity contracts of $2.2-million.
  • Cash totalled $1.4-million at June 30, 2018.

First six months of 2018 versus first six months of 2017

Gross oil and gas revenues totalled $11.8-million in the first six months of 2018 versus $4.65-million in the first six months of 2017. Oil revenues were $13,224,000 in the first six months versus $5,079,000 in the same period of 2017, an increase of 160 per cent as average oil prices increased 35 per cent or $16.72 a barrel, coupled by an increase in oil production of 92 per cent. Natural gas revenues increased $732,000 or 222 per cent, due to an average natural gas production increase of 267 per cent in the first six months of 2018, offset by a decrease in natural gas prices of 12 per cent. Natural gas production for the first six months of 2018 included 1,244,000 cubic feet per day related to prior-period adjustments. NGL revenue increased $470,000 or 79 per cent due to an increase in NGL production of 47 per cent and an average NGL price increase of 22 per cent in the first six months of 2018. NGL production for the first six months of 2018 included 15 boepd related to prior-period adjustments.

Average production per day for the first six months of 2018 increased 107 per cent from the prior-year comparable period due to two additional wells added to production in 2018 and two wells added in 2017. The production for the first six months of 2018 also included 222 boepd related to prior-period adjustments.

Production and operating expenses increased 129 per cent for the first six months of 2018 due to an increase in production. Operating expenses averaged $6.18 per boe for the first six months of 2018 compared with $6.54 per boe for the same period in 2017. The per-barrel-of-oil-equivalent operating expense decrease for 2018 is due to an increase in production which lowers the fixed operating cost per barrel, partially offset by increased production taxes due to a rate increase in 2018.

Depletion and depreciation expense increased $2.1-million due to increased production.

General and administrative expenses decreased $43,000 primarily due to management's continued efforts to reduce costs throughout the company, which were partially offset by adviser fees in 2018.

Finance income decreased $3.2-million due to unrealized and realized gains on financial commodity contracts in 2017.

Finance expense increased $3.2-million due to unrealized and realized losses on commodity contracts in 2018, offset by reduced interest expense on the credit facility in 2018.

             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)
                      (in thousands of U.S. dollars, except per-share amounts)

                                                                      Second quarter  First six months
                                                                       2018     2017     2018     2017

Oil and natural gas revenue, net                                    $ 6,866  $ 2,473  $11,798  $ 4,650
Other income                                                              1       75       19       76
                                                                      6,867    2,548   11,817    4,726
Production and operating expenses                                     1,356      594    2,343    1,021
Depletion and depreciation expense                                    2,541    1,238    4,295    2,195
General and administrative expenses                                     867      996    1,890    1,933
Stock-based compensation                                                193       43      222       87
                                                                      4,957    2,871    8,750    5,236
Finance income                                                            -    1,212        -    3,249
Finance expense                                                      (2,687)    (638)  (4,312)  (1,107)
Net income (loss) and comprehensive income (loss) 
from continuing operations                                             (777)     251   (1,245)   1,632
Net loss and comprehensive loss from discontinued operations            (24)    (195)     (50)    (592)
Net income (loss)                                                      (801)      56   (1,295)   1,040
Net income (loss) per share                                         $ (0.00) $  0.00  $ (0.01) $  0.01

Non-GAAP (generally accepted accounting principles) measures

Netback from operations, netback including commodity contracts, netback after adjustments, net operating income and funds from operations are not measures recognized under Canadian generally accepted accounting principles and do not have any standardized meanings prescribed by GAAP.

The company's non-GAAP measures are described and reconciled to the GAAP measures in the management's discussion and analysis (MD&A), available under the company's profile on SEDAR.

About BNK Petroleum Inc.

BNK Petroleum 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. 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 and on the OTCQX under the stock symbol BNKPF.

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