Petrobank Reports Q3 2012 Financial and Operating Results

Petrobank Reports Q3 2012 Financial and Operating Results 
CALGARY, ALBERTA -- (Marketwire) -- 11/12/12 -- Petrobank Energy and
Resources Ltd. (TSX:PBG) announces our 2012 third quarter financial
and operating results highlighted by funds flow from operations of
$1.19 per diluted share. 
Petrobank's results include the financial and operating results of
PetroBakken Energy Ltd. (TSX:PBN), 57% owned by Petrobank at
September 30, 2012. PetroBakken announced third quarter financial and
operating results on November 7, 2012.  
This news release includes forward-looking statements and information
within the meaning of applicable securities laws. Readers are advised
to review "Forward-Looking Information and Statements" at the
conclusion of this news release. Readers are also referred to
"Non-GAAP Measures" at the end of this news release for information
regarding the presentation of the financial information in this news
release. A full copy of our 2012 Third Quarter Financial Statements
and MD&A have been filed on our website at www.petrobank.com and
under our profile on SEDAR at www.sedar.com. 
In this report, quarterly comparisons are third quarter 2012 compared
to third quarter 2011 unless otherwise noted. All financial figures
are unaudited and in Canadian dollars ($) unless otherwise noted. 
HIGHLIGHTS 
Q3 2012 Financial and Operating Highlights 


 
--  Funds flow from operations decreased 19 percent from the third quarter
    of 2011 to $119.6 million, or $1.19 per diluted share, primarily as a
    result of lower realized commodity prices, as light oil differentials to
    WTI were wider than historical levels.  
--  PetroBakken's third quarter production averaged 38,503 barrels of oil
    equivalent per day ("boepd") (82% light oil and liquids), relatively
    flat over the third quarter of 2011, due primarily to the disposition of
    producing assets in the first half of 2012 and a delayed start to the
    second half 2012 capital program. 
--  PetroBakken's nine month production averaged 41,303 boepd, a 7% increase
    over the same period in 2011. 
--  Capital expenditures before dispositions totalled $292.7 million in the
    third quarter with PetroBakken drilling 82 net wells. 
--  Production from Petrobank's Kerrobert project averaged 305 barrels o
f
    upgraded THAI(R) oil per day ("bopd") in Q3 2012, an increase from 236
    bopd in Q2 2012. 
--  In mid-September, we renewed our Normal Course Issuer Bid ("NCIB") and
    can repurchase and cancel up to 7,784,304 Petrobank shares until
    September 13, 2013. Under this NCIB and through our Automatic Share
    Repurchase and PetroBakken Share Sale Plan, we have repurchased 3.5
    million Petrobank shares and sold an equivalent number of PetroBakken
    shares through to October 31, 2012. The sale of one PetroBakken share
    for each Petrobank share repurchased under this plan resulted in net
    cash proceeds to Petrobank of $1.1 million. 
--  On October 29, 2012, Petrobank and PetroBakken entered into an agreement
    to complete a corporate reorganization that will see Petrobank
    shareholders effectively receive Petrobank's proportionate interest in
    our PetroBakken share holdings while maintaining their interest in the
    remaining Petrobank assets (the "Reorganization"). A joint information
    circular describing the Reorganization is expected to be mailed to
    shareholders in mid-November for a shareholder vote in mid-December.
    Subject to approval of shareholders of both Companies and other standard
    approvals, the Reorganization will be effective December 31, 2012.

 
LIQUIDITY AND CAPITAL RESOURCES 
Petrobank and PetroBakken manage their capital structure
independently, generate their own cash flows and have the ability to
fund their operations through the issuance of secured and unsecured
debt as well as equity financing. Petrobank's capital resources are
focused on funding corporate and Heavy Oil Business Unit
expenditures. At September 30, 2012, on a standalone basis
independent of PetroBakken, Petrobank's HBU and Corporate operating
segment had cash and cash equivalents of $96.1 million and a net
working capital surplus (including cash) of $84.9 million.  
Based on Petrobank's current ownership and PetroBakken's current
annual dividend of $0.96 per PetroBakken share, Petrobank expects to
receive approximately $8.5 million of dividends per month.
PetroBakken instituted a DRIP in early 2012, which allows
shareholders to reinvest monthly cash dividends in new shares at a
five percent discount to the then current market price. Due to
Petrobank's significant positive working capital balance, we elected
to participate at a 100% level in PetroBakken's DRIP starting with
the March dividend. We believe that receiving additional shares in
PetroBakken is an attractive investment at this time.  We anticipate
that we will receive the October and November PetroBakken dividends
in PetroBakken shares through the DRIP and the December dividend
(payable in January 2013) in cash. 
Petrobank currently expects to fund our future working capital
requirements and HBU capital expenditure program with available cash
and cash from operations. 
PETROBANK AND PETROBAKKEN REORGANIZATION 
On October 29, 2012, PetroBakken and Petrobank entered into an
arrangement agreement that will see Petrobank shareholders receive
Petrobank's proportionate interest in PetroBakken (the
"Reorganization"). Pursuant to the Reorganization, a new Alberta
corporation will be formed ("New Petrobank") which will acquire all
of the existing assets and liabilities of Petrobank, including
THAI(R) and related technologies, but excluding Petrobank's ownership
interest in PetroBakken shares, and existing shareholders of
Petrobank will receive one share of New Petrobank for each Petrobank
share held.  
Following this distribution of Petrobank's heavy oil business to New
Petrobank, Petrobank and PetroBakken will, through a series of
transactions, amalgamate, with the resulting company to continue
under the name "PetroBakken Energy Ltd." ("New PetroBakken").
Existing PetroBakken shareholders will receive one share of New
PetroBakken for every share of PetroBakken held prior to the
Reorganization and Petrobank shareholders will receive, in aggregate,
a number of New PetroBakken shares equal to the number of PetroBakken
shares held by Petrobank immediately prior to the Reorganization,
being approximately 1.06 to 1.10 New PetroBakken shares for each
Petrobank share held. The number of shares outstanding in New
PetroBakken will be the same as the number of shares outstanding in
PetroBakken immediately prior to the Reorganization.  
The Reorganization will not result in any changes to the business of
Petrobank or our existing Board and senior management. The
Reorganization is subject to the approval of the shareholders of each
of Petrobank and PetroBakken.  
SUMMARY OF FINANCIAL AND OPERATING RESULTS 
The following table provides a summary of Petrobank's financial and
operating results for the three and nine months ending September 30,
2012 and 2011. Unaudited condensed interim consolidated financial
statements with Management's Discussion and Analysis ("MD&A") will be
available on the Company's website at www.petrobank.com and on the
SEDAR website at www.sedar.com. 
Summary of Results 


 
                         Three months ended          Nine months ended      
                              Sept. 30,                  Sept. 30,          
                                              %          
                 % 
                          2012      2011 Change       2012      2011 Change 
----------------------------------------------------------------------------
Financial                                                                   
($000s, except where                                                        
 noted)                                                                     
Oil and natural gas                                                         
 sales                 237,833   272,346    (13)   808,399   828,595     (2)
Funds flow from                                                             
 operations (1)        119,570   147,452    (19)   419,750   464,276    (10)
  Per share                                                                 
   - basic ($)            1.20      1.39    (14)      4.06      4.37     (7)
   - diluted ($)          1.19      1.37    (13)      4.02      4.27     (6)
Adjusted net income                                                         
 attributable to                                                            
 Petrobank                                                                  
 shareholders (1)       13,495     7,517     80    127,801    38,155    235 
 Per share                                                                  
   - basic ($)            0.14      0.07    100       1.24      0.36    244 
   - diluted ($)          0.13      0.07     86       1.22      0.34    259 
Capital expenditures                                                        
 (1)                                                                        
 PetroBakken           283,078   271,861      4%   599,255   692,352    (13)
 Heavy Oil Business                                                         
  Unit ("HBU")           9,624    30,772    (69)    32,027   140,668    (77)
----------------------------------------------------------------------------
Total capital                                                               
 expenditures          292,702   302,633     (3)   631,282   833,020    (24)
Total assets         6,471,738 6,852,270     (6) 6,471,738 6,852,270     (6)
Common shares                                                               
 outstanding, end of                                                        
 period (000s)                                                              
 Basic                  98,741   106,327     (7)    98,741   106,327     (7)
 Diluted (2)           102,892   111,216     (7)   102,892   111,216     (7)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operations                                                                  
PetroBakken operating                                                       
 netback ($/boe) (1)                                                        
 (3)                                                                        
 Oil, NGL and natural                                                       
  gas revenue (4)        66.58     75.37    (12)     71.04     77.98     (9)
 Royalties                9.09     12.20    (25)     10.26     12.36    (17)
 Production expenses     12.40     13.13     (6)     12.78     12.73      - 
----------------------------------------------------------------------------
 Operating netback                                                          
  (1) (3) (5)            45.09     50.04    (10)     48.00     52.89     (9)
Average daily                                                               
 production (3)                                                             
 PetroBakken - oil                                                          
  and NGL (bbls)        31,662    33,112     (4)    34,733    32,965      5 
 PetroBakken -                                                              
  natural gas (Mcf)     41,048    35,776     15     39,420    34,030     16 
----------------------------------------------------------------------------
 Total conventional                                                         
  (boe) (3)(6)          38,503    39,074     (1)    41,303    38,636      7 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1)  Non-GAAP measure. See "Non-GAAP Measures" section.                     
(2)  Consists of common shares, stock options, directors deferred common    
     shares, deferred common shares, and incentive shares as at the period  
     end date.                                                              
(3)  Six Mcf of natural gas is equivalent to one barrel of oil equivalent   
     ("boe").                                                               
(4)  Net of transportation expenses.                                        
(5)  Excludes hedging activities.                                           
(6)  HBU heavy oil volumes are excluded from average daily production as HBU
     operations are considered to be in the exploration and evaluation phase
     and accordingly are capitalized.                                       

 
INVESTOR CONFERENCE CALL (NEW TIME) 
Management of Petrobank will be holding a conference call for
investors, financial analysts, media and any interested persons on
Tuesday, November 13, 2012 at 8:30 a.m. Mountain Time (10:30 a.m.
Eastern Time) to discuss Petrobank's third quarter financial and
operating results. The investor conference call details are as
follows: 
Live call dial-in number(s): 416-695-7806 / 888-789-9572 
Live pass code: 5264057  
Replay dial-in numbers: 905-694-9451 / 800-408-3053 
Replay pass code: 5146272 
The live audio webcast link is:
http://events.digitalmedia.telus.com/petrobank/111312/index.php and
is also available on our website at:
http://www.petrobank.com/investors/presentations-webcasts. 
Petrobank Energy and Resources Ltd. is a Calgary-based oil and
natural gas exploration and production company with operations in
western Canada. The Company operates high-impact projects through two
business units and a technology subsidiary. Petrobank's 57% owned
TSX-listed subsidiary, PetroBakken Energy Ltd. (TSX:PBN), is an oil
and gas exploration and production company combining light oil Bakken
and Cardium resource plays with conventional light oil assets.
Whitesands Insitu Partnership, a partnership between Petrobank and
its wholly-owned subsidiary Whitesands Insitu Inc., applies
Petrobank's patented THAI(R) heavy oil recovery process in the field.
THAI(R) is an evolutionary in-situ combustion technology for the
recovery of bitumen and heavy oil. THAI(R) and CAPRI(R) are
registered trademarks of Archon Technologies Ltd., a wholly-owned
subsidiary of Petrobank Energy and Resources Ltd., for specialized
methods for recovery of oil from subterranean formations through
in-situ combustion techniques and methodologies with or without
upgrading catalysts. Used under license by Petrobank Energy and
Resources Ltd. 
Non-GAAP Measures. This press release contains financial terms that
are not considered measures under IFRS, such as funds flow from
operations, adjusted net income, funds flow per share, adjusted net
income per share, operating netback and capital expenditures. These
measures are 
commonly utilized in the oil and gas industry and are
considered informative for management and stakeholders. Specifically,
funds flow from operations reflects cash generated from operating
activities before changes in non-cash working capital. Adjusted net
income is determined by adding back any losses or deducting any gains
on the derivative liabilities, adding back any losses or deducting
any gains on settlement of convertible debentures, and adding back
impairments. Management considers funds flow from operations, funds
flow per share, adjusted net income, and adjusted net income per
share important as it helps evaluate performance and demonstrate the
ability to generate sufficient cash to fund future growth
opportunities. Profitability relative to commodity prices per unit of
production is demonstrated by an operating netback. Operating netback
reflects revenues less royalties, transportation costs, and
production expenses divided by production for the period. Capital
expenditures represent expenditures on property, plant and equipment,
exploration and evaluation expenditures and other expenditures. Funds
flow from operations, funds flow per share, adjusted net income,
adjusted net income per share, operating netbacks, and net capital
expenditures may not be comparable to those reported by other
companies nor should they be viewed as an alternative to cash flow
from operations or other measures of financial performance calculated
in accordance with IFRS. Further information in respect of these
non-GAAP measures is set forth in our MD&A. 
Forward-Looking Statements: Certain information provided in this
press release constitutes forward-looking statements. Specifically,
this press release contains forward-looking statements relating to
financial results, results from operations, the timing of certain
projects, timing for the Reorganization and anticipated sources of
available financing. Forward-looking statements are necessarily based
on a number of assumptions and judgments, including but not limited
to, assumptions relating to the outlook for commodity and capital
markets, the success of future resource evaluation and development
activities, the successful application of our technology, the
performance of producing wells and reservoirs, well development and
operating performance, general economic conditions, weather and the
regulatory and legal environment. The reader is cautioned that
assumptions used in the preparation of such information, although
considered reasonable at the time of preparation, may prove to be
incorrect. Actual results achieved during the forecast period will
vary from the information provided herein as a result of numerous
known and unknown risks and uncertainties and other factors. You can
find a discussion of those risks and uncertainties in our Canadian
securities filings. Such factors include, but are not limited to:
general economic, market and business conditions; weather conditions
and access to our properties; fluctuations in oil prices; the results
of exploration and development drilling, recompletions and related
activities; timing and rig availability; outcome of exploration
contract negotiations; fluctuation in foreign currency exchange
rates; the uncertainty of reserve estimates; changes in environmental
and other regulations; uncertainties associated with the regulatory
review and approval process in respect to our projects; risks
associated with the application of early stage technology; risks
associated with oil and gas operations; and other factors, many of
which are beyond the control of the Company. There is no
representation by Petrobank that actual results achieved during the
forecast period will be the same in whole or in part as those
forecasted. Except as may be required by applicable securities laws,
Petrobank assumes no obligation to publicly update or revise any
forward-looking statements made herein or otherwise, whether as a
result of new information, future events or otherwise. 
Natural gas volumes have been converted to barrels of oil equivalent
("boe"). Six thousand cubic feet ("Mcf") of natural gas is equal to
one barrel of oil equivalent based on an energy equivalency
conversion method primarily attributable at the burner tip and does
not represent a value equivalency at the wellhead. Boes may be
misleading, especially if used in isolation.
Contacts:
Petrobank Energy and Resources Ltd.
John D. Wright
President and Chief Executive Officer
403.750.4400 
Petrobank Energy and Resources Ltd.
Chris J. Bloomer
Senior Vice President and Chief Operating Officer, Heavy Oil
403.750.4400 
Petrobank Energy and Resources Ltd.
Peter Cheung
Vice President Finance and Chief Financial Officer
403.750.4400 
Petrobank Energy and Resources Ltd.
Suite 3000, 525 - 8th Avenue S.W.,
Calgary, Alberta, T2P 1G1
403.750.4400
403.266.5794 (FAX)
ir@petrobank.com
www.petrobank.com
 
 
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