BNK Petroleum Inc. Announces 2nd Quarter 2013 results

            BNK Petroleum Inc. Announces 2nd Quarter 2013 results

  PR Newswire

  CALGARY, August 9, 2013

CALGARY, August 9, 2013 /PRNewswire/ --

All amounts are in U.S. Dollars unless otherwise indicated:


                             Second Quarter                       First Half
                      2013        2012             %       2013        2012     %
    Earnings
    (Loss):
    $ Thousands     $(929)    $(2,630)             L   $(6,249)    $(6,150)       L
    $ per common
    share          $(0.01)     $(0.02)             L    $(0.04)     $(0.04)       L
    assuming
    dilution
    Capital
    Expenditures    $7,870     $12,142         (35%)    $10,362     $22,901   (55%)
      Average
     Production
    (Boepd)            266       1,439         (82%)        966       1,547   (38%)
      Average
      Product
    Price per
    Barrel          $43.83      $31.96           37%     $35.96      $35.47      1%
      Average
    Netback per
    Barrel          $16.52      $17.25          (4%)     $18.57      $17.69      5%

                  6/30/2013                12/31/2012              6/30/2012
      Cash and
        Cash
    Equivalents    $90,454                    $2,836                $16,348
    Working
    Capital        $90,494                      $472                $17,406

BNK's President and Chief Executive Officer, Wolf Regener commented:

"With the completed sale of our Woodford assets in our Tishomingo field in
April, the Company continues to make significant progress in our ongoing Caney
drilling program during the second quarter. The first well in our 2013
drilling program, the Barnes 6-3H, was drilled with the entire 5,200 lateral
located in the most productive Caney subinterval but unfortunately we were
only able to fracture stimulate 11 out of the 17 planned stages. The lateral
portion of the wellbore was recently cleaned out where two proppant blockages
were encountered after which flow back operations just re-commenced. We
believe these blockages have restricted the frac fluid recovery to only 12% to
date. The gross oil and water production rate is fluctuating between 250 to
350 gross barrels a day with the oil percentage increasing to between 40-50%
as we continue to optimize our flowback.

We also drilled the Dunn 2-2H Caney well, completed a 15 stage fracture
stimulation and are currently flowing back the fracture stimulation fluid. The
fracture stimulation design for this well was improved based on what we
learned from the Barnes 6-3H results. After two weeks of flowback, the Dunn
2-2H continues to free flow up the casing at rates between 1200-1500 barrels
of fluid per day and has recovered only 20% of the frac fluid to date. The
oil cuts continue to improve and the well has already produced at rates of 550
BOEPD with 300 BOPD being oil. Due to the strong flowrate and high flowing
pressures, a snubbing unit is currently installing the tubing string and gas
lift valves which is expected to further improve production from the well.

The third well in our 2013 drilling program, the Hartgraves 5-3H, was spud in
mid-July and although we are only on day 20 of drilling we are anticipating
finishing the drilling of the lateral in the next few days. This well is on
track to be drilled considerably faster and at lower cost than the previous
wells due to continuous design and performance improvements. The Hartgraves
5-3H well is expected to be fracture stimulated during the first week of
September.

Based on the improving excellent results of our Caney wells, the Company will
immediately proceed to the Barnes 7-2H.

To date, the lessons acquired from our Caney drilling program has helped
improve our costs to drill and complete each well, substantially reduce our
rig spud to production time and improve the productivity of the wells.

In Poland the Company has now received the final approval for the EIA on its
Bytow concession. The Company has filed a concession modification request and
is awaiting the final drilling permit which would permit the re-entry of the
Gapowo B-1 well so that the horizontal leg can be drilled.

The Company recorded a gain of $9.7 million on the sale of the Tishomingo
field assets, excluding the Caney and Upper Sycamore formations, and used a
portion of the proceeds to pay down its debt from $41 million to $100,000.
Offsetting this gain was $3.5 million related to the amortization of deferred
financing costs, a pre-payment penalty of $2.5 million and a $2.5 million
payment to settle all of our financial commodity contracts. At June 30, 2013,
we have cash on hand of over $90 million some of which the Company will use to
complete our 2013 drilling program in the Caney and to move forward our
exciting European projects once permits are approved.

The Company incurred a $0.9 million loss in the quarter versus a loss of $2.6
million in the second quarter of 2012. Production decreased 82% in the
comparative quarters due to the April 2013 sale while average pricing per
barrel increased 37% primarily due to higher natural gas prices. Oil and gas
revenues net of royalties declined by $2.5 million mainly due to the April
2013 sale of assets.

General and administrative expenses decreased $1.0 million to $3.2 million
primarily due to a decrease in payroll and related costs, travel expenses and
accounting, management and professional fees in Europe.

Through the first half of 2013 the Company incurred a loss of $6.2 million
which was the same loss incurred through the first half of 2012. Oil and gas
revenues declined $3.7 million due to a 38% decrease in average production per
day due to the sale of assets in April 2013. Other income increased $65,000
due to the higher management fees in 2013 while general and administrative
expenses decreased $1.3 million primarily due to lower payroll and related
costs, travel expenses and accounting, management and professional fees in
Europe.

SECOND QUARTER HIGHLIGHTS:

  *Drilled and fracture stimulated the Barnes 6-3H and Dunn 2-2H wells in the
    Caney formation in the Tishomingo field
  *In July started drilling the third Caney well in the 2013 drilling
    program, the Hartgraves 5-3H well.
  *Cash and working capital totaled $90.4 million and $90.5 million
    respectively at June 30, 2013
  *Closed the sale of the Tishomingo field, excluding the Caney and Upper
    Sycamore formations, in April 2013 for $147.1 million (which includes
    $560,000 of net operating profit for the first 18 days of April 2013)
  *Paid down the credit facility from $41 million to $100,000 in connection
    with the sale
  *Settled all the financial derivative contracts in April 2013 in connection
    with the sale
  *Capital expenditures decreased 35% from 2012 to $7.9 million due to the
    2012 drilling expenditures in Poland
  *Production decreased 82% from the second quarter of 2012 due to the sale
  *Loss of $0.9 million versus loss of $2.6 million in the second quarter of
    2012
  *Comparative oil and gas revenues declined by 75% or $3.1 million to $1.0
    million due to the sale of assets

Second Quarter 2013 to Second Quarter 2012

Oil and gas revenues net of royalties totaled $863,000 in the quarter versus
$3,401,000 in the second quarter of 2012. Oil revenues were $717,000 in the
quarter versus $2,028,000 in the second quarter of 2012, a decline of 65% as
average oil prices declined 1% or $1.32 a barrel while production decreased
64% to an average of 88 barrels per day due to the April sale of assets.
Natural gas revenues declined $487,000 or 71% as average natural gas prices
per mcf increased 96% while natural gas production decreased to 546 mcfd due
to the April sale of assets. Natural Gas Liquid (NGL) revenue declined
$1,326,000 or 90% to $144,000 as average NGL prices declined 35% to $18.18 a
barrel while average production decreased 85% to 87 boepd as a result of the
asset sale.

Other income increased $62,000 to $296,000 as second quarter 2013 results
included higher management fee revenue relating to Saponis.

Exploration and evaluation expenses declined $206,000 between quarters due to
less E&E activity in new areas of interest.

Production and operating expenses declined $679,000 between quarters due to
the sale of assets in April 2013.

Depletion and depreciation expense decreased $1,117,000 between quarters due
to decreased production and depletion base and lower production as a result of
the sale of assets.

General and administrative expenses decreased $1,022,000 between quarters
primarily due to lower payroll and related costs, lower professional fees
incurred in Europe relating to legal, accounting, management fees and lower
travel costs.

Stock based compensation increased $136,000 between quarters due to new stock
options granted in 2013.

Finance income increased $586,000 due to higher unrealized gains on financial
commodity contracts. Finance expense increased $8,559,000 primarily due to a
$6,534,000 charge related to interest on loans and borrowings which included
$3.5 million for the amortization of deferred financings costs and $2.5
million of pre-payment penalties related to the loan paydown along with a
realized loss on financial commodity contracts of $2.7 million as these
contracts were all settled in April 2013.

Cash increased $87,354,000 in the past three months primarily due to the net
proceeds from the sale of assets in the second quarter of 2013.

Capital expenditures of $7,870,000 were incurred in the second quarter of 2013
of which approximately $7.4 million was spent in Oklahoma.

FIRST HALF 2013 VERSUS FIRST HALF 2012 HIGHLIGHTS

  *Closed the sale of the Tishomingo field, excluding the Caney and Upper
    Sycamore formations, in April 2013 for $147.1 million (which includes
    $560,000 of net operating profit for the first 18 days of April 2013)
  *Paid down the credit facility from $41 million to $100,000 in connection
    with the sale
  *Settled all the financial derivative contracts in April 2013 in connection
    with the sale and incurred a realized loss of $2.5 million
  *Capital expenditures decreased $12.5 million or 55% to $10.4 million
    primarily due to $19 million of capital expenditures incurred in Poland in
    2012 partially offset by the 2013 drilling program in Oklahoma which
    totaled $9.0 million for the first half of 2013
  *Average production decreased 38% between comparative first half year
    periods due to the sale of assets in April
  *A net loss of $6.2 million was incurred in 2013 versus a similar loss of
    $6.2 million in 2012

First Half 2013 to First Half 2012

Oil and natural gas revenues net of royalties declined $3,004,000 or 37% to
$5,111,000. Oil revenues before royalties decreased $1,805,000 to $2,728,000
due to a 36% decrease in production due to the sale of assets while prices
decreased 5% between periods. Natural gas revenues before royalties declined
$277,000 or 16% due to a 39% decline in average production due to the sale of
assets partially offset by a 37% increase in natural gas prices per mcf. NGL
revenue before royalties declined $1,617,000 or 43% to $2,147,000 due to a 9%
decline in average NGL prices while average production per day decreased 37%
due to the April sale of assets.

Other income increased due to higher management fees.

Exploration and evaluation expenses declined $204,000 primarily due to less
E&E activity in new areas of interest.

Production and operating expenses decreased 41% as production decreased 38%
due to the sale of assets in April 2013.

Depletion and depreciation expense decreased $1,079,000 primarily due to sale
of assets in 2013.

General and administrative expenses decreased $1,270,000 primarily due to
lower payroll and related costs, lower professional fees incurred in Europe
relating to legal, accounting, management fees and lower travel costs.

Finance Income decreased $1,652,000 due to realized and unrealized gains on
financial commodity contracts in 2012. Finance expense increased $9,164,000
primarily due to a $7,528,000 charge related to interest on loans and
borrowings which included $3.5 million for the amortization of deferred
financings costs and $2.5 million of pre-payment penalties related to the loan
paydown along with a realized loss on financial commodity contracts of $2.5
million as these contracts were all settled in April 2013.

Cash has increased $87,618,000 through the first six months of 2013 primarily
due to the sale of assets in April 2013 offset by the 2013 capital
expenditures.


                                BNK PETROLEUM INC.
             CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
           (Unaudited, Expressed in Thousands of United States Dollars)

                                            June 30,          December 31,
                                              2013               2012
    Current assets
              Cash and cash
              equivalents                 $    90,454       $    2,836
              Trade and
              other
              receivables                       4,568           11,363
              Deposits and
              prepaid
              expenses                          3,459            2,334
              Fair value of
              commodity
              contracts                             -              779
                                               98,481           17,312
    Non-current assets
              Long-term
              receivables                         940            1,297
              Fair value of
              commodity
              contracts                        10,049           10,114
              Property,
              plant and
              equipment                        27,183          156,549
              Exploration
              and
              evaluation
              assets                           35,002           33,590
                                               73,174          201,550
    Total assets                          $   171,655       $  218,862
    Current liabilities
              Trade and
              other
              payables                    $     7,987       $   16,840
              Current
              portion of
              long-term
              debt                                  -           31,797
                                                7,987           48,637
    Non-current
    liabilities
              Loans and
              borrowings                          100                -
              Fair value of
              commodity
              contracts                             -               75
              Asset
              retirement
              obligations                          90            1,312
              Warrants                              3                3
                                                  193            1,390
    Equity
              Share capital                   247,422          247,326
              Contributed
              surplus                          17,456           16,663
              Deficit                       (101,403)         (95,154)
    Total equity                              163,475          168,835
    Total equity and
    liabilities                           $   171,655       $  218,862


                                BNK PETROLEUM INC.
        CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
           (Unaudited, expressed in Thousands of United States dollars,
                            except per share amounts)

                                      Second Quarter              First Half
                                    2013          2012         2013        2012
      Oil and natural gas
        revenue, net of
    royalties                $       863   $     3,401  $     5,111  $   8,115
    Gathering income                   1           332          331        734
    Other income                     296           234          519        454
    Gain on sale of assets         9,747             -        9,747          -
                                  10,907         3,967       15,708      9,303
    Exploration and
    evaluation
    expenditures                       3           209           57        261
    Production and
    operating expenses               463         1,142        1,862      3,135
    Depletion and
    depreciation                     483         1,600        2,337      3,416
    General and
    administrative
    expenses                       3,241         4,263        6,707      7,977
    Stock based
    compensation                     341           205          449        475
    Loss from investments
    in joint ventures                 42           203           65        240
    Legal restructuring
    expenses                         595           280          595        880
                                   5,168         7,902       12,072     16,384
    Finance income                 2,573         1,987          115      1,767
    Finance expense              (9,241)         (682)     (10,000)      (836)
    Net loss and
    comprehensive loss       $     (929)   $   (2,630)  $   (6,249)  $ (6,150)
    Net loss per share
            Basic and
            Diluted          $    (0.01)   $    (0.02)  $    (0.04)  $  (0.04)


                                BNK Petroleum Inc.
                               Second Quarter 2013
                              ($000 except as noted)

                                           2nd Quarter           First Half
                                        2013        2012      2013        2012
    Oil revenue before royalties   $     717       2,028     2,728       4,533
    Gas revenue before royalties         200         687     1,413       1,690
    NGL revenue before royalties         144       1,470     2,147       3,764
    Oil and Gas revenue                1,061       4,185     6,288       9,987
    Cash Flow used by operating
    activities                       (8,952)     (4,085)   (8,684)     (8,884)
    Additions to property, plant
                 &
    equipment                        (7,483)     (2,310)   (9,093)     (3,568)
    Additions to Exploration and
             Evaluation
    Assets                             (387)     (9,382)   (1,269)    (19,333)
    Statistics:

                                               2nd Quarter        First Half
                                             2013       2012    2013      2012
    Average natural gas production
    (mcf/d)                                   546      3,674   2,418     3,934
    Average NGL production (Boepd)             87        581     397       630
    Average Oil production (Bopd)              88        246     166       261
    Average production (Boepd)                266      1,439     966     1,547
    Average natural gas price ($/mcf)       $4.03      $2.06   $3.23     $2.36
    Average NGL price ($/bbl)              $18.18     $27.79  $29.90    $32.81
    Average oil price ($/bbl)              $89.15     $90.47  $90.70    $95.45
    Average price per barrel               $43.83     $31.96  $35.96    $35.47
    Royalties per barrel                     8.22       5.99    6.74      6.65
    Operating expenses per barrel           19.09       8.72   10.65     11.13
    Netback per barrel                     $16.52     $17.25  $18.57    $17.69

The information outlined above is extracted from and should be read in
conjunction with the Company's unaudited financial statements for the three
months ended June 30, 2012 and the related management's discussion and
analysis thereof, copies of which are available under the Company's profile at
http://www.sedar.com . 

Non-IFRS Information

Netback per barrel and its components are calculated by dividing revenue,
royalties and operating expenses by the Company's sales volume during the
period. Netback per barrel is a non-IFRS measure but it is commonly used by
oil and gas companies to illustrate the unit contribution of each barrel
produced. This is a useful measure for investors to compare the performance
of one entity with another. The non-IFRS measures referred to above do not
have any standardized meaning prescribed by IFRS and therefore may not be
comparable to similar measures used by other companies.

The Company also uses the "barrels" (bbls) or "barrels of oil equivalent"
(boe) reference in this report to reflect natural gas liquids and oil
production and sales. All boe conversions are derived by converting gas to
oil in the ratio of six thousand cubic feet of gas to one barrel of oil,
representing the approximate energy equivalency.

Caution Regarding Forward-Looking Information

statements contained in this news release constitute "forward-looking
information" as such term is used in applicable Canadian securities laws,
including information regarding the proposed timing and expected results of
exploratory work including the potential for, and level of, oil production
from the Lower Caney and upper Sycamore formations on the Company's Oklahoma
acreage and possible impact of that on the Company's netbacks and resources
base, projected levels of fracture stimulation fluid recovery, the effect of
design and performance improvements on future productivity, the anticipated
timing of commencement of drilling, well-deepening and fracture-stimulations
in connection with the Company's Caney drilling program, and the advancement
of the Company's European projects, including permit and concession
applications. Forward-looking information is based on plans and estimates of
management at the date the information is provided and certain factors and
assumptions of management, including that the Company's geologic models will
be validated, that previous exploration results are indicative of future
results and success, that future well production rates will be improved over
existing wells, that design and performance improvements will reduce
production time and improve productivity, that discoveries will prove to be
economic, that all required permits and approvals, funding from co-venturers
and the necessary labor and equipment will be obtained, provided or available,
as applicable, on terms that are acceptable to the Company, when required, and
that global economic conditions will not deteriorate in a manner that has an
adverse impact on the Company's business and its ability to advance its
business strategy and the industry as a whole. Forward looking information is
subject to a variety of risks and uncertainties and other factors that could
cause plans, estimates, timing and actual results to vary materially from
those projected in such forward-looking information. Factors that could cause
the forward-looking information in this news release to change or to be
inaccurate include, but are not limited to, the risk that permits, approvals,
equipment and/or funding are delayed or available only on terms that are not
acceptable to the Company, that production rates do not match the Company's
assumptions, political and currency risks and other risks associated with
exploration and development of oil and gas projects, including those set forth
in the Company's management's discussion and analysis and annual information
form filed under the Company's profile on http://www.sedar.com .

About BNK Petroleum Inc. BNK Petroleum Inc. 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, Poland, Germany and Spain.
Additionally the Company is utilizing its technical and operational expertise
to identify and acquire additional unconventional projects outside of North
America. The Company's shares are traded on the Toronto Stock Exchange under
the stock symbol BKX. 



For further information:Wolf E. Regener, President and Chief Executive Officer
+1-805-484-3613 Email: investorrelations@bnkpetroleum.com Website:
http://www.bnkpetroleum.com

    (BKX.)
 
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