BANKERS PETROLEUM ANNOUNCES 2014 FINANCIAL RESULTS

March 12th, 2015

Cash Position of $73 Million and 14% Increase in Oil Sales

CALGARY, March 12, 2015 /CNW/ – Bankers Petroleum Ltd. (“Bankers” or the “Company”) (TSX: BNK, AIM: BNK) is pleased to provide its 2014 financial results.  All amounts set out in this press release and listed in the tables below are in US dollars unless otherwise stated.

In 2014, Bankers made several key accomplishments including record levels of revenue of $583 million, adjusted funds generated from operations of $304 million, oil production of 20,690 barrels of oil per day (bopd) and capital investment of $291 million.

Results at a Glance

($000s, except as noted)

Year ended December 31

Results at a Glance

2014

2013

2012

Financial

Oil revenue

583,120

566,386

432,138

Net operating income

342,375

316,558

218,246

Net income

128,833

61,743

34,413

Basic (US$/share)

0.50

0.24

0.14

Diluted (US$/share)

0.49

0.24

0.14

Funds generated from operations

284,293

279,601

192,589

Adjusted funds generated from operations(1)

304,130

279,752

192,589

Basic (US$/share)

1.17

1.10

0.76

Capital expenditures

291,325

234,243

222,663

Operating

Average production (bopd)

20,690

18,169

15,020

Average sales (bopd)

20,679

18,173

14,808

Average Brent oil price (US$/barrel)

98.95

108.66

111.67

Average realized price (US$/barrel)

77.26

85.39

79.73

Netback (US$/barrel)

45.36

47.73

40.27

December 31

2014

2013

2012

Cash and restricted cash

73,036

31,706

38,740

Working capital

201,325

134,094

88,799

Total assets

1,284,846

1,007,148

825,816

Long-term debt

98,276

98,150

97,158

Shareholders’ equity

716,536

564,675

483,032

1. Represents funds generated from operations before non-recurring contract settlement expenses.

 

Highlights

Bankers reached several key financial and operational achievements during 2014 as described below:

Operational Highlights:

  • Average oil production was 20,690 barrels of oil per day (bopd) in 2014, 14% higher than the 2013 average production of 18,169 bopd.  Average oil production for the 2015 year-to-date is approximately 19,500 bopd.
  • Oil sales averaged 20,679 bopd in 2014, a 14% increase compared to 18,173 bopd in 2013.  Crude oil inventory at December 31, 2014 increased to 315,500 barrels from 311,000 barrels atDecember 31, 2013.
  • Capital expenditures in 2014 were $291 million, 24% higher compared to $234 million in 2013.  A total of 160 wells were drilled including 149 horizontal production wells, seven lateral re-drills, two water disposal wells and the Company’s first multi-lateral well in the Patos-Marinza field and its first horizontal well drilled in the Kuçova oilfield.  A total of 146 wells were drilled in 2013.
  • The Company continued the Enhanced Oil Recovery (EOR) program in 2014 with monitoring and expansion of flood patterns.  At the end of the year, 19 polymer flood and 4 water flood patterns were in place in the Patos-Marinza oilfield and continue to perform to model expectations. Reservoir pressure and production response are positive with good reservoir flood conformance.  The Company continues to be strongly encouraged by the results to date and plans to move forward with 20 to 30 additional conversions in 2015.
  • Bankers commenced Kuçova oilfield development in the Arreza pool with the takeover of 59 wells from Albpetrol in August 2014, reactivation of three wells and drilling of the first horizontal well in 2014.

Product Margin Highlights:

  • Operating and Sales and Transportation (S&T) costs, primarily originating from Albanian-based companies and their employees, were $155 million ($20.51/bbl) for 2014 compared to $156 millionfor 2013 ($23.44/bbl), an improvement of 13% on a per barrel basis.  Overall, operating and S&T costs improved by 21%, on a per barrel basis, from 2013 to 2014, taking into account the $1.91/bbl impact of excise tax for 2014.
  • Net operating income (netback) in 2014 was $342 million ($45.36/bbl) compared to $317 million($47.73/bbl) in 2013.
  • The Company focused on key infrastructure projects aimed at reducing costs and optimizing operations in the Patos-Marinza oilfield.  The field electrification project continued in the northern and central areas of the Patos-Marinza oilfield with realized energy cost savings.  Construction of the west water disposal line and northern flow line system started in 2014.  These projects target reductions in trucked volumes within the field.  Other infrastructure activities in 2014 include the commissioning of the Satellite 3 treating facility, installation of several Gas Oil Ratio (GOR) skids for gas capturing and measurement, as well as completed maintenance turnarounds of the main treating facilities.

Financial Highlights:

  • Revenue in 2014 was $583 million ($77.26/bbl) compared to $566 million ($85.39/bbl) in 2013.  Field price realization represented 78% of the Brent oil benchmark price ($98.95/bbl) as compared to 79% of the Brent price ($108.66/bbl) in 2013.   The reduction as a percentage of Brent compared to the previous year was mainly due to the commencement of domestic sales during 2014.
  • Royalties to the Albanian Government and related entities were $86 million (15% of revenue) during 2014 compared to $94 million (17% of revenue) for 2013.
  • During 2014, adjusted funds generated from operations were $304 million ($1.17 per share), a 9% increase compared to $280 million ($1.10 per share) for 2013.
  • The Company continues to maintain a strong financial position at December 31, 2014 with cash and restricted cash of $73 million and working capital of $201 million.  At December 31, 2014, the Company had drawn $104 million of its $224 million approved credit facilities.  At December 31, 2013, cash and restricted cash was $32 million and working capital was $134 million.
  • In August 2014, Bankers commenced delivery of crude oil to the domestic refinery, which is now under new ownership and management.  Bankers agreed to sell oil to an affiliate of this domestic refinery on a monthly basis until December 31, 2014 at 73% of Dated Brent (FOB Vlore equivalent) plus $40/tonne or approximately $6/bbl recovery against an outstanding accounts receivable balance.
  • In April 2014, the Company paid a $3 million premium to enter into financial commodity contracts representing 6,000 bopd at a floor price of $80/bbl of Dated Brent for 2015.  At December 31, 2014, the fair value of these contracts was $44 million.

Other Highlights in 2014:

  • The Oil Initially in Place (OIIP) resource assessment in Albania at year-end was 5.4 billion barrels, consistent with the OIIP resource assessment at the end of 2013.  Reserves on a proved basis were 125 million barrels compared to 147 million barrels at year-end 2013.  On a proved plus probable basis, reserves were 203 million barrels compared to 232 million barrels at year-end 2013.  The corresponding net present value (NPV) after tax (discounted at 10%) of the proved plus probable reserves was $1.8 billion at year-end compared to $2.2 billion in 2013, representingCAD$8.57/share and CAD$9.72/share, respectively.

Fiscal Terms Mitigation:

  • Bankers and the Government of Albania worked together to reach an agreement on mitigation of the 2014 fiscal changes.  The terms of the agreement were approved by Albpetrol and AKBN, and were ratified by the Council of Ministers on November 2, 2014.  The agreement is structured to allow excise and any applicable carbon and circulation taxes to be deducted from revenue and eligible for inclusion in the cost recovery pool for the Patos-Marinza concession to determine the Company’s taxable position.  This mechanism enables the near term impact on cash flow to be fully offset through a deferred and reduced profit tax burden which keeps the net asset value of the project whole and the economics of future investment consistent with the pre-2013 fiscal regime.

OUTLOOK

The Company’s reduced capital program in 2015 will be $153 million, funded from projected cash flow (based on an average $50/bbl Brent oil price) and existing cash resources.  Additionally, the Company’s 2015 hedge program, representing 6,000 bopd at $80/bbl Brent, will ensure sufficient funding to maintain a balanced program. The work program and budget include the following items:

  • Drilling of 60 horizontal wells focused on continuing development in the core area of the Patos-Marinza oilfield;
  • Continuation of the EOR program with the addition of 20 to 30 polymer and water injector conversions. The focus of the conversions planned is expansion of existing patterns, with several conversions testing new areas of the oilfield including higher viscosity fluids and thicker reservoir sands;
  • Continued focus on operational efficiencies in the field to expand product margins including the construction of emulsion flow-lines to reduce trucking costs, electrification and expansion of the gas gathering system to reduce energy costs and emissions, and a review of well construction and artificial lift design to improve well performance;
  • Expansion of the water disposal system to accommodate increased fluid handling requirements for the primary and EOR programs;
  • Drilling of one well in Kuçova and implementation of a flood pattern to commence EOR techniques in the oilfield;
  • Continued investment on environmental remediation and social initiatives as part of a sustained long-term effort to improve the physical environment, and to provide training programs and other community initiatives for the residents near the Company’s operations.

First Quarter Operational Update

Bankers intends to announce its first quarter 2015 Operational update on Tuesday, April 7, 2015.

Supporting Documents

The full Management Discussion and Analysis (MD&A), Financial Statements and updated March corporate presentation are available on www.bankerspetroleum.com. The MD&A and Financial Statements will also be available on www.sedar.com.

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