BNK Petroleum Inc. Announces 3rd Quarter 2012 results

Calgary (ots/PRNewswire) -

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

Third Quarter First Nine Months
2012 2011 % 2012 2011 %
Earnings (Loss):
$ Thousands $(4,260) $(274) L $(10,410) $18 L
$ per common share $(0.03) $0.00 L $(0.07) $0.00 L
assuming dilution
Capital Expenditures $12,746 $11,436 11% $36,104 $23,180 56%
Average Production (Boepd) 1,547 1,868 (17%) 1,547 1,503 3%
Average Product Price
per Barrel $34.11 $46.81 (27%) $35.01 $46.79 (25%)
Average Netback per Barrel $17.77 $28.27 (37%) $17.71 $27.56 (36%)
9/30/2012 12/31/2011 9/30/2011
Cash and Cash Equivalents $10,285 $40,496 $41,957
Working Capital $7,904 $39,697 $46,154

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

"Third Quarter results reflect our continued investment in Poland
as we seek to discover new large shale gas reserves in that country
as well as continued investment in our Oklahoma assets. In Poland we
believe we are much closer to proving that shale gas will work in
Europe with our Gapowo B-1 well results. We are looking forward to
obtaining the approvals needed to drill the lateral to test the
overpressured, high gas show intervals that we encountered. In the
United States our production from the Woodford shale has begun
increasing once again and we look forward to further evaluation of
the mainly oil producing Caney/Sycamore lime interval in the same
field. The Caney/Sycamore lime could add substantial reserves and it
should generate much higher net backs since it is anticipated to be
mainly oil, based on our early results.

In the third quarter the Company incurred a loss of $4.3 million
versus a loss of $.3 million in the third quarter of 2011. For the
first nine months of 2012 the Company incurred a loss of $10.4
million versus a profit of $18,000 earned in the first nine months of
2011. In the third quarter oil and gas revenues before royalties were
up $549,000 over 2nd quarter 2012, but declined $3.2 million in
comparison to the third quarter 2011, due to a lower average natural
gas prices and NGL prices coupled with reduced average total daily
production. Other income in the third quarter declined $1.1 million
due to lower management fee income.

For the comparative nine month periods oil and gas revenues
before royalties declined $4.4 million due to lower natural gas and
NGL prices. Other income in the comparative nine month period
declined $2.5 million due to a sale of seismic data in 2011 and lower
management fee income. Expenses increased $3.6 million between the
comparative nine month periods due to higher general and
administrative expenses resulting from the Company's expanding
European operations.

Capital expenditures were $12.7 million in the quarter and $36.1
million through the first nine months of 2012 as we continue to
explore for large shale gas reserves in Poland through our 100% owned
Indiana Investments Sp z o. o. subsidiary ("Indiana") and further
develop our Tishomingo assets both in operated and non-operated wells
primarily operated by XTO Energy.

As recently announced we remain very encouraged with the data we
have obtained from analyzing the core samples obtained from the
Gapowo B-1 well in Poland. The data validates our geologic model of
increasing thickness and organic content over the target interval and
are consistent with analyses indicating over pressured permeable
shales. We await approval to drill a lateral out of the Gapowo B-1
wellbore.

The Company's ongoing analysis in Germany has determined that a
number of the targets that the Company is pursuing have a higher risk
profile due to new data gathered. The Company will be deciding
whether to continue pursuing a number of these projects in the coming
months.

We are excited about the results of our testing of the Company
operated horizontal Barnes 6-2H well targeting the Lower Caney and
Upper Sycamore formations in Oklahoma. After fracture stimulation we
are seeing production in the range of 170 to 250 barrels of
equivalent oil per day with 80% of that production being crude oil
after flowing back only 32% of the fracture stimulation fluid.
Accordingly we expect to see higher production as flow back
increases. Testing of the Sycamore and two lower zones of the Caney
formation will confirm the production rates of each zone and the data
obtained will be used to position future horizontal wells to maximize
production rates.

We are exploring several options to secure new sources of working
capital. These include up front cash proceeds obtained from a
possible farm-out arrangement relating to certain of our European
concessions, a potential increase in the borrowing base against our
Oklahoma assets as well as potential proceeds from selling additional
equity in the Company. We are confident that the combination of cash
on hand, cash from operations and these potential new sources of
working capital if successfully completed will be sufficient to meet
the cash needs of the Company for the foreseeable future.

THIRD QUARTER HIGHLIGHTS:

- Capital Expenditures increased 11% in the quarter to $12.7 million of
which $7.1 million was spent in Poland relating to our Indiana concession and $5.0
million was spent in Oklahoma primarily to develop the Caney formation
- The Polish Ministry of Environment provided positive Environmental Decisions
allowing the Company to drill slightly deeper at both the Miszewo T-1 and Gapowo B-1
wells
- The Company-operated Barnes 6-2H well in Oklahoma targeting the Lower Caney
and Upper Sycamore formations (Mississippi Lime Equivalent) was fracture stimulated in
13 stages over an approximate 4,300 lateral
- Cash used from operating activities before changes in working capital and
long-term receivables was a negative $234,000 in the quarter
- Loss of $4.3 million versus a loss of $.3 million in the third quarter of 2011
due to lower oil and gas revenues of $2.6 million and lower other income of $1.1
million
- Cash and working capital totaled $10.3 million and $7.9 million respectively
at September 30, 2012

Third Quarter 2012 to Third Quarter 2011

Oil and gas revenues before royalties declined 40% or $3,191,000
in the quarter to $4,855,000. Oil revenues were $2,170,000 in the
quarter versus $3,396,000 in the third quarter of 2011 or a decline
of 36% as average oil production in the comparative quarters declined
39% due to normal declines from existing wells and not many new wells
being drilled in 2012. Average crude oil prices increased 5% between
quarters to an average of $90.03 a barrel. Natural gas revenues
declined 48% to $902,000 as natural gas prices declined 37% between
quarters while natural gas production declined 16%. Natural Gas
Liquids (NGLs) revenue declined 39% to $1,783,000 as average NGL
prices declined 37% while NGL production between quarters declined
4%.

Other income declined $1,163,000 between quarters due to lower
management fees relating to its role as Manager of Saponis
Investments Sp z o.o. ("Saponis").

Exploration and evaluation expenses declined $209,000 as more
pre-concession costs were incurred in the third quarter of 2011.
Production and operating expenses declined 16% commensurate with the
17% decline in average daily production between quarters.

General and administrative expenses increased 21% or $677,000 to
$3,940,000 primarily due to higher payroll and associated costs of
$431,000 and higher professional fees.

Stock Based Compensation expense declined $295,000 to $210,000
due to fewer stock options being granted. Legal restructuring
expenses declined $435,000 to $135,000 as the legal restructuring of
the Company's European operations is nearing completion.

Finance Income declined $1,736,000 to $490,000 as 2011 results
included a $1,797,000 unrealized gain on financial commodity
contracts. Finance Expense declined $1,028,000 between quarters to
$1,781,000 primarily due to lower foreign currency losses between
quarters of $2,272,000 partially offset by an unrealized loss in the
third quarter of 2012 of $1,091,000 on financial commodity contracts.

Cash declined $7,026,000 in the past three months due to
$12,746,000 in capital expenditures, a loss net of non-cash charges
in the third quarter of $441,000 offset by increased borrowings of
$4,200,000 plus changes in working capital. The Company estimates
that it incurred $5,700,000 in additions to Exploration and
Evaluation Assets as a direct result of the requirement to obtain a
positive Environmental Decision from the Polish Ministry of
Environment to drill slightly deeper than allowed in the original
concession applications.

Exploration and evaluation assets increased $8,247,000 in the
quarter primarily relating to drilling and seismic costs pertaining
to the Company's Indiana concession.

Trade and other payables increased $3,628,000 primarily resulting
from costs incurred in Poland while loans and borrowings increased
$4,261,000 due to increased borrowings of $4,200,000 in the quarter
and amortization of debt issue costs.

FIRST NINE MONTHS 2012 VERSUS FIRST NINE MONTHS 2011 HIGHLIGHTS:

- Capital expenditures increased 56% or $12.9 million to $36.1 million of
which $26.2 million relates to capital expenditures incurred at our Indiana
concession, $8.6 million incurred in Oklahoma and $1.3 million in the rest of Europe
- Average production increased 3% to 1,547 barrels a day
- Average product prices declined 25%
- A net loss of $10.4 million was incurred versus a profit of $18,000 in 2011
primarily due to lower oil and gas revenues of $4.4 million, higher general and
administrative expenses of $4.8 million and lower finance income of $.9 million

First Nine Months 2012 to First Nine Months 2011:

Oil and natural gas revenues before royalties declined 23% or
$4,355,000 to $14,844,000. Oil revenues decreased 12% or $888,000 to
$6,703,000 due to a 15% reduction in production as natural declines
set in from higher activity levels in 2011 than 2012. Average crude
oil prices increased 3% to $93.63 a barrel. Natural gas revenues
declined 36% or $1,480,000 to $2,592,000 due to a 41% decline in
average natural gas prices to $2.43 an mcf. Through nine months
natural gas production has increased 8%. NGL revenues declined 26% or
$1,989,000 to $5,547,000 due to average NGL prices declining 31%. NGL
production has increased 7% between periods.

Other income declined $2,479,000 to $735,000 due to the sale of
seismic data in 2011 and lower management fees.

Exploration and evaluation expenses declined $1,283,000 to
$310,000 due to the write-off of the investment in Black Warrior of
$1,091,000 in 2011 and higher pre-concession costs last year.

Production and operating expenses increased 6% or $258,000 to
$4,549,000 as average production increased 3% and current year
operating expenses include $390,000 in workover expenses partially
offset by the rebate of production taxes in Oklahoma.

Depletion and depreciation expense increased 21% or $906,000 to
$5,205,000 primarily due to increased production applied on a higher
depletable base.

General and administrative expenses increased $4,775,000 or 66%
to $12,064,000 due to increased payroll and related costs of
$2,173,000 and increased professional fees (legal, accounting, trust
services, public relations and consulting) primarily related to our
European operations of $2,202,000 and higher rent and office costs of
$217,000.

Stock based compensation declined $1,110,000 or 62% to $685,000
due to fewer stock options being issued.

Finance income declined $864,000 to $1,260,000 primarily due to
lower net gains on financial commodity contracts of $985,000. Finance
expense declined $324,000 primarily due to reduced foreign exchange
losses between periods of $675,000.

Cash has declined $30,211,000 since yearend 2011 primarily due to
capital expenditures of $36,104,000, losses less non-cash charges of
$4,107,000 net of $8,200,000 in new borrowing plus changes in working
capital.

BNK PETROLEUM INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited, Expressed in Thousands of United States Dollars)
September 30, December 31,
2012 2011
Current assets
Cash and cash equivalents $ 10,285 $ 40,496
Trade and other receivables 14,583 11,509
Deposits and prepaid expenses 2,697 2,309
Fair value of commodity contracts 817 738
28,382 55,052
Non-current assets
Long-term receivables 1,511 1,928
Fair value of commodity contracts 126 311
Property, plant and equipment 154,107 150,313
Exploration and evaluation assets 42,860 14,911
198,604 167,463
Total assets $ 226,986 $ 222,515
Current liabilities
Trade and other payables $ 20,478 $ 15,355
Non-current liabilities
Loans and borrowings 31,736 23,353
Asset retirement obligations 1,826 1,769
Warrants 16 262
33,578 25,384
Equity
Share capital 247,326 247,207
Contributed surplus 16,220 14,775
Deficit (90,616) (80,206)
Total equity 172,930 181,776
Total equity and liabilities $ 226,986 $ 222,515

BNK PETROLEUM INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited, expressed in Thousands of United States dollars,
except per share amounts)
Third Quarter First Nine Months
2012 2011 2012 2011
Oil and natural gas
revenue, net of royalties $ 3,946 $ 6,537 $ 12,061 $ 15,599
Gathering income 330 404 1,064 1,354
Other income 260 1,423 735 3,214
4,536 8,364 13,860 20,167
Exploration and evaluation
expenditures 49 258 310 1,593
Production and operating
expenses 1,414 1,678 4,549 4,291
Depletion and depreciation 1,757 1,781 5,205 4,299
General and administrative
expenses 3,940 3,263 12,064 7,289
Stock based compensation 210 505 685 1,795
Legal restructuring
expenses 135 570 1,015 980
7,505 8,055 23,828 20,247
Finance income 490 2,226 1,260 2,124
Finance expense (1,781) (2,809) (1,702) (2,026)
Net income (loss) and
comprehensive income (loss) $ (4,260) $ (274) $ (10,410) $ 18
Net income (loss) per share
Basic and Diluted $ (0.03) $ 0.00 $ (0.07) $ (0.00)

BNK Petroleum Inc.
Third Quarter 2012
($000 except as noted)
3rd Quarter First Nine Months
2012 2011 2012 2011
Oil revenue before royalties $ 2,170 3,396 6,703 7,591
Gas revenue before royalties 902 1,720 2,592 4,072
NGL revenue before royalties 1,783 2,930 5,547 7,536
Oil and Gas revenue 4,855 8,046 14,842 19,199
Cash Flow provided (used) by
operating activities (1,799) 1,270 (10,495) 374
Capital Expenditures (12,746) (11,436) (36,104) (23,180)
Proceeds from Loans and Borrowings 4,200 0 8,200 0
Cash Proceeds of Stock Options
and Warrants 0 192 63 621
Statistics:
3rd Quarter First Nine Months
2012 2011 2012 2011
Average natural gas production (mcf/d) 3,816 4,564 3,894 3,598
Average NGL production (Boepd) 649 675 637 597
Average Oil production (Bopd) 262 432 261 306
Average production (Boepd) 1,547 1,868 1,547 1,503
Average natural gas price ($/mcf) $2.57 $4.10 $2.43 $4.15
Average NGL price ($/bbl) 29.85 $47.15 31.80 $46.25
Average oil price ($/bbl) 90.03 $85.46 93.63 $90.74
Average price per barrel $34.11 $46.81 $35.01 $46.79
Royalties per barrel 6.40 8.78 6.57 8.77
Operating expenses per barrel 9.94 9.76 10.73 10.46
Netback per barrel $17.77 $28.27 $17.71 $27.56

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 September 30, 2011 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

Certain 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 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,
anticipated timing of commencement of drilling, well-deepening,
fracture-stimulations, 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 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, when required. 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, 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, contact:

Wolf E. Regener, President and Chief Executive Officer +1 (805)
484-3613

Email: investorrelations@bnkpetroleum.com

Website: http://www.bnkpetroleum.com

ots Originaltext: BNK Petroleum Inc.
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