BNK Petroleum Inc. Announces 2nd Quarter 2014 Results

Camarillo, California (ots/PRNewswire) -

TSX ticker symbol: BKX

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

Second Quarter First Six Months
2014 2013 % 2014 2013 %
Net Income (Loss):
$ Thousands $199 $(929) - $449 $(6,249) -
$ per common share $0.00 $(0.01) - $0.00 $(0.04) -
assuming dilution
Capital Expenditures $22,710 $7,870 189% $35,664 $10,362 244%
Average Production (Boepd) 999 266 276% 980 966 1%
Average Product Price per Barrel $81.74 $43.83 86% $80.05 $35.96 123%
Average Netback per Barrel $58.85 $16.52 256% $58.16 $18.57 213%
June March December
2014 2014 2013
Cash and Cash Equivalents $32,266 $47,351 $17,159
Working Capital $18,721 $37,417 $18,854

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

"During the second quarter, the Company began its 2014 drilling
program in the U.S. with the Wiggins 11-2H well. The drilling was
completed in July with a 5,050 foot treatable lateral section and the
Company has just begun fracture stimulating the well with results
expected in early September. The lateral section of the Wiggins 11-2H
well was placed in what we believe is the most productive
stratigraphic portion of the Caney, based on the analysis of previous
well results and the pilot hole. The second well in the 2014 drilling
program is the Hartgraves 1-5H well which was spud on August 6th, and
is currently drilling the lateral portion of the wellbore with
fracture stimulation expected to begin in early September.

"The Wiggins 12-8H and the Barnes 7-2H wells both continue to
perform above our expectations with combined average production of
over 550 boepd for the six months of 2014. These wells have been on
production for 6 and 8 months respectively. The Company's first three
wells in the 2014 US drilling program are being drilled in sections
directly adjacent to the Wiggins 12-8H and Barnes 7-2H wells.

"With the recently announced $100 million reserve-based credit
facility and the equity financing in the first quarter, we intend to
continue our 2014 US Caney formation drilling program beyond the
three previously announced wells. The Company plans to continue
drilling Caney wells for the rest of the year. By year end, we are
projecting to have finished drilling 6 wells in 2014 and have 4 of
them on production. Our year-end production exit rate is projected to
be between 2,300 to 2,600 BOEPD.

"The credit facility, which was completed at the end of July, has
an initial commitment amount of $15.9 million and additional
commitment amounts will become available subject to new higher
reserve evaluations as we bring the new wells on production.

"Due to our successful 2013 drilling program in the Caney
formation, the Company was able to generate positive net income for
the first two quarters of 2014. Our netbacks for the first six months
increased by more than 200% compared to the same period in 2013,
which allowed the Company to generate positive net income with the
same level of production on a BOE basis due to the higher oil content
in the Caney formation. In addition, we generated positive cash flow
from operations of almost $5.3 million and revenue of $14.2 million
for the first six months of the year.

"The flow-back test of the Gapowo B-1 horizontal well in Poland
has concluded and the well is currently shut-in for a 3-4 week
pressure buildup test. Production rates remained in the range of
200,000 to 400,000 cubic feet per day throughout the flowback test.
The Company expects this pressure data to provide the remaining
information required to complete our reservoir model analysis. The
Company anticipates completing the reservoir analysis in October.

"The Company believes that this reservoir analysis will validate
the Company's preliminary analysis, through further design
improvements, that future wells can be effectively stimulated across
an entire lateral and that the production rates achieved at Gapowo
can be proportionally increased to not only account for the entire
lateral but also increase gas rates per stage when placement of
designed proppant concentrations are achieved. The Company expects
the resulting projected production to be at rates that would justify
further development of the reservoir.

"This is similar to the path of exploration to development in many
shale gas projects in the United States where numerous exploratory
wells are necessary to advance shale projects to economic production,
including the Company's own experience in the Caney formation. As
previously announced, given the capital requirements of such
exploration activities and the Company's focus on its Caney growth,
the Company intends to renew its efforts to joint venture with a
suitable partner after completing the reservoir analysis mentioned
above.

"In the second quarter of 2014, the Company generated net income
of $199,000 compared to a net loss of $929,000 in the second quarter
of 2013. Oil and gas revenue, net of royalties was $6.0 million in
the second quarter of 2014, an increase of $5.2 million, or almost
600%, compared to the prior year quarter when the Woodford assets
were sold in April 2013.

"Average netbacks for the second quarter 2014 were $58.85, an
increase of 256% compared to the prior year quarter due to the
significantly higher levels of oil in the production mix of the Caney
formation. Oil accounted for 72% of 2014 production in the Caney
versus 33% of 2013 production from the Woodford formation which was
sold in April 2013.

"Production increased 276% in the second quarter 2014 compared to
second quarter 2013 due to the Caney wells drilled in the second half
of 2013 and the Woodford sale in April 2013. Average pricing per
barrel increased 86% primarily due to the higher oil of the Caney
formation in the production mix.

"Capital expenditures increased to $22.7 million in the second
quarter 2014 due to the startup of the 2014 drilling program in the
US and the drilling and completion of the Gapowo B-1 well in Poland.
Capital expenditures in the second quarter of 2013 were $7.8
million."

"Through the first half of 2014 the Company generated net income
of $449,000 compared to a loss of $6.2 million in the first half of
2013. Oil and gas revenues increased by 125% to $11.5 million due to
an increase of 123% in average prices due to the higher oil from the
Caney formation in the production mix. Cash flow generated from
operating activities for the first six months of 2014 was $5.3
million compared to negative cash flow from operating activities of
$8.7 million in the first six months of 2013."

SECOND QUARTER HIGHLIGHTS:

- Revenue, net of royalties was $6.0 million for second quarter of 2014 and
netbacks were $58.85 per BOE, an increase of 256% compared to the second quarter of
2013 due to more oil in the production mix and higher prices
- Production was 999 BOEPD for the second quarter, an increase of 276% due to
the Caney production in the second half of 2013 and the Woodford sale in April 2013
- Net income was $199,000 for the second quarter of 2014 compared to a loss of
$929,000 in second quarter of 2013
- In July, the Company closed a $100 million credit facility with Morgan Stanley
with an initial commitment amount of $15.9 million
- Cash flow from operating activities was $2.3 million for the second quarter of
2014 compared to negative cash flow from operating activities of $9.0 million in the
second quarter of 2013
- Cash and working capital totaled $32.3 million and $18.7 million respectively
at June 30, 2014 not including the subsequently closed credit facility.
- Capital expenditures increased 189% to $22.7 million primarily due to the
startup of the 2014 US drilling program and the drilling and fracture stimulation of
the Gapowo B-1 well in Poland
- In June 2014, the Company entered into financial derivative transactions with
Morgan Stanley as part of the hedging requirements of the credit facility that was
completed in July 2014. These transactions also meet the Company's risk management
strategy to manage commodity price fluctuations and stabilize cash flows for future
exploration and development programs.

Second Quarter 2014 versus Second Quarter 2013

Gross oil and gas revenues totaled $7,432,000 in the second
quarter 2014 versus $1,063,000 in the second quarter of 2013. Oil
revenues were $6,697,000 in the quarter versus $717,000 in the second
quarter of 2013, an increase of 834% as production increased 720% due
to the higher oil content from the Caney wells. Average oil prices
increased 14% or $12.78 a barrel for the quarter. Natural gas
revenues increased $135,000 or 68%, as natural gas production
increased 51% due to the Woodford asset sale in April 2013 and
average natural gas prices per mcf increased 11% compared to the
second quarter of 2013. Natural Gas Liquid (NGL) revenue increased
$255,000 or 177% to $399,000 as average production increased 61% to
140 boepd due to the Woodford sale in 2013 and average NGL prices
increased 72% to $31.28 a barrel.

Production and operating expenses increased $224,000 between
quarters due to the Woodford asset sale in April 2013.

Depletion and depreciation expense increased $1,403,000 between
quarters due to increased production and a higher depletion base due
to the Caney wells.

General and administrative expenses decreased $239,000 between
quarters primarily due to lower professional fees relating to legal,
accounting, and management fees partially offset by an increase in
director fees.

Finance income decreased $2,242,000 due to higher unrealized gains
on financial commodity contracts in 2013. Finance expense decreased
$9,087,000 primarily due to 2013 interest expense of $6,534,000 which
included $3.5 million for the amortization of deferred financings
costs and $2.5 million of pre-payment penalties and a realized loss
on financial commodity contracts of $2.7 million as these contracts
were all settled in April 2013.

Capital expenditures of $22,710,000 were incurred in the second
quarter of 2014 primarily related to the startup of the 2014 drilling
program in the US and the Gapowo B-1 well in Poland.

FIRST SIX MONTHS 2014 HIGHLIGHTS

- Revenue, net of royalties was $11.5 million for first six months of 2014
and netbacks were $58.16 per BOE, an increase of 213% compared to the first six months
of 2013 due to more oil in the production mix and higher prices
- Average production was 980 BOEPD for the first six months, an increase of 1%
as increased production from the Caney wells drilled in the second half of 2013 was
offset by the loss of production from the Woodford sale in April 2013
- Net income was $449,000 for the first six months of 2014 compared to a loss of
$6,249,000 in first six months of 2013
- In July, the Company closed a $100 million credit facility with Morgan Stanley
with an initial commitment amount of $15.9 million
- Completed an equity financing for total net proceeds of approximately $30.8
million
- Cash flow from operating activities was $5.3 million for the first six months
of 2014 compared to negative cash flow from operating activities of $8.7 million in
the first six months of 2013
- Capital expenditures increased 244% to $35.7 million primarily due to the
completion of the 2013 U.S. drilling program, the startup of the 2014 U.S. drilling
program and the Gapowo B-1 well in Poland
- In June 2014, the Company entered into financial derivative transactions with
Morgan Stanley as part of the hedging requirements of the credit facility that was
completed in July 2014. These transactions also meet the Company's risk management
strategy to manage commodity price fluctuations and stabilize cash flows for future
exploration and development programs

First Six Months of 2014 versus First Six Months of 2013

Gross oil and gas revenues totaled $14,202,000 in the first six
months of 2014 versus $6,291,000 in the first six months of 2013. Oil
revenues were $12,385,000 in the first six months versus $2,728,000
in the same period of 2013, an increase of 354% as production
increased 313% due to the higher oil content from the Caney wells and
average oil prices increased 10% or $8.98 a barrel. Natural gas
revenues decreased $665,000 or 47%, due to a decrease in natural gas
production of 65% due to the Woodford asset sale in April 2013 which
was partially offset by an average natural gas price increase of 51%
in the first six months of 2014. NGL revenue decreased $1,080,000, or
50%, due to a decrease in NGL production of 61% due to the Woodford
sale in April 2013 which was partially offset by an average NGL price
increase of 29% in the first six months of 2014.

Management fees and other income decreased due to lower management
fees compared to the prior year.

Production and operating expenses decreased 34% for the first six
months of 2014 due to a reduced well count due to the Woodford sale
in 2013 and reduced gathering costs.

Depletion and depreciation expense increased $1,357,000 due to the
Woodford sale in April 2013 and a higher depletion base due to the
Caney wells.

General and administrative expenses decreased $775,000 primarily
due to lower professional fees relating to legal and accounting
expenses and lower payroll and related costs, partially offset by an
increase in director fees.

Finance expense decreased $9,823,000 primarily due to 2013
interest expense of $7,528,000 which included $3.5 million for the
amortization of deferred financings costs and $2.5 million of
pre-payment penalties and a realized loss on financial commodity
contracts of $2.5 million as these contracts were all settled in
April 2013.

BNK PETROLEUM INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited, Expressed in Thousands of United States Dollars)
December
June 30, 31,
2014 2013
Current assets
Cash and cash equivalents $ 32,266 $ 17,159
Trade and other receivables 6,656 7,268
Deposits and prepaid expenses 1,509 1,243
Fair value of commodity
contracts - 25,056
40,431 50,726
Non-current assets
Long-term receivables - 433
Investments in joint ventures 3,659 2,787
Fair value of commodity
contracts 26 -
Property, plant and equipment 103,878 94,663
Exploration and evaluation
assets 59,421 36,194
166,984 134,077
Total assets $ 207,415 $ 184,803
Current liabilities
Trade and other payables $ 21,627 $ 31,872
Fair value of commodity
contracts 84 -
21,711 31,872
Non-current liabilities
Loans and borrowings 100 100
Fair value of commodity
contracts 82 -
Asset retirement obligations 1,312 1,192
1,494 1,292
Equity
Share capital 279,071 247,782
Contributed surplus 19,554 18,721
Deficit (114,415) (114,864)
Total equity 184,210 151,639
Total equity and liabilities $ 207,415 $ 184,803

BNK PETROLEUM INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME(LOSS)
(Unaudited, expressed in Thousands of United States dollars, except per
share amounts)
Second Quarter First Six Months
2014 2013 2014 2013
Oil and natural gas revenue, net $ 6,083 863 11,539 5,111
Gathering income - 1 - 331
Other income 3 296 205 519
Gain on sale of assets - 9,747 - 9,747
6,041 10,907 11,744 15,708
Exploration and evaluation
expenditures 36 3 136 57
Production and operating expenses 687 463 1,220 1,862
Depletion and depreciation 1,886 483 3,694 2,337
General and administrative expenses 3,002 3,241 5,932 6,707
Stock based compensation 356 341 691 449
Loss from investments in joint
ventures 52 42 (239) 65
Legal restructuring expenses - 595 - 595
6,019 5,168 11,434 12,072
Finance income 331 2,573 316 115
Finance expense (154) (9,241) (177) (10,000)
Net income (loss) and comprehensive
income (loss) $ 199 (929) 449 (6,249)
Net income (loss) per share
Basic and Diluted $ 0.00 (0.01) 0.00 (0.04)

BNK PETROLEUM INC.
SECOND QUARTER 2014
($000 except as noted)
Second Quarter First Six Months
2014 2013 2014 2013
Oil revenue before
royalties $ 6,697 717 12,385 2,728
Gas revenue before
royalties 335 200 748 1,413
NGL revenue before
royalties 399 144 1,067 2,147
Oil and Gas revenue 7,431 1,061 14,200 6,288
Cash Flow from (used) by operating
activities 2,340 (8,952) 5,296 (8,684)
Additions to property, plant &
equipment (7,308) (7,483) (12,487) (9,093)
Additions to exploration and
evaluation assets (15,402) (387) (23,177) (1,269)
Statistics:
2nd Quarter First Six Months
2014 2013 2014 2013
Average natural gas production
(mcf/d) 822 546 846 2,418
Average NGL production (Boepd) 140 87 153 397
Average Oil production (Bopd) 722 88 686 166
Average production (Boepd) 999 266 980 966
Average natural gas price
($/mcf) $4.48 $4.03 $4.89 $3.23
Average NGL price ($/bbl) $31.28 $18.18 $38.54 $29.90
Average oil price ($/bbl) $101.93 $89.15 $99.68 $90.70
Average price per barrel $81.74 $43.83 $80.05 $35.96
Royalties per barrel 15.33 8.22 15.01 6.74
Operating expenses per
barrel 7.56 19.09 6.88 10.65
Netback per barrel $58.85 $16.52 $58.16 $18.57

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, 2014 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-GAAP MEASURES

Netback per barrel, net operating income and funds from operations
(collectively, the "Company's Non-GAAP Measures") are not measures
recognized under Canadian generally accepted accounting principles
("GAAP") and do not have any standardized meanings prescribed by
GAAP. Management of the Company believes that such measures are
relevant for evaluating returns on each of the Company's projects as
well as the performance of the enterprise as a whole. The Company's
Non-GAAP Measures may differ from similar computations as reported by
other similar organizations and, accordingly, may not be comparable
to similar non-GAAP measures as reported by such organizations. The
Company's Non-GAAP Measures should not be construed as alternatives
to net income, cash flows related to operating activities, or other
financial measures determined in accordance with GAAP, as an
indicator of the Company's performance.

Netback per barrel and its components are calculated by dividing
revenue less 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.
However, non-IFRS measures do not have any standardized meaning
prescribed by IFRS and therefore may not be comparable to similar
measures used by other companies.

Net operating income is similarly a non-GAAP measure that
represents revenue net of royalties and operating expenses. The
Company believes that net operating income is a useful supplemental
measure to analyze operating performance and provides an indication
of the results generated by the Company's principal business
activities prior to the consideration of other income and expenses.

Funds from operations is a non-GAAP measure that represents cash
provided by (used in) operating activities, as per the consolidated
statements of cash flows, before changes in non-cash working capital.
The Company considers this a key measure as it demonstrates its
ability to generate the funds necessary for future growth after
taking into account the short-term fluctuations in the collection of
accounts receivable and the payment for accounts payable.

Cautionary Statements

In this news release and the Company's other public disclosure:

(a) The Company's natural gas production is reported in thousands of cubic feet
("Mcfs"). The Company also uses references to barrels ("Bbls") and barrels of oil
equivalent ("Boes") to reflect natural gas liquids and oil production and sales.
Boes may be misleading, particularly if used in isolation. A Boe conversion ratio
of 6 Mcf:1 Boe is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the
wellhead. Given that the value ratio based on the current price of crude oil as
compared to natural gas is significantly different from the energy equivalency of
6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of
value.
Discounted and undiscounted net present value of future net revenues attributable
(b) to reserves do not represent fair market value.
Possible reserves are those additional reserves that are less certain to be
recovered than probable reserves. There is a 10% probability that the quantities
actually recovered will equal or exceed the sum of proved plus probable plus
(c) possible reserves.
This news release contains short-term production rates. Readers are cautioned
that such production rates are preliminary in nature and are not necessarily
(d) indicative of long-term performance or of ultimate recovery.

Caution Regarding Forward-Looking Information

This release contains forward-looking information including
information regarding the proposed timing and expected results of
exploratory and development work including production from the Lower
Caney and upper Sycamore formations on the Company's Oklahoma
acreage, the effect of design and performance improvements on future
productivity, the anticipated timing of commencement and completion
of drilling and fracture-stimulations in connection with the
Company's Caney drilling program, the advancement of the Company's
European projects, including the Company's Gapowo B-1 shale gas well
in Poland, and including expected results from the planned reservoir
analysis, future well stimulations, and expected productivity from
future wells, planned capital expenditure programs and cost
estimates, availability of funds from the Company's reserves based
loan facility and the Company's strategy and objectives. The use of
any of the words "target", "plans", "anticipate", "continue",
"estimate", "expect", "may", "will", "project", "should", "believe"
and similar expressions are intended to identify forward-looking
statements.

Such forward-looking information is based on management's
expectations and assumptions, including that the Company's geologic
and reservoir models and analysis will be validated, that indications
of early results are reasonably accurate predictors of the
prospectiveness of the shale intervals, that previous exploration
results are indicative of future results and success, that expected
production from future wells can be achieved as modeled, declines
will match the modeling, future well production rates will be
improved over existing wells, that rates of return as modeled can be
achieved, that recoveries are consistent with management's
expectations, that additional wells are actually drilled and
completed, that design and performance improvements will reduce
development time and expense and improve productivity, that
discoveries will prove to be economic, that anticipated results and
estimated costs will be consistent with managements' expectations,
that all required permits and approvals and the necessary labor and
equipment will be obtained, provided or available, as applicable, on
terms that are acceptable to the Company, when required, that no
unforeseen delays, unexpected geological or other effects, equipment
failures, permitting delays or labor or contract disputes are
encountered, that the development plans of the Company and its
co-venturers will not change, that the demand for oil and gas will be
sustained, that the Company will continue to be able to access
sufficient capital through financings, credit facilities, farm-ins or
other participation arrangements to maintain its projects, that funds
will be available from the Company's reserves based loan facility
when required to fund planned operations, that the Company will not
be adversely affected by changing government policies and
regulations, social instability or other political, economic or
diplomatic developments in the countries in which it operates 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.

Forward looking information involves significant known and unknown
risks and uncertainties, which could cause actual results to differ
materially from those anticipated. These risks include, but are not
limited to: any of the assumptions on which such forward looking
information is based vary or prove to be invalid, including that the
company's geologic and reservoir models or analysis are not
validated, anticipated results and estimated costs will not be
consistent with managements' expectations, the risks associated with
the oil and gas industry (e.g. operational risks in development,
exploration and production; delays or changes in plans with respect
to exploration and development projects or capital expenditures; the
uncertainty of reserve and resource estimates and projections
relating to production, costs and expenses, and health, safety and
environmental risks), the risk of commodity price and foreign
exchange rate fluctuations, risks and uncertainties associated with
securing the necessary regulatory approvals and financing to proceed
with continued development of the Tishomingo Field and other shale
basins in the United States and Europe, the Company or its
subsidiaries is not able for any reason to obtain and provide the
information necessary to secure required approvals or that required
regulatory approvals are otherwise not available when required, that
unexpected geological results are encountered, that completion
techniques require further optimization, that production rates do not
match the Company's assumptions, that very low or no production rates
are achieved, that the Company is unable to access required capital,
that funding is not available from the Company's reserves based loan
facility at the times or in the amounts required for planned
operations, that occurrences such as those that are assumed will not
occur, do in fact occur, and those conditions that are assumed will
continue or improve, do not continue or improve and the other risks
identified in the Company's most recent Annual Information Form under
the "Risk Factors" section, the Company's most recent management's
discussion and analysis and the Company's other public disclosure,
available under the Company's profile on SEDAR at
http://www.sedar.com.

Although the Company has attempted to take into account important
factors that could cause actual costs or results to differ
materially, there may be other factors that cause actual results not
to be as anticipated, estimated or intended. There can be no
assurance that such statements will prove to be accurate as actual
results and future events could differ materially from those
anticipated in such statements. The forward-looking information
included in this release is expressly qualified in its entirety by
this cautionary statement. Accordingly, readers should not place
undue reliance on forward-looking information. The Company undertakes
no obligation to update these forward-looking statements, other than
as required by applicable law.

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 and Spain. 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.

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.)

ots Originaltext: BNK Petroleum Inc.
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