BNK Petroleum Inc. Announces 3rd Quarter 2015 Results

Camarillo, California (ots/PRNewswire) -

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

THIRD QUARTER HIGHLIGHTS:

- Average production was 1,554 barrels of oil equivalent per day
(BOEPD) for the third quarter of 2015, an increase of 60% compared
to the third quarter 2014 production of 971 BOEPD due to the
completion of the Nickel Hill 36-3H well and the remaining portion
of the Emery 17-1H well in 2015
- Subsequent to the end of the quarter, Morgan Stanley reaffirmed the
Company's current outstanding borrowing base of $24.4 million and
the credit facility was modified to enable the Company to request a
quick redetermination of the borrowing base when the price of oil
improves by 10% above current levels
- Net income was $4.2 million for the third quarter of 2015 compared
to a net loss of $299,000 in the third quarter of 2014 due
primarily to realized and unrealized gains on commodity hedges
- Positive cash flow from operating activities was $1.7 million for
the third quarter of 2015 compared to $2.9 million in the third
quarter of 2014 despite a decrease in average prices of 58% over
the same time period
- General & administrative expenses decreased by 45% and operating
expenses on a per barrel basis decreased by 42% for the third
quarter of 2015 compared to the third quarter of 2014 due to the
Company's global cost cutting efforts initiated at the beginning of
the year
- Revenue, net of royalties was $3.5 million for the third quarter of
2015 compared to $5.4 million in the third quarter of 2014 due to
lower prices in 2015 partially offset by production increases
- Average netbacks were $19.24 per BOE for the quarter, a decrease of
63% compared to the third quarter of 2014 due to lower prices in
2015 partially offset by lower operating costs per barrel. If the
realized gains from the commodity contracts are included, the
average netbacks for the quarter increase by more than $9/barrel to
$28.50 per BOE
- Cash and working capital totaled $2.3 million and $5.4 million
respectively at September 30, 2015
- Capital expenditures decreased 96% to $966,000 million due to the
prior year drilling program in the U.S. and Poland

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

"Our third quarter production increased to 1,554 BOEPD, an
increase of 60% compared to the prior year third quarter, due to the
fracture stimulation of the previously drilled Nickel Hill 36-3H well
and the remaining stages in the Emery 17-1H well in the second
quarter of 2015. Our wells have been performing well. Comparing the
actual production to the proved developed producing production
forecast from the 2014 year end NI51-101 report shows that actual
production is outperforming the forecast by about 18 percent.

"Earlier this week, Morgan Stanley reaffirmed our credit facility
at its current outstanding borrowing base of $24.4 million and
modified our credit facility to give us an extra borrowing base
redetermination so that we can request a quick redetermination of our
borrowing base once oil prices have increased by 10% from current
levels. We appreciate Morgan Stanley modifying this agreement which
allows us to utilize an internally prepared Reserve Report for this
extra redetermination. Morgan Stanley also agreed to evaluate the
request within ten business days which will enable us to get a quick
response to our higher borrowing base request once oil prices
improve.

"Our global cost cutting efforts that were initiated at the
beginning of the year have continued to show significant cost
reductions with general and administrative expenses decreasing by 45%
during the third quarter of 2015 compared to the prior year third
quarter. In addition, the Company's per barrel operating costs for
the third quarter of 2015 were $5.02, a 42% decrease from the third
quarter of 2014.

"These costs reductions helped the Company to maintain positive
cash flow from operations of $1.7 million for the third quarter of
2015 despite a decrease in average prices of 58% compared to the
prior year third quarter. Cash flow from operations in the third
quarter of last year were $2.9 million.

"The Company recorded net income of $4.2 million in the third
quarter of 2015 compared to a net loss of $299k in the third quarter
of 2014. The 2015 net income was due to realized gains of $1.3
million on settlement of commodity contracts during the quarter as
well as unrealized gains on commodity contracts of $4.3 million as
the Company marked its commodity contracts to market as oil prices
decreased during the third quarter.

"Average netbacks for the third quarter 2015 were $19.24, a
decrease of 63% compared to the prior year third quarter due to the
58% average price decrease. If we include the impact of the realized
gains from the commodity contracts, our average netbacks for the
third quarter would be $28.50, which is a decrease of 47% compared to
the 2014 third quarter.

"Capital expenditures decreased to $1.0 million in the third
quarter 2015, compared to $22.1 million in the third quarter 2014,
due to the prior year drilling and completion of the Gapowo B-1 well
in Poland and the start of drilling in the U.S. in 2014

"The Company completed the abandonment and reclamation of the
Gapowo B1-A and Lebork S-1 wells in Poland during the quarter for a
total cost of less than $0.6 million. All of the Poland wells that
were previously drilled by the Company have now been plugged and
abandoned."

Third Quarter 2015 versus Third Quarter 2014

Oil and gas gross revenues totaled $4,525,000 in the third quarter
2015 versus $6,682,000 in the third quarter of 2014. Oil revenues
were $3,693,000 in the third quarter 2015 versus $5,978,000 in the
third quarter of 2014, a decrease of 38% as average oil prices
decreased 54% or $52.19 a barrel for the quarter, partially offset by
an increase in production of 34%. Natural gas revenues increased
$70,000 or 20%, as natural gas production increased 76% which was
partially offset by a 32% decrease in average natural gas prices
compared to the third quarter of 2014. Natural Gas Liquid (NGL)
revenue increased $58,000 or 16% to $412,000 as average production
increased 176% which was partially offset by an average NGL price
decrease of 58%.

Production and operating expenses decreased $55,000 between
quarters. These costs declined from the prior year quarter even
though total production increased by 60% due to the Company's costs
cutting efforts during 2015.

Depletion and depreciation expense increased $419,000 between
quarters due to increased production and a higher depletion base due
to the Caney wells that were drilled and completed at the end of 2014
and into 2015.

General and administrative expenses decreased $1,375,000 between
quarters due to the Company's cost cutting efforts which resulted in
lower salary and benefit costs, director fees, legal and professional
fees and travel costs.

Finance income increased $4,469,000 due to realized and unrealized
gains on financial commodity contracts in 2015. Finance expense
increased $409,000 primarily due to interest expense on the credit
facility.

Capital expenditures of $966,000 were incurred in the third
quarter of 2015 primarily related to the U.S. and Spain.

FIRST NINE MONTHS 2015 HIGHLIGHTS

- Average production was 1,432 barrels of oil equivalent per day
(BOEPD) for the first nine months of 2015, an increase of 47%
compared to the first nine months of 2014 production of 977 BOEPD
due to the completion of the Nickel Hill 36-3H well and the
remaining portion of the Emery 17-1H well in 2015
- General & administrative expenses decreased by 34% and operating
expenses on a per barrel basis decreased by 33% for the first nine
months of 2015 compared to the first nine months of 2014 due to the
Company's global cost cutting efforts initiated at the beginning of
2015
- Revenue, net of royalties was $10.7 million for the first nine
months of 2015 compared to $17.0 million in the first nine months
of 2014 due to lower prices in 2015 partially offset by production
increases
- Average netbacks were $22.37 per BOE for the first nine months of
2015, a decrease of 60% compared to the first nine months of 2014
due to lower prices in 2015 partially offset by lower operating
costs per barrel. If the realized gains from the commodity
contracts are included, the average netbacks for the first nine
months increase by more than $7/barrel to $29.71 per BOE
- Net loss was $221,000 for the first nine months of 2015 compared to
net income of $150,000 in first nine months of 2014
- Cash flow from operating activities was $4,542,000 for the first
nine months of 2015 compared to cash flow from operating activities
of $8,185,000 in the first nine months of 2014
- Capital expenditures decreased by 83% to $9.5 million in the first
nine months of 2015 primarily due to the prior year drilling and
completion of the Gapowo well in Poland
- In February 2015, the Company obtained an additional $8.5 million
under the Company's $100 million credit facility to fund the
drilling of Caney wells in Oklahoma. Total borrowing under the
facility is now at $24.4 million

First Nine Months of 2015 versus First Nine Months of 2014

Oil and gas gross revenues totaled $13,977,000 in the first nine
months of 2015 versus $20,882,000 in the first nine months of 2014.
Oil revenues were $11,812,000 in the first nine months of 2015 versus
$18,363,000 in the first nine months of 2014, a decrease of 36% as
average oil prices decreased 51% or $50.30 a barrel for the period,
partially offset by an increase in production of 31%. Natural gas
revenues increased $51,000 or 5%, in the first nine months of 2015 as
natural gas production increased 78% which was partially offset by a
41% decrease in average natural gas prices compared to the first nine
months of 2014. NGL revenue decreased $405,000, or 29%, due to a
decrease in NGL prices of 62% which was partially offset by an
average NGL production increase of 86% in the first nine months of
2015.

Production and operating expenses decreased $31,000 or 2% for the
first nine months of 2015 compared to the prior year first nine
months even though total production increased by 47% due to the
Company's costs cutting efforts during 2015.

Depletion and depreciation expense increased $757,000 due to
increased production and a higher depletion base due to the Caney
wells that were drilled and completed at the end of 2014 and into
2015.

General and administrative expenses decreased $3,001,000 due to
the Company's cost cutting efforts during 2015 which resulted in
lower salary and benefit costs, director fees, legal and professional
fees and travel costs.

Finance income increased $4,077,000 due to realized and unrealized
gains on financial commodity contracts in 2015. Finance expense
increased $1,630,000 primarily due to interest expense on the credit
facility.

The information outlined above is extracted from and should be
read in conjunction with the Company's unaudited financial statements
for the nine months ended September 30, 2015 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, netback per barrel including commodity
contracts, net operating income funds from operations and adjusted
working capital (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. Netbacks including Commodity Contracts and
its components are calculated by dividing revenue and realized gains
from commodity contracts, less royalties and operating expenses by
the Company's sales volume during the period. Netback per barrel is
a non-GAAP measure but it is commonly used by oil and gas companies
to illustrate the unit contribution of each barrel produced.
However, non-GAAP measures do not have any standardized meaning
prescribed by GAAP and therefore may not be comparable to similar
measures used by other companies and should not be used to make
comparisons.

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 calculated as cash from operating
activities before change in non-cash operating 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.

Adjusted working capital is current assets minus current
liabilities excluding the current portion of long term debt. The
Company believes that this measure provides a more complete
understanding of its operating working capital and the funds
available to meet its current liquidity requirements.

CAUTIONARY STATEMENTS

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

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
Company's Tishomingo field, Oklahoma acreage, 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.

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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