BNK Petroleum Inc., Camarillo, Calif., (TSX: BKX) reported its second quarter 2011 financial results, as well as an operational update.
"BNK earned a net profit of $407,000 in the second quarter of 2011 on a 53% increase in oil and gas revenues net of royalties," says Wolf Regener, president and CEO. "Other income in the quarter was $2.2 million versus $.4 million in the second quarter of 2010 which resulted from the sale of seismic data in Oklahoma for $1.2 million, $.6 million in estimated management fee income and $.4 million in gathering revenue."
The increase in oil and gas revenues resulted from the combination of a 31% increase in average product prices in the quarter coupled with a 13% increase in average daily production. Average net-backs per barrel (per barrel product prices less royalties and operating expenses) increased 52% in the quarter.
General and administrative expenses increased 93% or $1.8 million in the comparative quarters due to increases in re-organization fees of $ 370,000, higher stock based compensation expense of $325,000, increased European accounting management and consulting fees of $ 329,000 as well as increased travel costs of $204,000 and other smaller cost items.
Cash and working capital remained strong at June 30, 2011 totaling $56.4 million and $56.4 million respectively.
Through the first half of 2011 BNK earned net income of $292,000 versus a loss of $2.4 million in the first half of 2010. Oil and gas revenues increased $2.4 million or 36% aided by a 17% increase in average production per day and a 12% increase in average product prices.
The company recently fracture stimulated two Woodford horizontal wells in Oklahoma one of which is still in the early stages of flowback. In addition the company participated in a non-operated well which was recently fracture stimulated. Accordingly recent production increased to over 2,300 barrels a day and the company is scheduling fracture stimulations on two more horizontal wells by the end of the year.
In Poland, the company as manager for Saponis Investments Sp z o.o. finished drilling two wells (Wytowno S-1 and Lebork S-1) and spud a third well (Starogard S-1) last month with total depth on that well expected to be reached by the end of August 2011. Fracture stimulation work on the first two wells is scheduled for mid-September.
Based on the recent core analysis received from 3rd party contractors on the Wytowno S-1 and Lebork S-1 wells the company is encouraged with the Lebork S-1 well looking particularly promising.
In other areas of Europe the company awaits the potential grant of other concessions that it has applied for in addition to applying for other concessions throughout the world.
Second Quarter 2011 vs. Second Quarter 2010 Highlights
- Oil and gas revenues net of royalties increased 53%
- Average net-back per barrel increased 52% to $27.92 a barrel
- Cash and working capital at June 30, 2011 totaled $56.4 million and $56.4 million respectively
- Average daily production increased 13% to 1,308 BOE/d
- Capital expenditures totaled $7.4 million of which $5.7 million was in Oklahoma, $1.4 million was in Poland and $.3 million was in Spain
- Acquired a new concession in Spain totaling 61,470 acres
- As manager of Saponis completed drilling two wells in Poland and prepared to spud a third well in July 2011
Oil and gas revenues net of royalties totaled $4,634,000 in the second quarter versus $3,022,000 in the second quarter of 2010. Oil revenues increased $806,000 or 63% as oil production per day increased 22% to 230 BOE/d while average oil prices increased $24.85 a barrel or 33% to $99.54 a barrel. Natural gas liquids (NGL's) revenues increased $767,000 or 47% to $2,414,000 as NGL production increased 6% to 564 boepd while NGL prices increased 38% to $47.04 a barrel. Natural gas revenues increased $276,000 or 30% to $1,204,000 as average natural gas prices rose $.44 a barrel to $4.29 while natural gas production increased 434 metric cubic feet per day (mcf/d) to 3,083 or 16%.
Other income of $1,761,000 consisted of $1,176,000 from the sale of seismic data in Oklahoma and $585,000 for management fees.
Exploration and evaluation expenses totaled $692,000 in the quarter and relates to write-off of costs relating to Black Warrior in Alabama of $591,000 and other European costs of $101,000
Production and operating expenses increased $233,000 to $1,310,000 or 22% due to higher gathering and field maintenance expenses due to increased production of 13% and the timing of repair and maintenance costs
Depletion and depreciation expenses increased $417,000 or 46% to $1,329,000 due to increased production, a higher reserve base on which the reserve percentage is applied and increased depreciation
General and administrative expenses increased $1,787,000 or 93% due to higher legal, other professional fees, stock based compensation, travel and other costs.
Finance income increased to $856,000 from $337,000 or 154% due to projected gains on the hedging of crude oil.
Finance expense decreased 84% to $261,000 due to a $1,112,000 currency loss in the second quarter of last year versus a $16,000 currency gain in the second quarter of 2011 coupled with lower interest expense between quarters of $228,000
First Half 2011 vs. First Half 2010 Highlights
- Average production per day increased 17% to 1,318 BOE/d
- Oil and gas revenues net of royalties increased 36% to $9,062,000 from $6,670,000 in the first half of 2010
- Average net-back per barrel increased 25% to $27.04 a barrel
- Earnings were $292,000 versus a loss of $2,431,000 in the first half of 2010
- Cash from operations excluding changes in non-cash working capital increased to $2,951,000 from $953,000
- Capital expenditures totaled $11,744,000 versus $3,917,000 in 2010 (excluding the $12,000,000 expenditure in the second quarter of 2010 to purchase the overriding royalty and the net profits interest from its former lender which was recorded as an increase in property, plant & equipment).
Oil and gas revenues net of royalties totaled $9,062,000 in the first half of 2011 versus $6,670,000 in the first half of 2010. Oil revenues increased $1,245,000 or 42% as oil production per day increased 17% to 243 BOE/d while average oil prices increased $16.99 a barrel or 22% to $95.51 a barrel. Natural gas liquids (NGL's) revenues increased $1,098,000 or 31% to $4,606,000 as NGL production increased 13% to 557 boepd while NGL prices increased 17% to $45.69 a barrel. Natural gas revenues increased $319,000 or 16% to $2,352,000 as average natural gas prices declined $.27 an mcf to $4.18 while natural gas production increased 581 metric cubic feet per day (mcf/d) to 3,107 or 23%.
Exploration and evaluation expenses declined $917,000 in the comparative periods due to increased Black Warrior write-offs in the first half of 2010.
Production and operating expenses increased 16% commensurate with the 17% increase in production.
Depletion and depreciation expense increased $769,000 or 44% due to increased production, a higher reserve base on which the depletion rate is applied and increased depreciation primarily on European assets.
General and administrative expenses increased $2,170,000 in the comparative periods due to higher legal and other professional fees (management fees, accounting and consulting fees), travel and other.
Finance income increased $621,000 as foreign currency gains realized in the first half of 2011 due to the strong Canadian dollar versus the US dollar were partially offset by unrealized and realized hedging gains and an unrealized gain on broker warrant revaluation in the first half of 2010.
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