Bankers Petroleum announces second quarter financial and operational results



    2009 Horizontal Drilling Update

    CALGARY, Aug. 14 /CNW/ - Bankers Petroleum Ltd. ("Bankers" or the
"Company") (TSX: BNK, AIM: BNK) is pleased to announce today its financial and
operating results for the period ended June 30th, 2009:

    
    -------------------------------------------------------------------------
                                         Q2 - 2009    Q1 - 2009    Q2 - 2008
    -------------------------------------------------------------------------
    Capital Expenditures ($000)              6,126        2,835       17,100
    -------------------------------------------------------------------------
    Brent Oil Price $/bbl                    58.79        44.40       121.51
    -------------------------------------------------------------------------
    Patos Marinza Oil Price $/bbl            34.63        24.73        64.36
    -------------------------------------------------------------------------
    Operating Costs $/bbl                     9.90        10.44        14.03
    -------------------------------------------------------------------------
    Transportation $/bbl                      3.45         2.70         3.27
    -------------------------------------------------------------------------
    Royalties $/bbl                           9.28         6.61        12.43
    -------------------------------------------------------------------------
    Netback $/bbl                            12.00         4.98        34.63
    -------------------------------------------------------------------------

    HIGHLIGHTS

    -   Production averaged 6,383 bopd, an increase of 9% over the first
        quarter of 2009.

    -   Revenue increased by 53% to $20.1 million ($34.63/bbl - 59% of Brent)
        in the second quarter of 2009 from $13.1 million ($24.73/bbl - 56% of
        Brent) in the first quarter. The fluctuation in the sales prices
        reflected the change in Brent prices, which averaged $58.79 for the
        second quarter of 2009. Comparatively, average Brent prices were
        $44.40 for the preceding quarter.

    -   Net operating income (netbacks) increased to $7.0 million
        ($12.00/bbl) from $3.7 million ($4.98/bbl) over the first quarter of
        2009.

    -   Operating expenses have decreased to $9.90/bbl in the second quarter
        of 2009 from the preceding quarter of $10.44/bbl.

    -   Funds generated from operations increased to $6.0 million in the
        second quarter of 2009 from $1.3 million over the previous quarter.

    -   Capital expenditures were limited to $6.1 million to minimize balance
        sheet risk and to focus on forward planning in a stable oil price
        environment.

    -   To strengthen its balance sheet, on May 7, Bankers completed a
        bought-deal equity issue with a syndicate of underwriters of
        25,143,800 common shares of the Company at CAD$1.75 per common share,
        generating gross proceeds of CAD$44.0 million.

    -   On May 8, Bankers announced it had finalized a $110.0 million
        reserve-based long-term credit facility with the International
        Finance Corporation (IFC), a member of the World Bank Group, and the
        European Bank for Reconstruction and Development (EBRD) to supplement
        the Company's existing $32.0 million credit facility with Raiffeisen
        Bank.

    -   IFC and EBRD each received warrants in conjunction with the financing
        to purchase eight million common shares of the company at a price of
        CAD$1.50 per share. The warrants were exercised in July 2009
        generating proceeds of CAD$24.0 million resulting in IFC and EBRD
        each having a 3.6% equity interest in the Company.

    -   In July 2009, Bankers commenced export operations at the new Port of
        Vlore export terminal for the storage and handling of its oil in a
        13,000 cubic meter Company-dedicated oil tank. The storage facility
        has significantly improved the Company's export operations and is
        expected to lead to additional export contracts.

    Results at a Glance                             Six months ended June 30
                                                   --------------------------
                                                           2009         2008
    -------------------------------------------------------------------------
    Financial ($000s, except as noted)
    Oil revenue                                          33,159       58,833
    Net operating income                                  9,595       31,144
    Net income (loss)                                    (4,171)       1,544
      Basic and diluted earnings (loss) per share        (0.022)       0.009
    Funds generated from operations                       7,263       26,241

                                                             June 30
                                                   --------------------------
                                                           2009         2008
    -------------------------------------------------------------------------
    Cash and deposits                                    41,147       42,516
    Working capital                                      28,161       27,918
    Total assets                                        257,689      201,093
    Bank loans                                           32,651       29,004
    Other long-term liabilities                          35,491       30,181
    Shareholders' equity                                174,640      119,964
    

    PATOS MARINZA DRILLING UPDATE

    On July 8, 2009, Bankers initiated its 10 well horizontal drilling
program for 2009 to follow-up on its successful first horizontal well (375
metre lateral section) which is currently producing at an average rate of 150
bopd and has produced in excess of 31,000 barrels since January 2009.
    The second horizontal well (475 metre lateral) was placed on production
on August 3, 2009, and is currently producing at a rate of 160 bopd and
improving. The third horizontal well was drilled and cased as an oil well (600
metre lateral) and is expected to be completed and commenced production on
August 14.
    The drilling program is continuing with the spudding of the fourth
horizontal well on August 12, 2009. The Company is planning to drill seven
additional horizontal wells and three vertical locations before year-end 2009.
    With excellent horizontal well productivities and improved drilling time
and well costs, the Company has solicited bid proposals for a second drilling
rig and is currently evaluating several offers. Bankers expects to have the
second rig on location by early 2010 and is planning a significant increase of
the number of horizontal wells to be drilled in 2010 and beyond.
    The well re-activation and re-completion program of existing wells will
continue simultaneously with the new well drilling program.
    Current production is 6,200 bopd with an additional 600 bopd from shut-in
wells which we expect to bring back on production over the next few weeks as
the Company continues with its full operational well service activities that
were curtailed during the first half of 2009 due to low oil prices.
    Bankers second quarter results have now been incorporated into the
corporate presentation and will be posted on Bankers website later today.
    Abby Badwi, President and Chief Executive Officer will host a conference
call and webcast on Monday, August 17, 2009 at 9:00 a.m. MST. For complete
details please go to www.bankerspetroleum.com.

    About Bankers Petroleum Ltd.

    Bankers Petroleum Ltd. is a Canadian-based oil and gas exploration and
production company focused on developing large oil and gas reserves. In
Albania, Bankers operates and has the full rights to develop both the Patos
Marinza and the Kuçova heavy oil fields. Bankers' shares are traded on the
Toronto Stock Exchange and the AIM Market in London, England under the stock
symbol BNK.


    
                     MANAGEMENT'S DISCUSSION AND ANALYSIS
    

    The following is management's discussion and analysis (MD&A) of Bankers
Petroleum Ltd.'s (Bankers or the Company) operating and financial results for
the three and six months periods ended June 30, 2009 compared to the preceding
quarter and the corresponding period in the prior year, as well as information
and expectations concerning the Company's outlook based on currently available
information. The MD&A should be read in conjunction with the unaudited interim
financial statements for the three and six months periods ended June 30, 2009
and the audited financial statements and MD&A for the year ended December 31,
2008. Additional information relating to Bankers, including its Annual
Information Form, is on SEDAR at www.sedar.com and on the Company's website at
www.bankerspetroleum.com. All dollar values are expressed in U.S. dollars,
unless otherwise indicated, and are prepared in accordance with Canadian
generally accepted accounting principles (GAAP).

    The Company reports its heavy oil production in barrels.

    This report is prepared as of August 13, 2009.

    NON-GAAP MEASURES

    Netback per barrel and its components are calculated by dividing revenue,
royalties, operating and sales and transportation expenses by the gross
production volume during the period. Netback per barrel is a non-GAAP measure
and it is commonly used by oil and gas companies to illustrate the unit
contribution of each barrel produced.
    Net operating income is similarly a non-GAAP measure that represents
revenue net of royalties and operating, sales and transportation 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 generated from operations include all cash from operating
activities and are calculated before change in non-cash working capital. 
Reconciliation to the GAAP measure is as follows:

    
                             Three months ended         Six months ended
                                   June 30                   June 30
                         ----------------------------------------------------
    ($000s)                      2009         2008         2009         2008
    -------------------------------------------------------------------------
    Cash provided by
     (used in) operating
     activities                (4,354)      15,208       (5,338)      26,060
    Change in non-cash
     working capital           10,352        1,545       12,601          181
                          ------------------------- -------------------------
    Funds generated from
     operations                 5,998       16,753        7,263       26,241
                          ------------------------- -------------------------
                          ------------------------- -------------------------
    

    The non-GAAP measures referred to above do not have any standardized
meaning prescribed by GAAP and therefore may not be comparable to similar
measures used by other companies. Management uses these non-GAAP measurements
for its own performance measures and to provide its shareholders and investors
with a measurement of the Company's efficiency and of its ability to fund a
portion of its future growth expenditures.

    CAUTION REGARDING FORWARD-LOOKING INFORMATION

    This MD&A offers our assessment of the Company's future plans and
operations as of August 13, 2009 and contains forward-looking information.
Such information is generally identified by the use of words such as
"anticipate", "continue", "estimate", "expect", "may", "will", "project",
"should", "believe" and similar expressions are intended to identify
forward-looking statements. Statements relating to "reserves" or "resources"
are also forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions that the resources and reserves
described can be profitably produced in the future. All such statements
involve known and unknown risks, uncertainties and other factors that may
cause actual results or events to differ materially from those anticipated in
such forward-looking statements. Management believes the expectations
reflected in those forward-looking statements are reasonable but no assurance
can be given that these expectations will prove to be correct and such
forward-looking statements included in this AIF should not be unduly relied
upon. These statements speak only as of the date hereof.

    
    In particular, this MD&A contains forward-looking statements pertaining
    to the following:
    -   performance characteristics of the Company's oil properties;
    -   crude oil production estimates and targets;
    -   the size of the oil reserves;
    -   capital expenditure programs and estimates;
    -   projections of market prices and costs;
    -   supply and demand for oil;
    -   expectations regarding the ability to raise capital and to
        continually add to reserves through acquisitions and development; and
    -   treatment under governmental regulatory regimes and tax laws.
    

    These forward looking statements are based on a number of assumptions,
including but not limited to: those set out herein and in the Company's Form
51-101F1 Statement of Reserves Data and Other Oil and Gas Information (NI
51-101 Report), availability of funds for capital expenditures, a consistent
and improving success rate for well re-completions at Patos Marinza,
increasing production as contemplated by the Plan of Development (PoD), stable
costs, availability of equipment and personnel when required, continuing
favourable relations with Albanian governmental agencies and continuing strong
demand for oil.

    
    Actual results could differ materially from those anticipated in these
    forward-looking statements as a result of the risks and uncertainties set
    forth below:
    -   volatility in market prices for oil and natural gas;
    -   risks inherent in oil and gas operations;
    -   uncertainties associated with estimating oil and natural gas
        reserves;
    -   competition for, among other things, capital, acquisitions of
        reserves, undeveloped lands and skilled personnel;
    -   the Company's ability to hold existing leases through drilling or
        lease extensions;
    -   incorrect assessments of the value of acquisitions;
    -   geological, technical, drilling and processing problems;
    -   fluctuations in foreign exchange or interest rates and stock market
        volatility;
    -   rising costs of labour and equipment;
    -   changes in income tax laws or changes in tax laws and incentive
        programs relating to the oil and gas industry.
    

    The Company from time to time updates its forward-looking information
based on the events and circumstances that occurred during the period. As a
consequence of the recent sharp declines in oil prices the Company has
adjusted its capital expenditure program to ensure the commitments are funded
by cash provided by operations, cash on hand and available credit.
    Readers are cautioned that the foregoing lists of factors are not
exhaustive. The forward-looking statements contained in this MD&A are
expressly qualified by this cautionary statement.

    OVERVIEW & SELECTED QUARTERLY INFORMATION

    
                              Three months ended         Six months ended
                                    June 30                   June 30
                          ------------------------- -------------------------
    Results at a Glance          2009       2008(*)        2009       2008(*)
    -------------------------------------------------------------------------
    Financial ($000s,
     except as noted)
    Oil revenue                20,107       34,157      33,159        58,833
    Net operating income        6,967       18,136       9,595        31,144
    Net income (loss)          (1,679)       1,005      (4,171)        1,544
    Basic and diluted
     earnings (loss)
     per share                 (0.009) 0.006/0.005      (0.022)        0.009
    Funds generated from
     operations                 5,998       16,753       7,263        26,241
    Additions to property,
     plant and equipment        6,126       17,100       8,961        30,864

    Operating
      Average production
       (bopd)                   6,383        5,826       6,125         5,522
      Average price
       ($/barrel)               34.63        64.36       29.91         58.54
      Netback ($/barrel)        12.00        34.63        8.65         29.58

                                                              June 30
                                                    -------------------------
                                                           2009       2008(*)
                                                    -------------------------
    Cash and deposits                                    41,147       42,516
    Working capital                                      28,161       27,918
    Total assets                                        257,689      201,093
    Bank loans                                           32,651       29,004
    Other long-term liabilities                          35,491       30,181
    Shareholders' equity                                174,640      119,964

    (*) Excludes results from discontinued U.S. operations.

    Highlights for the quarter ended June 30, 2009 are:

    -   Production averaged 6,383 bopd, an increase of 10% over the same
        quarter of 2008 and an increase of 9% over the first quarter of 2009.

    -   Revenue increased by 53% to $20.1 million ($34.63/bbl) in the second
        quarter from $13.1 million ($24.73/bbl) in the first quarter.

    -   Net operating income (netbacks) increased to $7.0 million
        ($12.00/bbl) in the second quarter from $3.7 million ($4.98/bbl)
        during the first quarter of 2009.

    -   Funds generated from operations increased to $6.0 million in the
        second quarter of 2009 from $1.3 million over the previous quarter.

    -   On May 7, Bankers completed a bought-deal equity issue via prospectus
        with a syndicate of underwriters whereby 25,143,800 common shares of
        the Company were issued at CAD$1.75 per share, generating gross
        proceeds of CAD$44.0million.

    -   On May 8, Bankers announced it had finalized a $110.0 million
        reserve-based long-term credit facility with the International
        Finance Corporation (IFC), a member of the World Bank Group, and the
        European Bank for Reconstruction and Development (EBRD) to supplement
        the Company's existing credit facility with Raiffeisen Bank.

    -   In conjunction with the credit facility, IFC and EBRD each received
        warrants to purchase eight million common shares of the company at a
        price of CAD$1.50 per share. The warrants were subsequently exercised
        in July 2009 generating proceeds of CAD$24.0 million, resulting in
        IFC and EBRD each having a 3.6% equity interest in the Company.

    -   The Company maintained a strong balance sheet with working capital of
        $28.2 million at June 30, 2009 as compared to working capital
        deficiencies of $10.2 million at March 31, 2009 and $7.4 million at
        December 31, 2008, respectively.

    -   In July 2009, Bankers commenced export operations at the new Port of
        Vlore export terminal for the storage and handling of its oil in a
        13,000 cubic meter Company-dedicated oil tank. The storage facility
        has significantly improved the Company's export operations and is
        expected to lead to additional export contracts.

    QUARTERLY SUMMARY

    Below is a summary of Bankers' performance over the last eight quarters.
This summary excludes results from discontinued U.S. operations.

                              2008                          2009
                  ----------------------------- -----------------------------
    ($000s, except        Third         Fourth          First         Second
     as noted)          Quarter        Quarter        Quarter        Quarter
    ------------------------------------------- -----------------------------
                          $/bbl          $/bbl          $/bbl          $/bbl
    ------------------------------------------- -----------------------------
    Average
     production
     (bopd)           5,880          6,561          5,864          6,383
    ------------------------------------------- -----------------------------
    Oil revenue   33,543  62.08  17,877  29.63  13,052  24.73  20,107  34.63
    Royalties      7,790  14.40   4,163   6.69   3,486   6.61   5,389   9.28
    Sales and
     transporta-
      tion         1,932   3.57   2,192   3.63   1,426   2.70   2,003   3.45
    Operating
     expenses      7,503  13.32   7,843  13.54   5,512  10.44   5,748   9.90
                  ----------------------------- -----------------------------
    Net operating
     income       16,318  30.79   3,679   5.77   2,628   4.98   6,967  12.00
                  ----------------------------- -----------------------------
                  ----------------------------- -----------------------------



                              2007                          2008
                  ----------------------------- -----------------------------
    ($000s, except        Third         Fourth          First         Second
     as noted)          Quarter        Quarter        Quarter        Quarter
    ------------------------------------------- -----------------------------
                          $/bbl          $/bbl          $/bbl          $/bbl
    ------------------------------------------- -----------------------------
    Average
     production
     (bopd)           4,753          5,429          5,218          5,826
    ------------------------------------------- -----------------------------
    Oil revenue   16,239  37.14  21,398  42.84  24,676  51.96  34,157  64.36
    Royalties      1,922   4.40   2,207   4.42   4,298   9.05   6,601  12.43
    Sales and
     transporta-
      tion         1,068   2.44   1,332   2.67   1,664   3.50   1,727   3.27
    Operating
     expenses      4,535  10.37   5,303  10.93   5,706  12.02   7,693  14.03
                  ----------------------------- -----------------------------
    Net operating
     income        8,714  19.93  12,556  24.82  13,008  27.39  18,136  34.63
                  ----------------------------- -----------------------------
                  ----------------------------- -----------------------------



                                    2008                      2009
    ($000s, except as           Third       Fourth        First       Second
     noted)                   Quarter      Quarter      Quarter      Quarter

    Financial
    Funds generated from
     operations                14,795          339        1,265        5,998
    Net income (loss)           4,876       (8,007)      (2,492)      (1,675)
    Basic/diluted earnings
     (loss) per share(1)  0.027/0.026       (0.044)      (0.014)      (0.009)
    General and
     administrative             2,157        1,089        1,204        2,079
    Total assets              216,978      214,675      210,674      257,689
    Capital expenditures       25,502       22,011        2,835        6,126
    Bank loans                 27,583       28,125       26,948       32,651



                                    2007                      2008
    ($000s, except as           Third       Fourth        First       Second
     noted)                   Quarter      Quarter      Quarter      Quarter

    Financial
    Funds generated from
     operations                 6,436        9,358        9,488       16,753
    Net income (loss)             572       (2,126)         539        1,005
    Basic/diluted earnings
     (loss) per share(1)        0.004       (0.014)       0.003  0.006/0.005
    General and
     administrative             1,779        2,667        2,091        2,034
    Total assets              109,765      115,039      177,127      201,093
    Capital expenditures       13,066        8,357       13,764       17,100
    Bank loans                 25,967       30,850       30,218       29,004

    (1) On July 30, 2008, the Company completed the consolidation of its
        shares on the basis of one (1) new post-consolidation share for each
        three (3) pre-consolidation shares. The computations of basic and
        diluted earnings (loss) per share for all the periods presented are
        based on the new number of shares after giving effect to the share
        consolidation.

    DISCUSSION OF OPERATING RESULTS

    Production, Revenue and Netback

                              Three months ended         Six months ended
                                    June 30                   June 30
                          ------------------------- -------------------------
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------
    Average production
     (bopd)                     6,383        5,826        6,125        5,522
    Oil revenue ($000)         20,107       34,157       33,159       58,833
      Netback ($/bbl)
    Average price               34.63        64.36        29.91        58.54
    Royalties                    9.28        12.43         8.01        12.25
    Sales and
     transportation              3.45         3.27         3.09         3.38
    Operating expenses           9.90        14.03        10.16        13.33
    Netback                     12.00        34.63         8.65        29.58
    

    Active well counts remained stable from 184 at the end of first quarter
to 185 in June 2009. In addition, the Company took over 40 wells within the
Company's areas of operations that were inactive and retained no pre-existing
production burden as part of an area consolidation initiative. Average
production increased 9% from 5,864 bopd in the previous quarter to 6,383 bopd,
and 10% compared to the same quarter in 2008.
    The Company received an average sale price of $34.63/bbl compared to
$24.73/bbl for the first quarter of 2009 and $64.36/bbl for the second quarter
of 2008. The fluctuation in sales prices reflects the change in Brent prices,
which averaged $58.79 for the second quarter of 2009. Comparatively, average
Brent prices were $44.40 for the preceding quarter and $121.51 for the same
period in 2008.
    Oil revenue increased by 53% from $13.1 million in the first quarter of
2009 to $20.1 million in the second quarter of 2009, as a result of higher
sales volumes and stronger oil prices. Sales were $34.2 million for the second
quarter of 2008.
    As a result of higher commodity prices in conjunction with operating
expense reductions, the Company's netback (revenue less royalties, operating,
sales and transportation expenses) increased 141% to $12.00/bbl compared to
$4.98/bbl in the first quarter of 2009. The netback for the same period in
2008 was $34.63 primarily due to the higher average commodity price.

    Royalties

    Royalties in Albania are calculated pursuant to the Petroleum Agreement
with Albpetrol and consist of a royalty based on Albpetrol's pre-existing
production (PEP), a 1% gross overriding royalty (ORR) on new production and a
10% royalty tax on net production (RT). Overall royalties for the current
quarter represented 27% of oil revenue, consistent with the preceding quarter
although slightly higher than the corresponding 2008 quarter (19% of oil
revenue) due to the royalty mix. As a percent of revenue, the various royalty
components currently represent 18% from PEP, 1% for the ORR and 8% for the RT.
Flutuations in the.royalty on a per barrel basis are due to changes in the
underlying oil prices. The average royalty rate is expected to decline as new
production increases and the 1,100 bopd of PEP declines. The reduced capital
program during 2009 has resulted in a lower capitalization level for the
corresponding PEP royalty.

    Operating Expenses

    Operating expenses decreased to $9.90/bbl in the second quarter of 2009
from the preceding quarter of $10.44/bbl and $14.03/bbl in the same period of
2008. This improvement was mainly due to increased efficiency on fuel
utilization and reduction in well servicing activity to focus on higher impact
wells.
    Sales and transportation costs for the quarter increased to $3.45/bbl
compared to $2.70/bbl in the first quarter and $3.27/bbl during the same
period in 2008 due to the increase in export volumes. Exports accounted for
81% of the total sales in the quarter. During the prior quarter and the same
period of 2008, the Company exported 45% and 60%, respectively, of total
sales.

    General and Administrative Expenses

    General and administrative expenses (G&A) for the quarter were $2.0
million compared to $1.2 million in the preceding quarter and $2.0 million for
the same period in 2008. The increase in G&A compared to the first quarter in
2009 resulted from the currency impact of the stronger Canadian dollar in
comparison to the U.S. dollar and employee restructuring costs.
    During the quarter, the Company capitalized $0.7 million of general and
administrative expenses as compared to $0.5 million for the preceding quarter
and $0.7 million for the same period in 2008. These expenses were directly
related to acquisition, exploration and development activities in Albania.
    Non-cash stock-based compensation expense pertaining to options vested
and/or granted to officers, directors, employees and service providers was
$2.3 million compared to $0.7 million for the preceding quarter and $4.1
million for the same period in 2008. Of this amount $1.6 million was charged
to earnings during this quarter, compared to $0.6 million and $3.5 million
that were charged to earnings for the preceding period and the period ending
June 30, 2008, respectively. The remainder was capitalized.

    Depletion, Depreciation and Accretion

    Depletion, depreciation and accretion expenses (DD&A) for the quarter
ended June 30, 2009 were $3.9 million compared to $4.0 million for the
preceding quarter and $3.2 million for the same period in 2008. The increase
in DD&A compared to the same quarter in 2008 was a result of higher production
and an increased depletable asset basis. Depletion expense on a per barrel
basis was $6.51 for the quarter compared to $6.80 and $5.67 for the preceding
quarter and the same period in 2008, respectively.

    Income Taxes

    Future income tax liabilities result from the temporary differences
between the carrying value and tax values of its Albanian assets and
liabilities. As of June 30, 2009 the net book value of the Albania property,
plant and equipment exceeded their tax value by $64.2 million, compared to
$63.0 million on December 31, 2008. Applying a tax rate of 50%, the Company
recorded a $32.1 million future income tax liability, compared to $31.5
million at the end of 2008. The Company recorded a future income tax expense
of $1.7 million for the quarter compared to a recovery of $1.1 million for the
preceding quarter and expense of $9.0 million for the quarter ended June 30,
2008. The fluctuation in future income taxes compared to the first quarter of
2009 and the same period in 2008 was mainly due to the change in net income
incurred in the second quarter of 2009.
    The cost recovery pool represents deductions for income tax purposes in
Albania at a 50% income tax rate. Bankers is presently not paying cash taxes
in any jurisdiction.

    Net Loss and Funds Generated from Operations

    The Company recorded a net loss of $1.7 million ($0.009 per share) during
the quarter, a net loss of $2.5 million ($0.014 per share) for the preceding
quarter and net income of $1.0 million ($0.006 per share) for the same period
in 2008.
    Funds generated from operations amounted to $6.0 million for the quarter
ended June 30, 2009 compared to $1.3 million in the preceding quarter and
$16.8 million the same period in 2008.

    OPERATIONS UPDATE

    Albania

    Patos Marinza Field

    The Company's operational focus during the quarter was on cost reduction
initiatives. Operating expenditures increased by 4% to $5.7 million from $5.5
million in the previous quarter; however, the average production increased
from 5,864 bopd to 6,383 bopd. Consequently, operating costs decreased from
$10.44/bbl to $9.90/bbl. This was achieved by initiatives undertaken in the
first quarter and carried forward into the second quarter of 2009, including
renegotiated diesel and propane supply contracts to capture the lower
commodity prices, reduction of the service rig fleet utilization to focus on
wells with high oil rate production and demonstrated performance, and
rewriting transportation and third party equipment use contracts to monthly
flat rate billings.
    The capital development program remained curtailed during the second
quarter of 2009 to focus on forward planning and allow stabilization of the
oil price environment. Capital expenditures were limited to $6.1 million
during the quarter an increase from $2.8 million in the previous quarter, but
were significantly lower than $17.1 million in the same quarter in 2008. This
was primarily for standby fees and upfront costs to enable drilling start-up
in July 2009 and further work to upgrade the water disposal system and
associated facilities to maintain production levels.
    The Company also took over an additional 40 inactive wellbores from
Albpetrol that did not have any associated pre-existing production burden.
These wells are part of consolidation efforts to expand the Company's area of
operations and enable focused development execution. At the same time, limited
well re-activation activities were conducted in the quarter, but were reviewed
and programmed for the second half of the year as the oil price continues to
improve.
    Production increased 9% to 6,383 bopd for the quarter from the previous
quarter average of 5,864 bopd, primarily as a result of well servicing
activities targeted on returning higher productivity wells to production.

    
    Export Capacity
    ---------------
    

    In July 2009, Bankers commenced export operations at the new Port of
Vlore export terminal for the storage and handling of its oil in a 13,000
cubic meter Company-dedicated oil tank. The storage facility has significantly
improved the Company's export operations and is expected to lead to additional
export contracts.

    
    Kuçova Field
    ------------
    

    Bankers will start field activity in the Kuçova field in the third
quarter of 2009. During the second quarter, Bankers technical team finalized
the initial test area which will include the F-37 production satellite in the
Ferma pool and all associated flowlined wells into that group for evaluation.
The satellite and 12 wells will be taken over in September for operations. The
initial plan is to prepare one well for water injection and conduct operations
to attain reservoir pressure data and conduct injectivity tests to assist in
planning, to determine possible skin damage and establish reservoir
permeability for secondary recovery application. Upon successful testing,
injection facilities will be modified for Bankers operations, an injection
pump will be ordered and about five to eight wells will be prepared for
production operations or observation for a waterflood field trial most likely
to occur late in 2009 or early 2010.
    The Kuçova data acquisition team completed the initial compilation of
well histories, service records and monthly production data for 60 wells
within the main Kuçova field. Data acquisition for the Kuçova field's five
major oil pools is now complete with production data for all wells compiled
and stored in the Company's production databases.
    Fluid compatibility and fluid-reservoir rock compatibility evaluation
work is currently in progress and will be complete prior to the field trials.
Fluid samples and samples of core were gathered and sent to a laboratory in
Canada for evaluation.

    CAPITAL EXPENDITURES

    
                              Three months ended         Six months ended
                                    June 30                   June 30
    -------------------------------------------------------------------------
    ($000s)                      2009         2008         2009         2008
    -------------------------------------------------------------------------
    Well re-activations           815       13,237        1,895       21,364
    Drilling programs           1,582        1,111        2,876        1,354
    Property acquisitions          26           56          118        2,268
    Base program                3,801        4,053        4,434        5,883
    Inventory change              (99)      (1,357)        (363)          (5)
                          ------------------------- -------------------------
                                6,126       17,100        8,961       30,864
                          ------------------------- -------------------------
                          ------------------------- -------------------------
    

    The Company continued its strategic response to the low oil prices by
deferring some of the capital projects into later quarters. During the quarter
ended June 30, 2009, Bankers spent $0.8 million on well re-activations
compared to $1.1 million during the preceding quarter and $13.2 million during
the same period in 2008. The Company incurred $1.6 million on the drilling
program (primarily related to standby fees) compared to $1.3 million on
drilling operations during the first quarter of 2009 and $1.1 million incurred
in the same period of 2008. The balance represented maintenance-level capital
projects and capitalized G&A.

    LIQUIDITY AND CAPITAL RE

SOURCES At June 30, 2009, Bankers had working capital of $28.2 million (including cash, cash equivalents and deposits totalling $41.1 million) and long-term bank loans of $8.4 million. The Company's credit facility with a European financial institution was $32.7 million on June 30, 2009. This amount includes a revolving operating loan of $19.9 million, a three-year term loan of $8.8 million and a 54-month term loan of $4.0 million. Repayments of $937,500 were made on the three-year term loan during this quarter. As of December 31, 2008 the Company had a working capital deficiency of $7.4 million and long-term bank loan of $6.9 million. On March 31, 2009 the Company received approval for an $8.0 million increase to its existing credit facility with Raiffeisen Bank. The existing $16 million operating loan facility has been increased to $20.0 million and a new $4.0 million five-year term facility was utilized. On May 7, 2009 the Company finalized an agreement with a syndicate of underwriters whereby the members of the syndicate purchased, on a bought-deal basis, 22,858,000 common shares of the Company at CAD$1.75 per share, generating gross proceeds of CAD$40.0 million. Under the terms of the offering, an additional allotment of 2,285,800 common shares were exercised on May 25, 2009. The gross proceeds raised through this financing amounted to CAD$44.0 million. On May 8, 2009, the Company finalized loan agreements with the IFC and EBRD for provision of a reserve-based long-term financing of up to $110.0 million to supplement the Company's existing $32.7 million facility with Raiffeisen Bank. The Company's approach to managing liquidity is to ensure a balance between capital expenditure requirements and funds generated from operations, available credit facilities and working capital. In recognition that significant changes in expected commodity prices could impact cash provided by operations, capital expenditures for the first half of 2009 were constrained. There were approximately 208 million shares and 224 million shares outstanding as at June 30, 2009 and August 13, 2009 respectively. In addition, the Company had approximately 13 million stock options as of June 30, 2009 and August 13, 2009. The outstanding warrants as of June 30, 2009 were 26 million, of which 16 million were granted equally to the IFC and EBRD. In July 2009, IFC and EBRD exercised their entire warrant positions at a price of CAD$1.50 per share, thereby generating proceeds of CAD$24.0 million. Directors and officers of the Company represent approximately nine percent ownership in the Company on a fully diluted basis as of June 30, 2009 and August 13, 2009. The strong ownership position of the directors and officers creates an alignment with shareholders and a team that is dedicated to activities that support future value creation. In Albania, the Company considers any amounts greater than 60 days as past due. Of the total receivables of $22.7 million in Albania, approximately $13.6 million is due from one domestic customer of which $13.0 million is considered past due. In an effort to collect these receivables, the Company has regular dialogue with this customer; payments totalling $5.0 million have been received during the quarter. The Albanian government continues to own 15% of this customer; the remainder was privatized for $167 million in December 2008. The two refineries owned by this customer are the only ones in Albania and are strategically important to the country. Bankers' management has confidence that these amounts will be collected and has not recorded a loss provision. In the interim, Bankers, as the largest supplier of crude oil to these refineries, has reduced its delivery of oil to this customer and exported additional shipments to its foreign customers. Bankers has expanded its export capacity by way of the new shipping terminal completed during the quarter. Plan of Development Bankers has no capital expenditure commitment for the Patos Marinza oilfield under the Petroleum Agreement. Bankers annually submits a work program to AKBN which includes the nature and the amount of capital expenditures to be incurred during that year. Significant deviations in this annual program from the Plan of Development will be subject to AKBN approval. The Petroleum Agreement provides that disagreements between the parties will be referred to an independent expert whose decision will be binding. The Company has the right to relinquish a portion or all of the contract area. If only a portion of the contract area is relinquished then the Company will continue to conduct petroleum operations on the portion it retains and the future capital expenditures will be adjusted accordingly. Commitments The Company has long-term lease commitments in Canada and Albania. The minimum lease payments for the next four years are $511,000 as follows: ($000s) Canada Albania Total ------------------------------------------------------------ 2009 74 80 154 2010 148 55 203 2011 148 - 148 2012 6 - 6 -------------------------------------- 376 135 511 -------------------------------------- -------------------------------------- The Company has two term loans with a European financial institution, totalling $12.8 million. The 2006 term loan is repayable in equal monthly instalments of $0.3 million ending on November 30, 2011. The principal payments for the 2009 term loan will commence in November 2009 in equal monthly instalments of $74,000 for a 54-month period. Of the amount outstanding, $4.3 million is classified as current and $8.5 million as long-term. Principal repayments of the term loan over the next five years are as follows: ($000s) ------------------------------------------------------------ 2009 2,023 2010 4,639 2011 4,014 2012 889 2013 889 2014 296 ------------ 12,750 ------------ ------------ PRINCIPAL BUSINESS RISKS Bankers' business and results of operations are subject to a number of risks and uncertainties, including but not limited to the following: Exploration, development, production and marketing of oil and natural gas involves a wide variety of risks which include but are not limited to the uncertainty of finding oil and gas in commercial quantities, securing markets for existing reserves, commodity price fluctuations, exchange and interest rate exposure and changes to government regulations, including regulations relating to prices, taxes, royalties and environmental protection. The oil and gas industry is intensely competitive and the Company competes with a large number of companies with greater resources. Bankers' ability to increase its reserves in the future will depend not only on its ability to develop its current properties but also on its ability to acquire new prospects and producing properties. The acquisition, exploration and development of new properties also require that sufficient capital from outside sources will be available to the Company in a timely manner. The availability of equity or debt financing is affected by many factors many of which are beyond the control of the Company. Bankers has a significant investment in Albania. There are a number of risks associated with conducting foreign operations over which the Company has no control, including political instability, potential and actual civil disturbances, ability to repatriate funds, changes in laws affecting foreign ownership and existing contracts, environmental regulations, oil and gas prices, production regulations, royalty rates, income tax law changes, potential expropriation of property without fair compensation and restriction on exports. Additional risks that may affect the Company and its operations are set out in its AIF filed under the Company's profile on www.sedar.com. RELATED PARTY TRANSACTIONS The Company has a note receivable from BNK Petroleum Inc. (BKX), a related party, in the amount of $11.7 million that is considered to be in the normal course of business. Bankers has no further obligation to increase the note, which is due on October 2012 and accrues interest at LIBOR plus 5.5%. At June 30, 2009 no principal or interest amounts were due. The Company is entitled to receive up to 50% of any future equity financing by BKX and 90% of any increase in BKX's borrowing base, as repayment of this note. During the quarter, the Company received $2.0 million in payment of accrued interest receivable of $0.7 million and principal on the note of $1.3 million. Subsequent to June 30, 2009 the Company received $0.5 million in payment of accrued interest receivable of $0.2 million and principal on the note of $0.3 million as a result of a new financing facility finalized by BKX. NEW ACCOUNTING STANDARDS - Goodwill (Section 3064) - This section applies to goodwill subsequent to initial recognition and establishes standards for the recognition, measurement, presentation and disclosure of goodwill and intangible assets. This new standard has not had a material impact on Bankers' consolidated financial statements. - Transition to International Financial Reporting Standards (IFRS) - In February 2008 the Canadian Accounting Standards Board confirmed January 1, 2011 as the effective date for the requirement to report under IFRS along with conversion of comparative 2010 periods. The impact of IFRS on our results of operations and future financial position is not reasonably determinable at this time. The Company has supported staff training programs, has engaged external advisors to plan the IFRS initiative and is in the process of completing a preliminary assessment of transitional requirements to identify expected impacts on the Company. Regular reports on the IFRS transition status will be made to Management and the Audit Committee. - Business combinations - In December 2008 the CICA issued the new accounting standard 1582, Business Combination replacing Section 1581. This Section establishes principles and requirements for accounting for business combinations. Significant changes include determination of the purchase price based on the fair value of shares exchanged at the market price on the acquisition or closing date. The new guidance also requires that all acquisition related costs be expensed as incurred and contingent liabilities are to be measured at fair value at acquisition date and re-measured to fair value at each reporting period through earnings until settled. In addition, negative goodwill is required to be recognized in earnings on the acquisition date. The new Section will be applied prospectively effective January 1, 2011. INTERNAL CONTROLS The Company's President and Chief Executive Officer (CEO) and Vice President, Finance and Chief Financial Officer (CFO) are responsible for establishing and maintaining disclosure controls and procedures and internal controls over financial reporting as defined in NI 52-109. Disclosure controls and procedures have been designed to ensure that information to be disclosed by the Company is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure. The Company's CEO and CFO have evaluated the effectiveness of the disclosure controls and procedures as at June 30, 2009 and have concluded that they provide reasonable assurance that all material information relating to the Company is disclosed in a timely manner. Internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of the Company's financial reporting and compliance with generally accepted accounting principles. The CEO and CFO have evaluated the Company's internal controls over financial reporting as at June 30, 2009 based on the framework in "Internal Control Over Financial Reporting - Guidance for Smaller Public Companies" issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and have concluded they are designed and operating effectively to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with GAAP. During the quarter ended June 30, 2009 there have been no changes to the Company's internal controls over financial reporting that will, or are reasonably likely to, materially affect the internal controls over financial reporting. Because of their inherent limitations, disclosure controls and procedures and internal controls over financial reporting may not prevent or detect misstatements, errors or fraud. Control systems, no matter how well conceived or operated, can provide only reasonable and not absolute assurance that the objectives of the control systems are met. OUTLOOK The Company is well positioned with available cash resources of $63 million and $142 million of credit facilities to fund the $56 million 2009 capital expenditure program that is expected to yield an exit production rate for 2009 of approximately 8,000 bopd. The Company will continue to monitor oil prices and is prepared to make adjustments to its capital program if deemed necessary. Commencing in July 2009, Bankers initiated its 10 well horizontal drilling program for the second half of 2009 to follow-up on its successful first horizontal well drilled in December 2008 that continues to produce at an average rate of 150 bopd. In addition, to the ten additional horizontal wells, the Company is planning to drill three vertical locations before year-end 2009. With excellent horizontal well productivities and improved drilling time and lower well costs, the Company has solicited bid proposals for a second drilling rig and is currently evaluating several offers. Bankers expects to have the second rig on location by early 2010 and is planning a significant increase in the number of horizontal wells to be drilled in 2010 and beyond. The well re-activation and re-completion program of existing wells will continue simultaneously with the new well drilling program, along with other facilities construction projects. BANKERS PETROLEUM LTD. CONSOLIDATED BALANCE SHEETS (Unaudited, expressed in thousands of United States dollars) ------------------------------------------------------------------------- ASSETS June 30 December 31 2009 2008 ------------------------- Current assets Cash and cash equivalents (Note 11) $ 32,647 $ 15,607 Short-term deposits 7,000 3,000 Restricted cash 1,500 1,500 Investments 139 134 Accounts receivable 23,143 17,591 Crude oil inventory 1,622 1,588 Deposits and prepaid expenses 1,261 1,231 ------------------------- 67,312 40,651 Note receivable (Note 3) 11,665 13,000 Deferred financing costs (Note 5) 15,246 - Property, plant and equipment (Note 4) 163,466 161,024 ------------------------- $ 257,689 $ 214,675 ------------------------- ------------------------- LIABILITIES Current liabilities Operating loan (Note 5) $ 19,901 $ 17,500 Accounts payable and accrued liabilities 14,907 26,788 Current portion of term loans (Note 5) 4,343 3,750 ------------------------- 39,151 48,038 Term loans (Note 5) 8,407 6,875 Asset retirement obligations (Note 6) 3,410 2,896 Future income tax liability (Note 7) 32,081 31,508 SHAREHOLDERS' EQUITY Share capital (Note 8) 158,330 121,907 Warrants (Note 8) 16,224 2,088 Contributed surplus (Note 8) 14,751 11,862 Deficit (14,670) (10,499) Accumulated other comprehensive income 5 - ------------------------- 174,640 125,358 ------------------------- $ 257,689 $ 214,675 ------------------------- ------------------------- Commitments (Note 10) Subsequent event (Note 13) See accompanying notes to consolidated financial statements. BANKERS PETROLEUM LTD. CONSOLIDATED STATEMENT OF CHANGES IN DEFICIT, COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (Unaudited, Expressed in thousands of United States dollars) ------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 2009 2008 2009 2008 --------------------------------------------------- Deficit Balance, beginning of period $ (12,991) $ (8,018) $ (10,499) $ (8,324) Net income (loss) for the period (1,679) 1,050 (4,171) 1,356 --------------------------------------------------- Balance, end of period $ (14,670) $ (6,968) $ (14,670) $ (6,968) --------------------------------------------------- --------------------------------------------------- Comprehensive income (loss) Net income (loss) for the period $ (1,679) $ 1,050 $ (4,171) $ 1,356 Unrealized gain on investments 5 850 5 1,158 --------------------------------------------------- Comprehensive income (loss) $ (1,674) $ 1,900 $ (4,166) $ 2,514 --------------------------------------------------- --------------------------------------------------- Accumulated other comprehensive income Balance, beginning of period $ - $ 308 $ - $ - Unrealized gain on investments 5 850 5 1,158 --------------------------------------------------- Balance, end of period $ 5 $ 1,158 $ 5 $ 1,158 --------------------------------------------------- --------------------------------------------------- See accompanying notes to consolidated financial statements. BANKERS PETROLEUM LTD. CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited, expressed in thousands of United States dollars, except per share amounts) ------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 2009 2008 2009 2008 --------------------------------------------------- Revenue Oil revenue $ 20,107 $ 34,157 $ 33,159 $ 58,833 Royalties (5,389) (6,601) (8,875) (10,899) Interest 224 367 481 601 --------------------------------------------------- 14,942 27,923 24,765 48,535 --------------------------------------------------- Expenses Operating 5,748 7,693 11,260 13,399 Sales and transportation 2,003 1,727 3,429 3,391 General and administrative 2,079 2,034 3,283 4,125 Interest and bank charges 291 256 598 536 Interest on term loans 177 293 347 628 Foreign exchange (gain) loss (1,285) (833) (1,032) 215 Stock-based compensation (Note 8) 1,598 3,545 2,160 4,785 Amortization of deferred financing costs (Note 5) 436 - 436 - Depletion, depreciation and accretion 3,872 3,171 7,882 6,040 --------------------------------------------------- 14,919 17,886 28,363 33,119 --------------------------------------------------- Income (loss) from continuing operations before income tax 23 (10,037) (3,598) 15,416 Future income tax expense (Note 7) (1,702) (9,032) (573) (13,872) --------------------------------------------------- Income (loss) from continuing operations (1,679) 1,005 (4,171) 1,544 Discontinued operations - 45 - (188) --------------------------------------------------- Net income (loss) for the period $ (1,679) $ 1,050 $ (4,171) $ 1,356 --------------------------------------------------- --------------------------------------------------- Basic earnings (loss) per share - continuing operations $ (0.009) $ 0.006 $ (0.022) $ 0.009 --------------------------------------------------- --------------------------------------------------- Diluted earnings per share - continuing operations $ - $ 0.005 $ - $ 0.009 --------------------------------------------------- --------------------------------------------------- Basic and diluted earnings (loss) per share - discontinued operations $ - $ 0.000 $ - $ (0.001) --------------------------------------------------- --------------------------------------------------- See accompanying notes to consolidated financial statements. BANKERS PETROLEUM LTD. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited, expressed in thousands of United States dollars) ------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 ------------------------------------------------------------------------- 2009 2008 2009 2008 --------------------------------------------------- Cash provided by (used in): Continuing operations: Net income (loss) from continuing operations $ (1,679) $ 1,005 $ (4,171) $ 1,544 Items not involving cash: Depletion, depreciation and accretion 3,872 3,171 7,882 6,040 Amortization of deferred financing costs 436 - 436 - Future income tax expense 1,702 9,032 573 13,872 Stock-based compensation 1,598 3,545 2,160 4,785 Unrealized foreign exchange loss 69 - 383 - --------------------------------------------------- 5,998 16,753 7,263 26,241 Change in non-cash working capital (Note 11) (10,352) (1,545) (12,601) (181) --------------------------------------------------- (4,354) 15,208 (5,338) 26,060 --------------------------------------------------- Cash used in operating activities of discontinued operations - 11,329 - 10,469 --------------------------------------------------- Investing activities Additions to property, plant and equipment (6,126) (17,100) (8,961) (30,864) Additions to property, plant and equipment of discontinued operations - (19,662) - (25,465) Increase in restricted cash - - - (1,500) Change in non-cash working capital (Note 11) (4,105) 3,385 (4,896) 3,812 --------------------------------------------------- (10,231) (33,337) (13,857) (54,017) --------------------------------------------------- Financing activities Issue of shares for cash 38,481 13,028 38,523 73,062 Share issue costs (2,220) - (2,220) (1,485) Note receivable 1,335 (10,535) 1,335 (10,535) Short-term deposits (5,000) - (4,000) - Restructuring costs - (2,436) - (2,436) Deferred financing costs (1,546) - (1,546) - Increase (decrease) in operating loan 2,641 (276) 2,401 699 Increase (decrease) in term loans 3,062 (938) 2,125 (2,500) Change in non-cash working capital (Note 11) - 600 - 600 --------------------------------------------------- 36,753 (557) 36,618 57,405 --------------------------------------------------- Foreign exchange loss on cash and cash equivalents held in foreign currencies (69) - (383) - --------------------------------------------------- Increase (decrease) in cash and cash equivalents 22,099 (7,397) 17,040 39,917 Cash and cash equivalents, beginning of period 10,548 49,913 15,607 2,599 --------------------------------------------------- Cash and cash equivalents, end of period (Note 11) $ 32,647 $ 42,516 $ 32,647 $ 42,516 --------------------------------------------------- --------------------------------------------------- See accompanying notes to consolidated financial statements. Notes to the Consolidated Financial Statements (Unaudited, Expressed in U.S. dollars ------------------------------------------------------------------------- 1. BASIS OF PRESENTATION The interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (GAAP). Certain information and note disclosures normally included in financial statements prepared in accordance with Canadian GAAP have been condensed or omitted. These interim consolidated financial statements should be read together with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2008. In the opinion of the Company, its unaudited interim consolidated financial statements contain all adjustments necessary in order to present a fair statement of the results of the interim periods presented. The preparation of interim financial statements is based on accounting principles and practices consistent with those used in the preparation of annual financial statements, except for the following changes in accounting policies: Goodwill (Section 3064) - This section applies to goodwill subsequent to initial recognition and establishes standards for the recognition, measurement, presentation and disclosure of goodwill and intangible assets. This new standard does not have an impact on Bankers' consolidated financial statements. The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned operating subsidiaries - Bankers Petroleum Albania Ltd. (BPAL), Bankers Petroleum International Ltd. and Sherwood International Petroleum Ltd. Unless where otherwise noted, the unaudited interim consolidated financial statements are presented in thousands of United States dollars. 2. FUTURE ACCOUNTING CHANGES International Financial Reporting Standards In February 2008, the Canadian Accounting Standards Board confirmed January 1, 2011 as the effective date for the requirement to report under International Financial Reporting Standards (IFRS) with comparative 2010 periods converted as well. In order to meet the requirement to transition to IFRS the Company has appointed internal staff to lead the conversion project along with sponsorship from an executive steering committee. The Company involves the external auditors and external consultants, as required, during the conversion project. The Company has provided training to key employees, completed a preliminary analysis of the accounting differences and is monitoring the impact of the transition on its business practices, information systems and internal control over financial reporting. During the Company's preliminary analysis, accounting implementation for certain areas was identified as having the greatest potential impact to the Company's consolidated statements in terms of complexity and effort. The Company has determined that accounting for property, plant and equipment, impairment testing, asset retirement obligations, stock-based compensation, employee future benefits and income taxes will be impacted by the conversion to IFRS. The precise impact of IFRS on the Company's consolidated financial statements is not reasonably determinable at this time. 3. NOTE RECEIVABLE The note receivable of $11.7 million (December 31, 2008 - $13.0 million) represents the residual amount due from BNK Petroleum Inc. (BKX). The note, which is due on October 2012, accrues interest at LIBOR plus 5.5% and is secured by a floating charge debenture and a general security agreement. At June 30, 2009 no principal or interest amounts were due. The outstanding accrued interest receivable pertaining to this note was $0.2 million (December 31, 2008 - $0.4 million) and is included in accounts receivable as at June 30, 2009. The Company is entitled to receive up to 50% of any future equity financing by BKX and 90% of any increase in BKX's borrowing base as repayment of this note. The Company has no further obligation to increase the note. BKX is considered a related party as BKX and the Company have three common directors. The above transaction is considered to be in the normal course of business and has been measured at the exchange amount being the amounts agreed to by both the parties. Subsequent to June 30, 2009, the Company received $0.5 million in payment of accrued interest receivable of $0.2 million and principal on the note of $0.3 million. 4. PROPERTY, PLANT AND EQUIPMENT The following table summarizes the Company's property, plant and equipment as at June 30, 2009 and December 31, 2008: June 30, 2009 --------------------------------------------------------------------- Accumulated Depletion and Net Book ($000s) Cost Depreciation Value --------------------------------------------------------------------- Oil properties $ 196,741 $ 35,300 $ 161,441 Equipment, furniture and fixtures 3,495 1,470 2,025 -------------------------------------- $ 200,236 $ 36,770 $ 163,466 -------------------------------------- -------------------------------------- December 31, 2008 --------------------------------------------------------------------- Accumulated Depletion and Net Book ($000s) Cost Depreciation Value --------------------------------------------------------------------- Oil properties $ 186,650 $ 27,812 $ 158,838 Equipment, furniture and fixtures 3,400 1,214 2,186 -------------------------------------- $ 190,050 $ 29,026 $ 161,024 -------------------------------------- -------------------------------------- The depletion expense calculation for the three months ended June 30, 2009, excluded $4.0 million (2008 - $2.0 million) relating to undeveloped and non-producing properties in Albania. Depletable assets for the depletion calculation for the three months ended June 30, 2009 included $291.0 million (2008 - $183.0 million) for estimated future development costs associated with proved undeveloped reserves in Albania. The Company capitalized general and administrative expenses and stock-based compensation of $0.7 million and $1.2 million during the three and six months periods ended June 30, 2009, respectively ($1.1 million and $1.8 million for the corresponding periods in 2008) that were directly related to exploration and development activities in Albania. 5. LONG TERM AND OPERATING LOAN FACILITIES The Company has credit facilities with three international banks, including Raiffeisen Bank, the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC), as summarized below: ($000s) Amount Outstanding --------------------------------------------------------------------- June 30, December 31, 2009 2008 ------------------------- Raiffeisen Bank --------------- Operating loan (a) $ 20,000 $ 19,901 $ 17,500 Term loan - 2006 (b) 8,750 8,750 10,625 Term loan - 2009 (c) 4,000 4,000 - EBRD and IFC(*) --------------- Environmental term loan (d) 10,000 - - Revolving loan - Tranche 1 (e) 50,000 - - Revolving loan - Tranche 2 (e) 50,000 - - -------------------------------------- $ 142,750 $ 32,651 $ 28,125 -------------------------------------- -------------------------------------- (*) all facilities are equally funded These facilities are secured by all of the assets of BPAL, assignment of proceeds from the Albanian domestic and export crude oil sales contracts, a pledge of the common shares of BPAL and a guarantee by the Company. The credit facilities are subject to certain covenants requiring the maintenance of certain financial ratios, all of which were met as at June 30, 2009. (a) Operating Loan The operating loan consists of a one year facility, renewable annually (March), bearing interest at a rate relative to the bank's refinancing rate plus 3.5%. (b) Term Loan - 2006 This term loan bears interest at the bank's financing rate plus 4.5% and is repayable in equal monthly instalments of $0.3 million ending on October 31, 2011. As at June 30, 2009 the entire term loan was utilized. Of the amount outstanding, $3.8 million is classified as current and $5.0 million as long-term. Principal repayments of the term loan over the next three years are: ($000s) --------------------------------------------------------------------- 2009 $ 1,875 2010 3,750 2011 3,125 ------------ $ 8,750 ------------ ------------ (c) Term Loan - 2009 In March 2009, the Company obtained a new $4.0 million five-year term facility bearing interest at the bank's refinancing rate plus 4.65%. Principle repayments commence in November 2009 in equal monthly instalments of $74,000 for a 54-month period. As at June 30, 2009, the entire facility was utilized. Of the amount outstanding, $0.6 million is classified as current and $3.4 million as long-term. Principal repayments of the term loan over the next six years are: ($000s) --------------------------------------------------------------------- 2009 $ 148 2010 889 2011 889 2012 889 2013 889 2014 296 ------------ $ 4,000 ------------ ------------ (d) Environmental Term Loan This eight-year $10.0 million term loan commenced in May 2009, and is available for environmental and social programs pertinent to the Company's activities in Albania, The interest rate is based on the London InterBank Offered Rate (LIBOR) plus 4.5%. A standby fee of 0.5% is charged on the unutilized portion. At June 30, 2009 none of the facility was drawn. Principle repayments commence in April 2013 in bi-annual instalments of $0.5 million with maturity on October 15, 2017. (e) Revolving loans On May 8, 2009, the Company finalized a six-year revolving facility, funded equally by EBRD and IFC that consists of two $50.0 million tranches. Tranche I became available to the Company subsequent to June 30, 2009 and Tranche II becomes available subject to mutual agreement among the Company, IFC and EBRD, when production exceeds 10,000 barrels of oil per day and the Brent oil price exceeds $62 per barrel for twenty consecutive trading days. The interest rate is based on the London InterBank Offered Rate (LIBOR) plus 4.5%. A standby fee of 2.0% is charged on the unutilized Tranche I portion and Tranche II portion, when it becomes available. At June 30, 2009 none of the facility was drawn. For each of Tranche I and Tranche II, the amounts decline to $16.5 mm on October 15, 2013, $8.3 mm on October 14, 2014 with final repayment due on October 15, 2015. Setup costs of $15.7 million (December 31, 2008 - nil) pertaining to these facilities, including the value attributed to the share purchase warrants (Note 8(b)), have been recorded as deferred financing costs and are amortized over the life of the revolving facilities. 6. ASSET RETIREMENT OBLIGATIONS In Albania the Company estimated the total undiscounted amount required to settle the asset retirement obligations at June 30, 2009 at $22.5 million (December 31, 2008 - $21.4 million). These obligations will be settled at the end of the Company's 25-year license of which 22 years are remaining. The liability has been discounted using a credit-adjusted risk-free interest rate of 10% (December 31, 2008 - 10%) and an inflation rate of 2.5% (December 31, 2008 - 2.5%) to arrive at asset retirement obligations of $3.4 million as at June 30, 2009. ($000s) --------------------------------------------------------------------- Asset retirement obligations, December 31, 2008 $ 2,896 Liabilities incurred during the period 376 Accretion 138 ------------ Asset retirement obligations, June 30, 2009 $ 3,410 ------------ ------------ 7. INCOME TAXES Future income tax expense relates to the Albanian operations and results from the following: June 30, December 31, ($000s) 2009 2008 --------------------------------------------------------------------- Net book value of property, plant and equipment, net of asset retirement obligations $ 154,091 $ 151,972 Cost recovery pool (89,929) (88,956) ------------------------- Timing difference $ 64,162 $ 63,016 ------------------------- ------------------------- Future income tax liability at 50% $ 32,081 $ 31,508 ------------------------- ------------------------- The cost recovery pool represents deductions for income tax purposes in Albania at a 50% income tax rate. The provision for income taxes reported differs from the amounts computed by applying the cumulative Canadian federal and provincial income tax rates to the loss before tax provision due to the following: Three months ended Six months ended June 30 June 30 --------------------------------------------------------------------- 2009 2008 2009 2008 --------------------------------------------------------------------- Income (loss) before income taxes 23 10,037 (3,598) 15,416 Statutory tax rate 29.00% 29.50% 29.00% 29.50% --------------------------------------------------- 7 2,961 (1,043) 4,548 Difference in tax rates between Albania and Canada 402 2,736 (157) 4,496 Non-deductible expenses 463 1,046 626 1,412 Valuation allowance and other 830 2,289 1,147 3,416 --------------------------------------------------- Future income tax expense 1,702 9,032 573 13,872 --------------------------------------------------- --------------------------------------------------- 8. SHAREHOLDERS' EQUITY (a) Share Capital Authorized Unlimited number of common shares with no par value. Issued Number of ($000) Common Shares Amount Amount --------------------------------------------------------------------- Balance, December 31, 2007 452,509,492 $ 136,513 Consolidation adjustment (*) (301,672,997) - Discontinued operations - (97,472) Prospectus issue 22,222,222 59,749 Stock options exercised 6,179,624 15,038 Warrants exercised 3,301,838 9,569 Share issuance costs - (1,490) ------------------------------------- Balance, December 31, 2008 182,540,179 121,907 Prospectus issue 25,143,800 38,349 Stock options exercised 202,793 294 Share issuance costs - (2,220) ------------------------------------- Balance, June 30, 2009 207,886,772 $ 158,330 ------------------------------------- ------------------------------------- During the quarter, the Company completed an equity issue via prospectus with a syndicate of underwriters and issued an aggregate of 25,143,800 common shares at a price of CAD$1.75 per common share on a bought deal basis, resulting in proceeds of $36.1 million net of commissions and share issue expenses. The following table summarizes the calculation of basic and diluted weighted average number of common shares: Three months ended Six months ended June 30 June 30 ------------------------------------------- ------------------------- 2009 2008 2009 2008 --------------------------------------------------------------------- Weighted-average number of common shares outstanding - basic 197,071,732 174,680,556 189,861,018 170,217,806 Dilution effect of stock options (xx) - 5,131,247 - 3,916,395 Dilution effect of warrants(xx) - 5,702,046 - 4,174,767 --------------------------------------------------- Weighted-average number of common shares outstanding - diluted 197,071,732 185,513,849 189,861,018 178,308,968 --------------------------------------------------- --------------------------------------------------- (*) On July 30, 2008, the Company's shares, warrants and options were consolidated on a one-for-three (1:3) basis, as approved by the shareholders (xx) Due to net loss for the three and six months periods ended June 30, 2009, the effect is anti-dilutive. (b) Warrants A summary of the changes in warrants is presented below: Amount Number of Warrants ($000) --------------------------------------------------------------------- Balance, December 31, 2007 38,323,452 $ 2,539 Consolidation adjustment (*) (25,548,968) - -------------------------------------- 12,774,484 2,539 Issued 240,729 255 Transferred to share capital on exercise (3,301,838) (706) -------------------------------------- Balance, December 31, 2008 9,713,375 2,088 Issued 16,000,000 14,136 -------------------------------------- Balance, June 30, 2009 25,713,375 $ 16,224 -------------------------------------- -------------------------------------- The Company has reserved for issuance 16 million common share purchase warrants, eight million for each of the two international banks (EBRD and IFC) in relation to the reserve based long-term facility described in Note 5(d). Each warrant entitles the holder to purchase one common share of the Company at a price of CAD$1.50 when the Brent oil price is above $55 per barrel for ten consecutive trading days until the earlier of i) one year from such date or ii) 45 days after the date on which the Company has notified that its common shares close at or above the exercise price for twenty consecutive trading days. The Company determined the fair value of the warrants as CAD$1.01 per warrant using the Black-Scholes option pricing model. As a result, a value of $14.1 million was allocated to warrants. (*) On July 30, 2008, the Company's shares, warrants and options were consolidated on a one-for-three (1:3) basis, as approved by the shareholders The following table summarizes the outstanding and exercisable warrants at June 30, 2009: --------------------------------------------------------------------- Weighted Number of Warrants Average Outstanding and Price Expiry Date exercisable Exercise (CAD $) --------------------------------------------------------------------- November 10, 2009 3,573,041 2.49 November 15, 2010 1,266,667 2.63 March 1, 2012 4,873,667 2.37 May 8, 2010 16,000,000 1.50 -------------------------------------- 25,713,375 1.86 -------------------------------------- -------------------------------------- (c) Stock Options The Company has established a "rolling" Stock Option Plan. The number of shares reserved for issuance may not exceed 10% of the total number of issued and outstanding shares and, to any one optionee, may not exceed 5% of the issued and outstanding shares on a yearly basis or 2% if the optionee is engaged in investor relations activities or is a consultant. The exercise price of each option shall not be less than the market price of the Company's stock at the date of grant. A summary of the changes in stock options is presented below: Weighted Average Exercise Price Number of Options (CAD$) --------------------------------------------------------------------- Balance, December 31, 2008 11,936,128 2.26 Granted 3,030,000 1.83 Exercised (202,793) 1.01 Forfeited (1,307,443) 2.70 -------------------------------------- Balance, June 30, 2009 13,455,892 2.14 -------------------------------------- -------------------------------------- (d) Stock-based Compensation Using the fair value method for stock-based compensation, the Company calculated stock-based compensation expense for the three and six months periods ended June 30, 2009 as $2.3 million and $3.0 million, respectively ($4.1 million and $5.6 million for the same periods in 2008) for the stock options vested and/or granted to officers, directors, employees and service providers. Of these amounts, $1.6 million and $2.2 million ($3.5 million and $4.7 million for the same periods in 2008) were charged to earnings and $0.7 million and $0.9 million ($0.6 million and $0.8 million for the same periods in 2008) were capitalized. The Company determined these amounts using the Black-Scholes option pricing model assuming no dividends were paid. The weighted average fair market value per option granted in the three and six months periods ended June 30, 2009 and 2008 and the assumptions used in their determination were as follows: Three months ended Six months ended June 30 June 30 --------------------------------------------------------------------- 2009 2008 2009 2008 --------------------------------------------------------------------- Weighted average fair value per option (CAD$) 1.55 1.03 1.55 0.83 Risk-free interest rate (%) 2.51 3.25 2.33 3.32 Average volatility (%) 126 72 125 71 Expected life (years) 5 5 5 5 (e) Contributed Surplus The following table summarizes the changes in contributed surplus as of June 30, 2009 and December 31, 2008: ($000s) 2009 2008 --------------------------------------------------------------------- Balance, beginning of period $ 11,862 $ 8,308 Stock-based compensation 3,009 9,136 Discontinued operations - (1,591) Transferred to share capital on exercise (120) (3,991) ------------------------- Balance, end of period $ 14,751 $ 11,862 ------------------------- ------------------------- 9. SEGMENTED INFORMATION The Company defined its reportable segments based on geographic locations. Six months ended June 30, 2009 ($000s) Albania Canada Total --------------------------------------------------------------------- Revenue Oil revenue $ 33,159 $ - $ 33,159 Royalties (8,875) - (8,875) Interest 1 480 481 -------------------------------------- 24,285 480 24,765 -------------------------------------- Expenses Operating 11,260 - 11,260 Sales and transportation 3,429 - 3,429 General and administrative 1,568 1,715 3,283 Interest and bank charges 598 - 598 Interest on term loan 347 - 347 Foreign exchange (gain) loss (163) (869) (1,032) Stock-based compensation 175 1,985 2,160 Amortization of deferred financing costs - 436 436 Depletion, depreciation and accretion 7,820 62 7,882 -------------------------------------- 25,034 3,329 28,363 -------------------------------------- Loss before income taxes (749) (2,849) (3,598) Future income tax expense (573) - (573) -------------------------------------- Net loss for the period $ (1,322) $ (2,849) (4,171) -------------------------------------- -------------------------------------- Assets, June 30, 2009 $ 188,843 $ 68,846 $ 257,689 -------------------------------------- -------------------------------------- Additions to property, plant and equipment $ 8,911 $ 50 $ 8,961 -------------------------------------- -------------------------------------- Six months ended June 30, 2008 ($000s) Albania Canada Total --------------------------------------------------------------------- Revenue Oil revenue $ 58,833 $ - $ 58,833 Royalties (10,899) - (10,899) Interest - 601 601 -------------------------------------- 47,934 601 48,535 -------------------------------------- Expenses Operating 13,399 - 13,399 Sales and transportation 3,391 - 3,391 General and administrative 1,617 2,508 4,125 Interest and bank charges 536 - 536 Interest on term loans 628 - 628 Foreign exchange (gain) loss (25) 240 215 Stock-based compensation 493 4,292 4,785 Depletion, depreciation and accretion 5,962 78 6,040 -------------------------------------- 26,001 7,118 33,119 -------------------------------------- Income (loss) from continuing operations before income taxes 21,933 (6,517) 15,416 Future income tax expense (13,872) - (13,872) -------------------------------------- Income (loss) from continuing operations $ 8,061 $ (6,517) 1,544 Discontinued operations -------------------------- (188) -------------------------- ------------ Net income for the period $ 1,356 ------------ ------------ Assets, June 30, 2008 $ 143,434 $ 47,124 $ 190,558 -------------------------------------- -------------------------------------- Additions to property, plant and equipment $ 30,769 $ 96 $ 30,865 -------------------------------------- -------------------------------------- Three months ended June 30, 2009 ($000s) Albania Canada Total --------------------------------------------------------------------- Revenue Oil revenue $ 20,107 $ - $ 20,107 Royalties (5,389) - (5,389) Interest - 224 224 -------------------------------------- 14,718 224 14,942 -------------------------------------- Expenses Operating 5,748 - 5,748 Sales and transportation 2,003 - 2,003 General and administrative 1,002 1,077 2,079 Interest and bank charges 291 - 291 Interest on term loan 177 - 177 Foreign exchange (gain) loss (385) (900) (1,285) Stock-based compensation 128 1,470 1,598 Amortization of deferred financing costs - 436 436 Depletion, depreciation and accretion 3,838 34 3,872 -------------------------------------- 12,802 2,117 14,919 -------------------------------------- Income (loss) from continuing operations before income taxes 1,916 (1,893) 23 Future income tax expense (1,702) - (1,702) -------------------------------------- Income (loss) for the period $ 214 $ (1,893) $ (1,679) -------------------------------------- -------------------------------------- Additions to property, plant and equipment $ 6,083 $ 43 $ 6,126 -------------------------------------- -------------------------------------- Three months ended June 30, 2008 ($000s) Albania Canada Total --------------------------------------------------------------------- Revenue Oil revenue $ 34,157 $ - $ 34,157 Royalties (6,601) - (6,601) Interest - 367 367 -------------------------------------- 27,556 367 27,923 -------------------------------------- Expenses Operating 7,693 - 7,693 Sales and transportation 1,727 - 1,727 General and administrative 771 1,263 2,034 Interest and bank charges 256 - 256 Interest on term loan 293 - 293 Foreign exchange (gain) loss 101 (934) (833) Stock-based compensation 236 3,309 3,545 Depletion, depreciation and accretion 3,131 40 3,171 -------------------------------------- 14,208 3,678 17,886 -------------------------------------- Income (loss) from continuing operations before income taxes 13,348 (3,311) 10,037 Future income tax expense (9,032) - (9,032) -------------------------------------- Income (loss) from continuing operations $ 4,316 $ (3,311) 1,005 Discontinued operations -------------------------- 45 -------------------------------------- Net income for the period $ 1,050 ------------ ------------ Additions to property, plant and equipment $ 13,720 $ 44 $ 13,764 -------------------------------------- -------------------------------------- 10. COMMITMENTS The Company leases office premises, requiring minimum lease payments of: ($000s) Canada Albania Total --------------------------------------------------------------------- 2009 $ 74 $ 80 $ 154 2010 148 55 203 2011 148 - 148 2012 6 - 6 -------------------------------------- $ 376 $ 135 $ 511 -------------------------------------- -------------------------------------- The Company has debt repayment commitments as disclosed in Note 5. 11. SUPPLEMENTAL CASH FLOW INFORMATION Three months ended Six months ended June 30 June 30 --------------------------------------------------------------------- 2009 2008 2009 2008 --------------------------------------------------------------------- Operating activities (Increase) decrease in current assets Accounts receivable $ (3,296) $ (4,633) $ (5,552) $ (5,780) Crude oil inventory 314 (188) (34) (469) Deposit and prepaid expenses 219 (356) (30) (360) (Decrease) increase in current liabilities Accounts payable and accrued liabilities (7,589) 3,632 (6,985) 6,428 --------------------------------------------------- $ (10,352) $ (1,545) $ (12,601) $ (181) --------------------------------------------------- --------------------------------------------------- Investing activities (Decrease) increase in current liabilities Accounts payable and accrued liabilities $ (4,105) $ 3,385 $ (4,896) $ 3,812 --------------------------------------------------- --------------------------------------------------- Financing activities Increase in current liabilities Accounts payable and accrued liabilities $ - $ 600 $ - $ 600 --------------------------------------------------- --------------------------------------------------- Interest paid $ 468 $ 549 $ 945 $ 1,164 --------------------------------------------------- --------------------------------------------------- Interest received $ 712 $ 367 $ 778 $ 601 --------------------------------------------------- --------------------------------------------------- June 30, December 31, 2009 2008 --------------------------------------------------------------------- Cash and cash equivalents Cash $ 857 $ 933 Fixed income investments 31,790 14,674 ------------------------- $ 32,647 $ 15,607 ------------------------- ------------------------- 12. FINANCIAL RISK MANAGEMENT Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from petroleum refineries relating to accounts receivable. As at June 30, 2009, the Company's receivables consisted of $22.7 million (December 31, 2008 - $16.9 million) of receivables from petroleum refineries and $0.5 million (December 31, 2008 - $0.7 million) of other trade receivables as summarized below: 30 - 61 - Over ($000s) Current 60 days 90 days 90 days Total --------------------------------------------------------------------- Albania $ 9,021 $ 630 $ 3,139 $ 9,879 $ 22,669 Canada 233 - - 241 474 -------------------------------------------------------------- $ 9,254 $ 630 $3,139 $ 10,120 $ 23,143 -------------------------------------------------------------- -------------------------------------------------------------- In Albania the Company considers any amounts greater than 60 days as past due. The accounts receivable, included in the table, past due or not past due are not impaired. They are from counterparties with whom the Company has a history of timely collection and the Company considers the accounts receivable collectible. Domestic receivables from a petroleum refinery are due by the end of the month following production. Export receivables are collected within 30 days from the date of the shipment. The Company's policy to mitigate credit risk associated with these balances is to establish marketing relationships with large purchasers. Of the total receivables of $22.7 million in Albania, approximately $13.6 million (December 31, 2008 - $13.6 million) is due from one domestic customer of which $13.0 million is considered past due. During the quarter, the Company received $5.0 million from this customer as payments on account of sales. The Company is in discussion with its Albanian legal counsel and the senior management of this customer towards reaching a payment plan. Bankers has the support of the Albanian government who confirm the validity of these outstanding amounts. Upon resolution of this matter, Bankers expects to resume oil deliveries to support the domestic Albanian refineries, Based on the above evaluation of the receivable from this customer, Bankers does not consider it impaired. In Canada, no amounts are considered past due or impaired. The carrying amount of accounts receivable represents the maximum credit exposure. As of June 30, 2009 and December 31, 2008, the Company does not have an allowance for doubtful accounts and did not provide for any doubtful accounts nor was it required to write-off any receivables. The Company also has credit risk with respect to the $11.7 million Note Receivable from BKX and regularly monitors the operations and financial condition of the borrower (See Note 3). Subsequent to June 30, 2009 the Company received $0.5 million in payment of accrued interest receivable of $0.2 million and principal on the note of $0.3 million. 13. SUBSEQUENT EVENT In July 2009, EBRD and IFC exercised their warrants to purchase 16 million common shares of the Company at a price of CAD$1.50 per share, generating proceeds of approximately $21.3 million.

For further information:

For further information: Abby Badwi, President and Chief Executive
Officer, (403) 513-2694; Doug Urch VP, Finance and Chief Financial Officer,
(403) 513-2691, Email: investorrelations@bankerspetroleum.com, Website:
www.bankerspetroleum.com; AIM NOMAD: Canaccord Adams Limited, Ryan Gaffney,
Henry Fitzgerald-O'Connor, +44 20 7050 6500; AIM JOINT BROKERS: Canaccord
Adams Limited, Ryan Gaffney, Henry Fitzgerald-O'Connor, +44 20 7050 6500;
Tristone Capital Ltd., Nick Morgan, +44 20 7355 5800

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Bankers Petroleum Ltd.

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