Fully Funded US$218 Million Capital Program
and Accelerated Enhanced Oil Recovery Program
CALGARY, Dec. 12, 2014 /CNW/ - Bankers Petroleum Ltd. ("Bankers" or the "Company") (TSX: BNK, AIM: BNK) is pleased to announce its 2015 capital program of US$218 million (all amounts referenced below are in US dollars). The capital program will be fully supported by funds generated from operations and cash resources. The budget has been approved by the Company's Board of Directors and submitted to the Albanian authorities for their approval.
The 2015 capital program will continue to focus on three main strategic goals: execution of the primary horizontal drilling program, acceleration of the secondary recovery program, and targeted capital for operational improvements to reduce costs and provide infrastructure and facilities necessary to support the future growth of the Company.
David French, President and CEO, commented, "We have put together a strategic fully funded capital program that maintains a solid level of drilling activity while investing in the future growth of Bankers through enhanced oil recovery (EOR).
"Over the past several years Bankers has built a business with a clean balance sheet and operational flexibility to withstand softer commodity prices. When combining our 2015 sales program and hedge position, the Company anticipates a cash margin of around $30/bbl at $70 Brent with capability to deliver over $25/bbl stress tested at $60/bbl Dated Brent. This budget builds upon our low-cost development of horizontal wells, and continues our commitment to reserves growth and future volumes through expansion of polymer flooding. We believe our financial discipline, reservoir management, and operational capability will serve us well in this volatile market."
CAPITAL PROGRAM FUNDING
The 2015 capital program utilizes a $70 per barrel average annual Brent oil price forecast. The Company expects to fully fund the 2015 capital program with funds generated from operations and cash resources.
2015 Sales Contracts
Bankers is pleased to announce that it expects to receive average cash realization equivalent of 82% of Dated Brent price realization; inclusive of both the export and domestic agreements as well as the existing hedge at current average Brent forecast of $70/bbl.
The Company has committed 55% of next year's crude oil volumes to export counterparties in the Mediterranean and the United States. An average realized price of 79 – 80% of Dated Brent is projected for all export volumes on term contracts.
Bankers has also reached an agreement to sell 45% of its 2015 volumes to the domestic market at 74% of Dated Brent (FOB Vlora equivalent), plus a fixed $28/metric-ton or approximately $4.45/bbl recovery against the overdue accounts receivable balance from prior years. Over the course of the year, the Company will receive full payment of the remaining $15.4 million accounts receivable in addition to sales and transportation savings of approximately $2.90/bbl. The fixed $4.45/bbl payment has the advantage of providing structural protection against further softening in Brent pricing.
The majority of the 2015 capital program at $118 million is for primary drilling with three rigs and between 85 – 90 new horizontal wells. These wells are a continuation of development in the Patos-Marinza oilfield.
Enhanced Oil Recovery: Polymer Flood Expansion
Next year will mark a shift from an early-stage pilot project to commercial development of our EOR program. We are encouraged by the strong performance to date and will be allocating $36 million to EOR expansion in 2015, with plans to convert 25 – 30 existing production wells to polymer injection throughout the year. Approximately 70% of EOR capital will be spent on associated infrastructure and facilities, and the remaining 30% on well conversions and injection.
This program represents an increase of 41% compared to the 2014 EOR budget of $22 million and more than double the number of wells converted to injection.
Facilities, Infrastructure, and Associated Capital
A total of $64 million of the 2015 capital program will be allocated to facilities and infrastructure activities which include improvements aimed at lowering operating costs. Projects include:
- well servicing and work overs;
- flow lining within the field;
- electrification of well pads;
- expansion of water disposal capabilities with two (2) water disposal wells; and
- continuation of environmental remediation and social initiatives.
Over the past several years, Bankers has constructed its capital program to allow for flexibility in changing market conditions. In this lower commodity price environment, Bankers has initiated a drilling rig phase-down from six to three rigs to conserve cash-flow and balance capital spending. By the end of the fourth quarter 2014, two rigs will be suspended with the third rig following in January 2015. In addition, the Company has been in conversation with all material service providers to source near term price reductions.
Our efforts will continue on expanding margins through further operational efficiencies in the field including the installation of flow lines to reduce trucking costs, electrification of well pads, well servicing improvements and diluent reduction. Over the past two years that margin expansion has been a strategic focus of the Company, we have reduced our cost structure by over $6/bbl excluding excise and carbon and circulation tax changes introduced in 2014. Bankers projects an additional costs savings of $2 – 3/bbl over the next two years.
Bankers is positioned to respond quickly when oil prices show signs of recovery and will prioritize its primary drilling program by reinstating drilling rigs, infrastructure and facilities spending.
Bankers maintains a strong balance sheet with a cash position of $88 million at September 30, 2014. Management will continue to protect the financial position of the Company with the strategic view to maintain capital expenditures within 2015 cash flow, supplemented with cash resources. At September 30, 2014, Bankers had drawn $104 million from its $224 million credit facilities; no additional draws are anticipated in 2015.
To protect against the downside of oil prices, in Q2 2014, Bankers purchased two Puts, which combined represent 6,000 bopd at $80/bbl Brent for 2015. Cash proceeds from the Puts are received monthly, based on the difference between the average monthly Brent price and $80/bbl. The financial stability provided by this hedge supports the operation of three drilling rigs in 2015.
In recognition of recent pullback in Brent oil price, reduced 2015 capital expenditure and the acceleration of the polymer flood program, Bankers anticipates 2015 average production levels will be in line with the 2014 average production level.
UPDATED CORPORATE PRESENTATION
For additional information on this operational update, please see the December 2014 version of the Company's corporate presentation at www.bankerspetroleum.com.
Management of Bankers will host a conference call on December 12, 2014 at 6:30 am MST to discuss the 2015 Capital Budget. Following Management's presentation, there will be a question and answer session for analysts and investors.
To participate in the conference call, please contact the conference operator ten minutes prior to the call at 1-888-231-8191 or 1-647-427-7450. A live audio web cast of the conference call will also be available on Bankers website at www.bankerspetroleum.com or by entering the following URL into your web browser, http://www.newswire.ca/en/webcast/detail/1457825/1621957.
The web cast will be archived two hours after the presentation on the website, and posted on the website for 90 days. A replay of the call will be available until December 25, 2014 by dialing 1-855-859-2056 or 1-416-849-0833 and entering access code 47056493.
Q4 2014 OPERATIONAL UPDATE
Bankers intends to announce its Operational Update for the Fourth Quarter 2014 and host a conference call on Tuesday, January 6, 2015.
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 the Patos-Marinza heavy oilfield, has a 100% interest in the Kuçova oilfield, and a 100% interest in Exploration Block "F". Bankers' shares are traded on the Toronto Stock Exchange and the AIM Market in London, England under the stock symbol BNK.
SOURCE: Bankers Petroleum Ltd.
For further information: David French, President and Chief Executive Officer, (403) 513-6930; Doug Urch, Executive VP, Finance and Chief Financial Officer, (403) 513-2691; Laura Bechtel, Investor Relations Analyst, (403) 513-3428; Email: [email protected]; Website: www.bankerspetroleum.com; AIM NOMAD: Canaccord Genuity Limited, Henry Fitzgerald-O'Connor, +44 0 207 523 8000; AIM BROKER: FirstEnergy Capital LLP, Hugh Sanderson / David van Erp, +44 0 207 448 0200