Bankers Petroleum announces third quarter financial and operational results
Horizontal Drilling Update
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Q3 - 2009 Q2 - 2009 Q3 - 2008
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Capital Expenditures ($000) 12,104 6,126 25,502
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Brent Oil Price $/bbl 68.27 58.79 114.78
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Patos Marinza Oil Price $/bbl 40.71 34.63 62.08
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Operating Costs $/bbl 10.56 9.90 13.32
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Transportation $/bbl 4.76 3.45 3.57
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Royalties $/bbl 9.32 9.28 14.40
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Netback $/bbl 16.07 12.00 30.79
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HIGHLIGHTS
- Production averaged 6,258 bopd, compared to second quarter
production of 6,383 bopd. The slight drop in production was due to
restricted production during July caused by water disposal
infrastructure enhancements, which have since been completed.
- Current production is 7,100 bopd with 350 bopd shut-in pending
well servicing.
- Revenue increased 17% to $23.4 million ($40,.71/bbl) in the third
quarter of 2009 from $20.1 million ($34.63/bbl) during the second
quarter.
- Net operating income (netbacks) increased 33% to $9.3 million
($16.07/bbl) in the third quarter from $7.0 million ($12.00/bbl)
during the second quarter of 2009.
- Funds generated from operations increased 23% to $7.4 million in
the third quarter of 2009 from $6.0 million in the second quarter
of 2009.
- In July 2009, International Finance Corporation (IFC) and the
European Bank for Reconstruction and Development (EBRD) exercised
their warrants generating total proceeds of $21.9 million.
- Bankers maintained a strong balance sheet with working capital of
$50.2 million at September 30, 2009 ($61.4 million in cash) as
compared to working capital of $28.2 million at June 30, 2009.
- In July 2009, Bankers commenced export operations from the new
Port of Vlore export terminal. This facility significantly
enhances the Company's export operations, provides 80,000 barrels
of storage capacity and will play a key role in Bankers'
production growth.
- Subsequent to September 30, 2009, 2.7 million November 2009 series
warrants were exercised generating total proceeds of CAD$6.8
million. Bankers expects to receive approximately $10.0 million
from BNK Petroleum Inc. as payment on the note receivable from
their expected November 13, 2009 equity issue.
Results at a Glance ($000) Three months ended September 30
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2009 2008
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Oil revenue 23,441 33,543
Net operating income 9,251 16,318
Net income 1,708 4,876
Basic and diluted earnings per share 0.008 0.027/0.026
Funds generated from operations 7,371 14,795
Additions to property, plant and equipment 12,104 25,502
September 30
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2009 2008
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Cash and deposits 61,386 33,668
Working capital 50,188 17,543
Total assets 292,212 216,978
Bank loans 31,355 27,583
Other long-term liabilities 38,358 34,615
Shareholders' equity 203,007 131,262
Drilling Update
Commencing in
Five horizontal wells have been drilled and completed during the quarter; four oil wells are currently producing at a combined total rate of 500 bopd. Well repairs to shut off crossflow problems adjacent to the fifth well have been completed and the well is currently producing at a rate of 24 bopd with high rates of water production. The Company expects that the oil cut will improve as the cross flow water dries up.
Upgrades on the current drilling rig have been completed and drilling operations resumed last month. Horizontal well 5015 (D4 zone - 440 metre lateral) was drilled and completed as an oil well and will be placed on production this week. The rig is currently drilling horizontal well 5021, moving northwards within the deeper part of the field where a recent vertical completion provided excellent production rates and indicated virgin reservoir pressures. After drilling well 5021, three additional horizontal wells are planned for the 4th quarter 2009. Due to the downtime necessary to upgrade the drilling rig, it is now anticipated that the vertical wells, planned to acquire core information to add in the thermal planning process, will be delayed until
The Company will continue to drill test horizontal wells in different areas and zones to fully evaluate the field's reserves and production potential. In 2010, the horizontal development drilling program will focus on the highest productivity areas and zones in the field. Detailed mapping has outlined more than 400 horizontal drilling locations to be drilled at the Patos Marinza field over the next few years.
Bankers' third quarter results have now been incorporated into the corporate presentation and will be posted on Bankers' website by
Abby Badwi, President and Chief Executive Officer, will host a conference call and webcast on
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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
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 nine months periods ended
The Company reports its heavy oil production in barrels.
This report is prepared as of
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 Nine months ended
September 30 September 30
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($000s) 2009 2008 2009 2008
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Cash provided by
(used in) operating
activities 5,012 13,124 (326) 39,522
Change in non-cash
working capital 2,359 1,671 14,960 1,852
---------------------- -------------------------
Funds generated from
operations 7,371 14,795 14,634 41,374
---------------------- -------------------------
---------------------- -------------------------
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
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 Nine months ended
September 30 September 30
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Results at a Glance
($000s, except as noted) 2009 2008* 2009 2008*
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Financial
Oil revenue 23,441 33,543 56,600 92,377
Net operating income 9,251 16,318 18,846 47,463
Net income (loss) 1,708 4,876 (2,463) 6,420
Basic and diluted
earnings (loss)
per share 0.008 0.027/0.026 (0.012) 0.037/0.035
Funds generated from
operations 7,371 14,795 14,634 41,374
Additions to property,
plant and equipment 12,104 25,502 21,065 56,367
Operating
Average production
(bopd) 6,258 5,880 6,170 5,646
Average price
($/barrel) 40.71 62.08 33.60 59.71
Netback
($/barrel) 16.07 30.79 11.19 30.68
September 30
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2009 2008
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Cash and deposits 61,386 33,668
Working capital 50,188 17,543
Total assets 292,212 216,978
Bank loans 31,355 27,583
Other long-term liabilities 38,358 34,615
Shareholders' equity 203,007 131,262
* Excludes results from discontinued U.S. operations.
Highlights for the quarter ended September 30, 2009 are:
- Production averaged 6,258 bopd, an increase of 6% over the third
quarter of 2008. Production for the nine months ended September
30, 2009 averaged 6,170 bopd, a 9% increase from 5,646 bopd for
the comparable 2008 period.
- Revenue increased 17% to $23.4 million ($40.71/bbl) in the third
quarter of 2009 from 20.1 million ($34.63/bbl) during the second
quarter.
- Net operating income (netbacks) increased 33% to $9.3 million
($16.07/bbl) in the 2009 third quarter from $7.0 million
($12.00/bbl) during the 2009 second quarter.
- Funds generated from operations increased 23% to $7.4 million in
the third quarter of 2009 from $6.0 million over the second
quarter of 2009.
- In July 2009, International Finance Corporation (IFC) and the
European Bank for Reconstruction and Development (EBRD)
collectively exercised warrants to purchase 16 million common
shares of the Company, generating proceeds of $21.9 million.
- The Company continues to maintain a strong balance sheet with cash
of $61 million and working capital of $50.2 million at September
30, 2009 as compared to working capital of $28.1 million at June
30, 2009 and $17.5 million at September 30, 2008, respectively.
- In July 2009, Bankers commenced export operations from the new
Port of Vlore export terminal. This facility significantly
enhances the Company's export operations, provides 80,000 barrels
of storage capacity and will play a key role in Bankers'
production growth.
- Commencing in July 2009, Bankers recommenced its horizontal
drilling program to follow up on its successful first horizontal
well drilled in December 2008. Five new horizontal oil wells were
drilled during the quarter.
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
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($000s, except Fourth First Second Third
as noted) Quarter Quarter Quarter Quarter
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$/bbl $/bbl $/bbl $/bbl
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Average
production
(bopd) 6,561 5,864 6,383 6,258
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Oil revenue 17,877 29.63 13,052 24.73 20,107 34.63 23,441 40.71
Royalties 4,163 6.69 3,486 6.61 5,389 9.28 5,368 9.32
Sales and
transporta-
tion 2,192 3.63 1,426 2.70 2,003 3.45 2,739 4.76
Operating
expenses 7,843 13.54 5,512 10.44 5,748 9.90 6,083 10.56
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Net operating
income 3,679 5.77 2,628 4.98 6,967 12.00 9,251 16.07
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2007 2008
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($000s, except Fourth First Second Third
as noted) Quarter Quarter Quarter Quarter
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$/bbl $/bbl $/bbl $/bbl
---------------------------- --------------------------------------------
Average
production
(bopd) 5,429 5,218 5,826 5,880
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Oil revenue 21,398 42.84 24,676 51.96 34,157 64.36 33,543 62.08
Royalties 2,207 4.42 4,298 9.05 6,601 12.43 7,790 14.40
Sales and
transporta-
tion 1,332 2.67 1,664 3.50 1,727 3.27 1,932 3.57
Operating
expenses 5,303 10.93 5,706 12.02 7,693 14.03 7,503 13.32
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Net operating
income 12,556 24.82 13,008 27.39 18,136 34.63 16,318 30.79
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2008 2009
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($000s, except Fourth First Second Third
as noted) Quarter Quarter Quarter Quarter
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Financial
Funds generated from
operations 339 1,265 5,998 7,371
Net income (loss) (8,007) (2,492) (1,679) 1,708
Basic/diluted earnings
(loss) per share(1) (0.044) (0.014) (0.009) 0.008
General and
administrative 1,089 1,204 2,079 1,410
Total assets 214,675 210,674 257,689 292,212
Capital expenditures 22,011 2,835 6,126 12,104
Bank loans 28,125 26,948 32,651 31,355
2007 2008
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($000s, except Fourth First Second Third
as noted) Quarter Quarter Quarter Quarter
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Financial
Funds generated from
operations 9,358 9,488 16,753 14,795
Net income (loss) (2,126) 539 1,005 4,876
Basic/diluted earnings
(loss) per share(1) (0.014) 0.003 0.006/0.005 2,157
General and
administrative 2,667 2,091 2,034 0.027/0.026
Basic/diluted earnings
(loss) per share(1) (0.014) 0.003 0.006/0.005 2,157
Total assets 115,039 177,127 201,093 216,978
Capital expenditures 8,357 13,764 17,100 25,502
Bank loans 30,850 30,218 29,004 27,583
(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 Nine months ended
September 30 September 30
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2009 2008 2009 2008
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Average production
(bopd) 6,258 5,880 6,170 5,646
Oil revenue ($000) 23,441 33,543 56,600 92,377
Netback ($/bbl)
Average price 40.71 62.08 33.60 59.71
Royalties 9.32 14.40 8.46 12.08
Sales and transportation 4.76 3.57 3.66 3.44
Operating expenses 10.56 13.32 10.30 13.51
Netback 16.07 30.79 11.19 30.68
Active well counts increased 5% from 185 at the end of second quarter to 194 in
The Company received an average sale price of
Oil revenue increased 17% from
The Company's netback (revenue less royalties, operating, sales and transportation expenses) increased 34% to
Royalties
Royalties in
Operating Expenses
Operating expenses increased to
Sales and transportation costs for the quarter increased to
General and Administrative Expenses
General and administrative expenses (G&A) for the quarter were
During the quarter, the Company capitalized
Non-cash stock-based compensation expense pertaining to options vested and/or granted to officers, directors, employees and service providers was
Depletion, Depreciation and Accretion
Depletion, depreciation and accretion expenses (DD&A) for the quarter ended
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
The cost recovery pool represents deductions for income tax purposes in
Net Loss and Funds Generated from Operations
The Company recorded net income of
Funds generated from operations were
OPERATIONS UPDATE
Patos Marinza Field
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The Company's focus during the quarter shifted back to the capital development program as the oil price improved and stabilized at a Brent average level above
The Company took over 29 in-active wells from Albpetrol during the quarter 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.
Capital expenditures were
Operating expenditures increased marginally during the quarter by 6% to
In
Kuçova Field
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Bankers has made a formal request to Albpetrol and the AKBN (the state regulatory agency) for revisions to the Kucova Licence and Petroleum Agreements to revise the scope of work to a pressure maintenance project and for a 12 month extension of the evaluation period. Approval for the proposed amendments was received from Albpetrol during the quarter, approval is pending from the AKBN.
During the third quarter, Bankers requested the takeover of the F-37 production satellite in the Ferma pool with 12 associated flowlined wells into that group for evaluation. Upon approval, expected in November, the work plan is to prepare one well for water injection, conducting operations to attain reservoir pressure data and conduct injectivity tests to establish reservoir permeability for secondary recovery application. Upon successful testing, injection facilities will be constructed, an injection pump will be ordered and about five wells will be prepared for production or as observation for a waterflood field trial, now likely to occur in early 2010.
Operations and health and safety personnel conducted two field visits of the intended start up area at Kucova Group F-37 in July to conduct a risk assessment of the proposed operations. The assessments included highway and field access routes to the Ferme field, well site assessments, safety and environmental issues, community impact and to provide initial logistics for planning field activity.
Fluid compatibility and fluid-reservoir rock compatibility evaluation work is complete, with acceptable water compatibility, and the core analysis showed good rock characteristic (additional clay mineralogy determination is required).
CAPITAL EXPENDITURES
Three months ended Nine months ended
September 30 September 30
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($000s) 2009 2008 2009 2008
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Well re-activations 2,096 7,317 3,991 28,681
Drilling programs 6,876 8,854 9,752 10,208
Property acquisitions 98 1,472 216 3,740
Base program 3,505 5,040 7,940 10,923
Inventory change (471) 2,819 (834) 2,815
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12,104 25,502 21,065 56,367
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Improvements in commodity prices and the Company's strong financial position, established confidence to re-commence drilling and increase the capital program. Overall, capital expenditures in the third quarter increased to
LIQUIDITY AND CAPITAL RESOURCES
At
Bankers has credit facilities totalling
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 of the improvement in the commodity prices and the Company's capital resources, the Company resumed its drilling program in
During the nine months ended
There were 225 million shares and 228 million shares outstanding as at
Directors and officers of the Company represent approximately nine percent ownership in the Company, on a fully diluted basis, as of
In
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
($000s) Canada Albania Total
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2009 48 40 88
2010 191 55 246
2011 191 - 191
2012 8 - 8
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438 95 533
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The Company has two term loans with a European financial institution, totalling
($000s)
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2009 1,086
2010 4,639
2011 4,014
2012 889
2013 889
2014 296
------------
11,813
------------
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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
RELATED PARTY TRANSACTIONS
The Company has a note receivable from BNK Petroleum Inc. (BKX), a related party, in the amount of
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
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
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
By year-end 2009, Bankers expects to have 11 horizontal wells on production, ten of which were drilled in the second half of 2009. Based on this successful horizontal drilling program, a contract for the second drill rig has now been finalized. The second rig will arrive in mid-December and be ready to commence drilling in
The Company will continue to drill test horizontal wells in different areas and zones to fully evaluate the field's reserves and production potential. In 2010, the horizontal development drilling program will focus on the highest productivity areas and zones in the field. Detailed mapping has outlined more than 400 horizontal drilling locations to be drilled at the Patos Marinza field over the next few years. Full details of Bankers' 2010 capital expenditure program are expected to be released when fully ratified, expected by mid-December 2009.
Bankers is well positioned financially to accommodate its growth plans. At
BANKERS PETROLEUM LTD.
CONSOLIDATED BALANCE SHEETS
(Unaudited, expressed in thousands of United States dollars)
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ASSETS
September 30 December 31
2009 2008
-------------------------
Current assets
Cash and cash equivalents (Note 11) $ 54,886 $ 15,607
Short-term deposits 5,000 3,000
Restricted cash 1,500 1,500
Investments 571 134
Accounts receivable 27,349 17,591
Crude oil inventory 1,295 1,588
Deposits and prepaid expenses 3,186 1,231
-------------------------
93,787 40,651
Note receivable (Note 3) 11,342 13,000
Deferred financing costs (Note 5) 14,776 -
Property, plant and equipment (Note 4) 172,307 161,024
-------------------------
$ 292,212 $ 214,675
-------------------------
-------------------------
LIABILITIES
Current liabilities
Operating loan (Note 5) $ 19,542 $ 17,500
Accounts payable and accrued liabilities 19,492 26,788
Current portion of term loans (Note 5) 4,565 3,750
-------------------------
43,599 48,038
Term loans (Note 5) 7,248 6,875
Asset retirement obligations (Note 6) 3,672 2,896
Future income tax liability (Note 7) 34,686 31,508
SHAREHOLDERS' EQUITY
Share capital (Note 8) 198,785 121,907
Warrants (Note 8) 2,043 2,088
Contributed surplus (Note 8) 14,704 11,862
Deficit (12,962) (10,499)
Accumulated other comprehensive income 437 -
-------------------------
203,007 125,358
-------------------------
$ 292,212 $ 214,675
-------------------------
-------------------------
Commitments (Note 10)
See accompanying notes to consolidated financial statements.
BANKERS PETROLEUM LTD.
CONSOLIDATED STATEMENT OF CHANGES IN DEFICIT, COMPREHENSIVE INCOME
(LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Unaudited, Expressed in thousands of United States dollars)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
---------------------------------------------------
Deficit
Balance, beginning
of period $ (14,670) $ (9,404) $ (10,499) $ (8,324)
Net income (loss)
for the period 1,708 4,876 (2,463) 6,232
Discontinued
operations - 2,396 - 2,396
Restructuring costs - (360) - (2,796)
---------------------------------------------------
Balance, end of
period $ (12,962) $ (2,492) $ (12,962) $ (2,492)
---------------------------------------------------
---------------------------------------------------
Comprehensive income
(loss)
Net income (loss)
for the period $ 1,708 $ 4,876 $ (2,463) $ 6,232
Unrealized gain
(loss) on
investments 432 (1,454) 437 (296)
---------------------------------------------------
Comprehensive
income (loss) $ 2,140 $ 3,422 $ (2,026) 5,936
---------------------------------------------------
---------------------------------------------------
Accumulated other
comprehensive
income (loss)
Balance, beginning
of period $ 5 $ 1,158 $ - $ -
Unrealized gain
(loss) on
investments 432 (1,454) 437 (296)
---------------------------------------------------
Balance, end of
period $ 437 $ (296) $ 437 $ (296)
---------------------------------------------------
---------------------------------------------------
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)
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Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
---------------------------------------------------
Revenue
Oil revenue $ 23,441 $ 33,543 $ 56,600 $ 92,377
Royalties (5,368) (7,790) (14,243) (18,689)
Interest 216 541 697 1,141
---------------------------------------------------
18,289 26,294 43,054 74,829
---------------------------------------------------
Expenses
Operating 6,083 7,503 17,343 20,902
Sales and
transportation 2,739 1,932 6,168 5,323
General and
administrative 1,410 2,157 4,693 6,282
Interest and bank
charges 685 361 1,283 897
Interest on term loans 205 184 552 812
Foreign exchange
(gain) loss (2,638) 661 (3,670) 876
Stock-based
compensation (Note 8) 923 1,137 3,083 5,922
Amortization of
deferred financing costs
(Note 5) 692 - 1,128 -
Depletion, depreciation
and accretion 3,877 3,327 11,759 9,367
---------------------------------------------------
13,976 17,262 42,339 50,381
---------------------------------------------------
Income from
continuing operations
before income tax 4,313 9,032 715 24,448
Future income tax
expense (Note 7) (2,605) (4,156) (3,178) (18,028)
---------------------------------------------------
Income (loss) from
continuing operations 1,708 4,876 (2,463) 6,420
Discontinued operations - - - (188)
---------------------------------------------------
Net income (loss) for
the period $ 1,708 $ 4,876 $ (2,463) $ 6,232
---------------------------------------------------
---------------------------------------------------
Basic earnings (loss)
per share -
continuing
operations $ 0.008 $ 0.027 $ (0.012) $ 0.037
---------------------------------------------------
---------------------------------------------------
Diluted earnings
(loss) per share -
continuing
operations $ 0.008 $ 0.026 $ (0.012) $ 0.035
---------------------------------------------------
---------------------------------------------------
Basic and diluted
earnings (loss) per
share - discontinued
operations $ - $ - $ - $ (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 Nine months ended
September 30 September 30
-------------------------------------------------------------------------
2009 2008 2009 2008
---------------------------------------------------
Cash provided by (used in):
Continuing operations:
Net income (loss)
from continuing
operations $ 1,708 $ 4,876 $ (2,463) $ 6,420
Items not involving cash:
Depletion,
depreciation and
accretion 3,877 3,327 11,759 9,367
Amortization of
deferred financing
costs 692 - 1,128 -
Future income tax
expense 2,605 4,156 3,178 18,028
Stock-based
compensation 923 1,137 3,083 5,922
Unrealized foreign
exchange (gain)
loss (2,434) 1,299 (2,051) 1,637
---------------------------------------------------
7,371 14,795 14,634 41,374
Change in non-cash
working capital
(Note 11) (2,359) (1,671) (14,960) (1,852)
---------------------------------------------------
5,012 13,124 (326) 39,522
---------------------------------------------------
Cash used in operating
activities of
discontinued operations - - - 10,470
---------------------------------------------------
Investing activities
Additions to property,
plant and equipment (12,104) (25,502) (21,065) (56,367)
Additions to property,
plant and equipment
of discontinued
operations - - - (25,465)
Increase in restricted
cash - - - (1,500)
Change in non-cash
working capital
(Note 11) 1,140 2,564 (3,756) 4,540
---------------------------------------------------
(10,964) (22,938) (24,821) (78,792)
---------------------------------------------------
Financing activities
Issue of shares 24,952 6,852 63,475 79,914
Share issue costs - (5) (2,220) (1,490)
Note receivable 323 (2,465) 1,658 (13,000)
Short-term deposits 2,000 - (2,000) -
Restructuring costs - (360) - (2,796)
Deferred financing costs (222) - (1,768) -
Increase (decrease) in
operating loan (359) (484) 2,042 215
Increase (decrease) in
term loans (937) (937) 1,188 (3,437)
Change in non-cash
working capital
(Note 11) - (1,836) - 600
---------------------------------------------------
25,757 765 62,375 60,006
---------------------------------------------------
Foreign exchange gain
(loss) on cash and
cash equivalents held
in foreign currencies 2,434 (1,299) 2,051 (1,637)
---------------------------------------------------
Increase (decrease) in
cash and cash
equivalents 22,239 (10,348) 39,279 29,569
Cash and cash
equivalents, beginning of
period 32,647 42,516 15,607 2,599
---------------------------------------------------
Cash and cash
equivalents, end of
period (Note 11) $ 54,886 $ 32,168 $ 54,886 $ 32,168
---------------------------------------------------
---------------------------------------------------
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 and income taxes will be significantly 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 $11.3 million (December 31, 2008 - $13.0
million) represents the amount due from BNK Petroleum Inc. (BKX).
The note, which is due in October 2012, accrues interest at London
InterBank Offered Rate (LIBOR) plus 5.5% and is secured by a floating
charge debenture and a general security agreement. At September 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 September 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 common
directors. Subsequent to September 30, 2009, BKX announced an equity
financing, expected to close on November 13, 2009 and expects to
repay approximately $10.0 million of the subordinated loan and
interest outstanding. 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.
4. PROPERTY, PLANT AND EQUIPMENT
The following table summarizes the Company's property, plant and
equipment as at September 30, 2009 and December 31, 2008:
September 30, 2009
---------------------------------------------------------------------
Accumulated
Depletion
and Net Book
($000s) Cost Depreciation Value
---------------------------------------------------------------------
Oil properties $ 209,260 $ 38,963 $ 170,297
Equipment, furniture
and fixtures 3,611 1,601 2,010
----------------------------------------
$ 212,871 $ 40,564 $ 172,307
----------------------------------------
----------------------------------------
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
September 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 September 30, 2009 included $277.4 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 $0.8 million and $2.6 million during the
three and nine months periods ended September 30, 2009, respectively
($0.8 million and $2.6 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:
Facility
($000s) Amount Outstanding Amount
---------------------------------------------------------------------
September 30, December 31,
2009 2008
-----------------------------
Raiffeisen Bank
---------------
Operating loan (a) $ 20,000 $ 19,542 $ 17,500
Term loan - 2006 (b) 7,813 7,813 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 - -
----------------------------------------
$ 141,813 $ 31,355 $ 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 September 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 September 30, 2009 the entire term loan
was utilized. Of the amount outstanding, $3.8 million is classified
as current and $4.0 million as long-term. Principal repayments of the
term loan over the next three years are:
($000s)
---------------------------------------------------------------------
2009 $ 938
2010 3,750
2011 3,125
------------
$ 7,813
------------
------------
(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 September 30,
2009, the entire facility was utilized. Of the amount outstanding,
$0.8 million is classified as current and $3.2 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
An 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 LIBOR
plus 4.5%. A standby fee of 0.5% is charged on the unutilized
portion. At September 30, 2009 none of the facility was drawn.
Principal repayments commence in April 2013 in bi-annual instalments
of $0.5 million with maturity on October 15, 2017.
(e) Revolving loans
In May 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 during the third
quarter of 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 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 September 30, 2009 none of the facility was drawn. For
each of Tranche I and Tranche II, the amounts decline to $16.5
million on October 15, 2013, $8.3 million on October 14, 2014 with
final repayment due on October 15, 2015. Setup costs of $15.9 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 September 30,
2009 at $23.9 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 $3.7
million as at September 30, 2009.
($000s)
---------------------------------------------------------------------
Asset retirement obligations, December 31, 2008 $ 2,896
Liabilities incurred during the period 556
Accretion 220
------------
Asset retirement obligations, September 30, 2009 $ 3,672
------------
------------
7. INCOME TAXES
Future income tax expense relates to the Albanian operations and
results from the following:
September 30 December 31
($000s) 2009 2008
---------------------------------------------------------------------
Net book value of property, plant
and equipment, net of asset
retirement obligations $ 164,692 $ 151,972
Cost recovery pool (95,320) (88,956)
-----------------------------
Timing difference $ 69,372 $ 63,016
-----------------------------
-----------------------------
Future income tax liability at 50% $ 34,686 $ 31,508
-----------------------------
-----------------------------
The cost recovery pool represents deductions for income tax purposes
in Albania at 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 Nine months ended
September 30 September 30
---------------------------------------------------------------------
2009 2008 2009 2008
---------------------------------------------------------------------
Income before
income taxes 4,313 9,032 715 24,448
Statutory tax rate 29.00% 29.50% 29.00% 29.50%
------------------------------------------
1,251 2,664 207 7,212
Difference in tax rates between
Albania and Canada 855 2,440 697 6,937
Non-deductible expenses 268 335 894 1,902
Valuation allowance and
other 231 (1,283) 1,380 1,977
------------------------------------------
Future income tax expense 2,605 4,156 3,178 18,028
------------------------------------------
------------------------------------------
8. SHAREHOLDERS' EQUITY
(a) Share Capital
Authorized
Unlimited number of common shares with no par value.
Issued
Number of
Common Shares Amount ($000)
---------------------------------------------------------------------
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
Warrants exercised 16,407,924 36,979
Stock options exercised 1,291,239 3,770
Share issuance costs - (2,220)
---------------------------------------
Balance, September 30, 2009 225,383,142 $ 198,785
---------------------------------------
---------------------------------------
* 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
In May 2009, the Company completed an equity offering 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.
In July 2009, EBRD and IFC exercised warrants to purchase 16 million
common shares of the Company at a price of CAD$1.50 per share,
generating proceeds of approximately $21.9 million.
The following table summarizes the calculation of basic and diluted
weighted average number of common shares:
Three months ended Nine months ended
September 30 September 30
---------------------------------------------------------------------
2009 2008 2009 2008
---------------------------------------------------------------------
Weighted-average
number of common
shares
outstanding
- basic 220,615,444 182,237,294 200,225,147 174,250,384
Dilution effect
of stock
options(xx) 4,452,078 3,063,227 - 3,286,036
Dilution effect
of warrants(xx) 2,449,106 3,812,929 - 4,131,498
----------------------------------------------------
Weighted-average
number of
common shares
outstanding
- diluted 227,516,628 189,113,450 200,225,147 181,667,918
----------------------------------------------------
----------------------------------------------------
(xx) Due to net loss for the nine months period ended September 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
Transferred to share capital
on exercise (16,407,924) (14,181)
-------------------------------------
Balance, September 30, 2009 9,305,451 $ 2,043
-------------------------------------
-------------------------------------
* 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
In May 2009, the Company 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 entitled 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. All the above warrants were exercised during
the three months ended September 30, 2009.
Subsequent to September 30, 2009, 2.7 million of the November 2009
warrants were exercised generating proceeds of CAD$6.8 million.
Approximately 428,000 November 2009 warrants remained unexercised at
their expiry on November 10, 2009 and have been cancelled.
The following table summarizes the outstanding and exercisable
warrants at September 30, 2009:
---------------------------------------------------------------------
Weighted
Average
Number of Warrants Exercise
Outstanding and Price
Expiry Date exercisable (CAD$)
---------------------------------------------------------------------
November 10, 2009 3,165,117 2.49
November 15, 2010 1,266,667 2.63
March 1, 2012 4,873,667 2.37
-------------------------------------
9,305,451 2.45
-------------------------------------
-------------------------------------
(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 (1,291,239) 1.99
Forfeited (1,372,442) 2.77
-------------------------------------
Balance, September 30, 2009 12,302,447 2.24
-------------------------------------
-------------------------------------
(d) Stock-based Compensation
Using the fair value method for stock-based compensation, the Company
calculated stock-based compensation expense for the three and nine
months periods ended September 30, 2009 as $1.3 million and $4.3
million, respectively ($1.4 million and $7.0 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, $0.9 million and $3.1 million ($1.1 million and $5.9 million
for the same periods in 2008) were charged to earnings and $0.4
million and $1.2 million ($0.4 million and $1.1 million for the same
periods in 2008) were capitalized. The Company determined these
amounts using the Black-Scholes option pricing model assuming no
dividends were paid. The weighted average fair market value per
option granted in the three and nine months periods ended September
30, 2009 and 2008 and the assumptions used in their determination
were as follows:
Three months ended Nine months ended
September 30 September 30
---------------------------------------------------------------------
2009 2008 2009 2008
---------------------------------------------------------------------
Weighted average fair value
per option(CAD$) - 2.24 1.55 2.49
Risk-free interest rate (%) - 3.09 2.33 3.28
Average volatility (%) - 74 125 72
Expected life (years) - 5 5 5
(e) Contributed Surplus
The following table summarizes the changes in contributed surplus as
of September 30, 2009 and December 31, 2008:
($000s) 2009 2008
---------------------------------------------------------------------
Balance, beginning of period $ 11,862 $ 8,308
Stock-based compensation 4,284 9,136
Discontinued operations - (1,591)
Transferred to share capital
on exercise (1,442) (3,991)
-------------------------------
Balance, end of period $ 14,704 $ 11,862
-------------------------------
-------------------------------
9. SEGMENTED INFORMATION
The Company defined its reportable segments based on geographic
locations.
Nine months ended September 30,
2009 ($000s) Albania Canada Total
---------------------------------------------------------------------
Revenue
Oil revenue $ 56,600 $ - $ 56,600
Royalties (14,243) - (14,243)
Interest 1 696 697
----------------------------------------
42,358 696 43,054
----------------------------------------
Expenses
Operating 17,343 - 17,343
Sales and transportation 6,168 - 6,168
General and administrative 2,257 2,436 4,693
Interest and bank charges 860 423 1,283
Interest on term loan 552 - 552
Foreign exchange (gain) loss (56) (3,614) (3,670)
Stock-based compensation 247 2,836 3,083
Amortization of deferred
financing costs - 1,128 1,128
Depletion, depreciation
and accretion 11,666 93 11,759
----------------------------------------
39,037 3,302 42,339
----------------------------------------
Income (loss) before
income taxes 3,321 (2,606) 715
Future income tax expense (3,178) - (3,178)
----------------------------------------
Net income (loss) for
the period $ 143 $ (2,606) $ (2,463)
----------------------------------------
----------------------------------------
Assets, September 30, 2009 $ 203,291 $ 88,921 $ 292,212
----------------------------------------
----------------------------------------
Additions to property,
plant and equipment $ 21,008 $ 57 $ 21,065
----------------------------------------
----------------------------------------
Nine months ended September 30,
2008 ($000s) Albania Canada Total
---------------------------------------------------------------------
Revenue
Oil revenue $ 92,377 $ - $ 92,377
Royalties (18,689) - (18,689)
Interest - 1,141 1,141
----------------------------------------
73,688 1,141 74,829
----------------------------------------
Expenses
Operating 20,902 - 20,902
Sales and transportation 5,323 - 5,323
General and administrative 2,468 3,814 6,282
Interest and bank charges 897 - 897
Interest on term loans 812 - 812
Foreign exchange (gain) loss (412) 1,288 876
Stock-based compensation 611 5,311 5,922
Depletion, depreciation
and accretion 9,248 119 9,367
----------------------------------------
39,849 10,532 50,381
----------------------------------------
Income (loss) from
continuing operations
before income taxes 33,839 (9,391) 24,448
Future income tax expense (18,028) - (18,028)
----------------------------------------
Income (loss) from
continuing operations $ 15,811 $ (9,391) 6,420
---------------------------
---------------------------
Discontinued operations (188)
------------
Net income for the period $ 6,232
------------
------------
Assets, September 30, 2008 $ 166,257 $ 50,721 $ 216,978
----------------------------------------
----------------------------------------
Additions to property,
plant and equipment $ 56,304 $ 63 $ 56,367
----------------------------------------
----------------------------------------
Three months ended September 30,
2009 ($000s) Albania Canada Total
---------------------------------------------------------------------
Revenue
Oil revenue $ 23,441 $ - $ 23,441
Royalties (5,368) - (5,368)
Interest - 216 216
----------------------------------------
18,073 216 18,289
----------------------------------------
Expenses
Operating 6,083 - 6,083
Sales and transportation 2,739 - 2,739
General and administrative 689 721 1,410
Interest and bank charges 262 423 685
Interest on term loan 205 - 205
Foreign exchange (gain) loss 107 (2,745) (2,638)
Stock-based compensation 72 851 923
Amortization of deferred
financing costs - 692 692
Depletion, depreciation
and accretion 3,846 31 3,877
----------------------------------------
14,003 (27) 13,976
----------------------------------------
Income before income taxes 4,070 243 4,313
Future income tax expense (2,605) - (2,605)
----------------------------------------
Income for the period $ 1,465 $ 243 $ 1,708
----------------------------------------
----------------------------------------
Additions to property,
plant and equipment $ 12,097 $ 7 $ 12,104
----------------------------------------
----------------------------------------
Three months ended September 30,
2008 ($000s) Albania Canada Total
---------------------------------------------------------------------
Revenue
Oil revenue $ 33,543 $ - $ 33,543
Royalties (7,790) - (7,790)
Interest - 541 541
----------------------------------------
25,753 541 26,294
----------------------------------------
Expenses
Operating 7,503 - 7,503
Sales and transportation 1,932 - 1,932
General and administrative 851 1,306 2,157
Interest and bank charges 361 - 361
Interest on term loan 184 - 184
Foreign exchange (gain) loss (387) 1,048 661
Stock-based compensation 118 1,019 1,137
Depletion, depreciation
and accretion 3,286 41 3,327
----------------------------------------
13,848 3,414 17,262
----------------------------------------
Income (loss) from continuing
operations before income taxes 11,905 (2,873) 9,032
Future income tax expense (4,156) - (4,156)
----------------------------------------
Net income (loss) for
the period $ 7,749 $ (2,873) $ 4,876
----------------------------------------
----------------------------------------
Additions to property,
plant and equipment $ 25,493 $ 9 $ 25,502
----------------------------------------
----------------------------------------
10. COMMITMENTS
The Company leases office premises, requiring minimum lease payments
of:
($000s) Albania Canada Total
---------------------------------------------------------------------
2009 $ 48 $ 40 $ 88
2010 191 55 246
2011 191 - 191
2012 8 - 8
----------------------------------------
$ 438 $ 95 $ 533
----------------------------------------
----------------------------------------
The Company has debt repayment commitments as disclosed in Note 5.
11. SUPPLEMENTAL CASH FLOW INFORMATION
Three months ended Nine months ended
September 30 September 30
---------------------------------------------------------------------
2009 2008 2009 2008
---------------------------------------------------------------------
Operating activities
(Increase) decrease
in current assets
Accounts
receivable $ (4,206) $ 971 $ (9,758) $ (4,809)
Crude oil
inventory 327 (750) 293 (1,219)
Deposit and
prepaid
expenses (1,925) (2,738) (1,955) (3,098)
(Decrease) increase
in current
liabilities
Accounts payable
and accrued
liabilities 3,445 846 (3,540) 7,274
---------------------------------------------------
$ (2,359) $ (1,671) $ (14,960) $ (1,852)
---------------------------------------------------
---------------------------------------------------
Investing
activities
(Decrease)
increase
in current
liabilities
Accounts payable
and accrued
liabilities $ 1,140 $ 2,564 $ (3,756) $ 4,540
---------------------------------------------------
---------------------------------------------------
Financing
activities
(Decrease)
increase in
current
liabilities
Accounts
payable
and accrued
liabilities $ - $ (1,836) $ - $ 600
---------------------------------------------------
---------------------------------------------------
Interest paid $ 467 $ 454 $ 1,412 $ 1,709
---------------------------------------------------
---------------------------------------------------
Interest received $ 226 $ 541 $ 1,004 $ 1,141
---------------------------------------------------
---------------------------------------------------
September 30, December 31,
2009 2008
---------------------------------------------------------------------
Cash and cash equivalents
Cash $ 1,598 $ 933
Fixed income investments 53,288 14,674
----------------------------
$ 54,886 $ 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 September 30, 2009, the Company's receivables
consisted of $27.1 million (December 31, 2008 - $16.9 million) of
receivables from petroleum refineries and $0.2 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
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Albania $ 13,952 $ - $ 3,502 $ 9,687 $ 27,141
Canada 208 - - - 208
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$ 14,160 $ - $ 3,502 $ 9,687 $ 27,349
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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
$27.1 million in Albania, approximately $14.0 million (December 31,
2008 - $13.6 million) is due from one domestic customer of which
$13.2 million is considered past due. The Company received $0.5
million from this customer as payments on account of sales during the
quarter and received $1.5 million subsequent to September 30, 2009.
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. In Canada, no amounts are
considered impaired.
The carrying amount of accounts receivable represents the maximum
credit exposure. As of September 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 $11.3 million
Note Receivable from BKX and regularly monitors the operations and
financial condition of the borrower (See Note 3). Subsequent to
September 30, 2009, BKX expects to complete an equity financing on
November 13, 2009 and has agreed to repay approximately $10.0 million
of the note and interest outstanding.
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: [email protected], 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; Macquarie Capital Advisors, Paul Connolly, Ben Colegrave, +44 (0) 20 3037 2000
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