Exit Production Rate for the third quarter exceeds 6,200 bopd
CALGARY, Oct. 9 /CNW/ - Bankers Petroleum Ltd. (TSX: BNK, AIM: BNK) is
pleased to announce the following operational and corporate updates.
Third quarter production averaged 5,881 bopd from the Patos Marinza oil
field in Albania compared to second quarter production of 5,826 bopd. Net oil
inventory at the end of September was 5,660 barrels higher compared to the
second quarter inventory. Timing of successful re-activation and new wells
being placed on production impacted average production for the quarter,
however, exit production rate exceeded 6,200 bopd and the Company is on track
to meet its production target of 7,000 bopd by the end of this year. During
the quarter, 39 re-activation operations of existing wells were completed with
24 wells placed on production.
Expansion of the second train of the 8,000 bopd Central Treating Facility
with the construction of a second emulsion receiving and water tank was
completed during the quarter. The tanks are aimed toward improving the water
quality for disposal purposes and as potential source water for the upcoming
Initial waterflood formation and area selection, pattern layout and
design have been finalized. Injectivity tests will commence this month on
selected injection wells to determine expected rates and pressures. Initial
pattern conversions are anticipated to commence before year end. Detailed
third party reservoir simulation work has commenced to optimize waterflood
performance and production rate predictions.
Bankers initiated its vertical infill drilling program on June 21, 2008
with the first four new wells having been drilled from one pad to evaluate the
different producing horizons. The initial production rates from these wells
has been between 15 and 40 bopd per well from four different zones. All zones
are producing sand at various concentrations of up to 30 percent, which is
typical of initial production in heavy oil reservoirs and encouraging in that
it demonstrates the initiation of the Cold Heavy Oil Production with Sand
process ("CHOPS"). As the wells continue to clean up, it is expected that
production rates from each individual well will continue to increase. Overall
the production levels from the new wells are in line with forecast. Further
evaluation of untested zones will continue with added perforations.
In addition, three wells have been drilled and cased from the second pad
with completion commencing immediately. The drilling program is continuing
with the rig currently drilling the first of five locations from a third pad.
Bankers has entered into a contract, with an unrelated party, for the
provision of drilling and service rigs with Peritus International Oilfield
Services Ltd., a subsidiary of Precision Drilling Corporation of Calgary. The
contract is for two years with an option to extend for a third year and
provides Bankers with one drilling rig and three service rigs with an option
for a second drilling rig in 2009. This will bring the total number of rigs
available to two drilling rigs and 10 service rigs before the end of this
year. The rigs are planned to mobilize in October, arriving in Albania in late
November, with an anticipated spud date for the drilling rig of December 1,
Patos Marinza Oil Price
Third quarter average oil price achieved was $62.55 per barrel (54% of
the Brent oil price), 3% lower than the second quarter price of $64.42 per
barrel, in line with commodity price changes.
New Royalty Tax Mitigation
Agreement has been reached on the terms of an Amending Agreement to the
Petroleum Agreement dated June 19, 2004 with Albpetrol Sh. A., the Albanian
national oil company. The Amending Agreement was prepared to include the
necessary incentive amendments to the Petroleum Agreement that will mitigate
the overall economic impact to Bankers resulting from imposition of the 10%
Royalty Tax announced in August by the Albanian Government.
The amendments include: a) establishing the Royalty Tax as an allocation
of produced volumes to the Government of Albania, thereby deducting the value
from production revenues to arrive at Cost Recovery Petroleum value and b)
providing for the addition of an amount equal in value to the amount of
Royalty Tax paid which exceeds that which would have been paid under prior
arrangements as a Petroleum Cost, thereby allowing deduction of the amount in
the calculation of Profit Oil. After the payout period, the full amount of the
Royalty Tax paid will be considered excess and thus will be added to Petroleum
Costs. These changes will mitigate the overall economic impact to Bankers
resulting from imposition of the 10% Royalty Tax and on an undiscounted basis
total payments to the government remain unchanged.
While the Company is awaiting the final approval of the new tax law and
associated regulations by the Albanian Parliament, these amendments and all
other agreements with Albpetrol have been incorporated in the Company's second
quarter financial report, in future reporting and in the Plan of Development
of Patos Marinza Field.
The agreement reached for the above amendments provide the framework that
will also be applied to the Kucova oil field contract. The reserves report for
this field is currently being finalized and the Company expects to disclose
its details by the end of October 2008.
The Company is in an ongoing data acquisition phase of Albpetrol data in
Kucova. Plans to start field activities are on target and the Company expects
to initiate field testing before year end.
The Company is pleased to announce that the Standard & Poor's Canadian
index operations have added Bankers Petroleum to the S&P/TSX Composite index
effective September 22, 2008.
Mr. Ford Nicholson a director of the Company has resigned for personal
reasons effective October 7, 2008. The management and board would like to
thank Mr. Nicholson for his four years of service with Bankers Petroleum.
Equity & Liquidity
Approximately 1.2 million options and 5.6 million warrants were exercised
during the third quarter, generating proceeds of approximately $6.9 million.
Total cash on deposit at the end of September 2008 was approximately $32
million and $7.8 million working capital excluding cash. The Company's
existing credit facility with Raiffeisen Bank of Austria has been recently
approved to be increased to $50 million. Current outstanding debt is $27.6
Abby Badwi President and CEO of Bankers said:
"The global financial crisis and the liquidity and volatility issues in
the credit markets had a serious negative impact on the equity value of many
public companies including Bankers Petroleum. Record oil prices this summer
and the subsequent decline to current levels have also contributed to this
decline in our share price in the last few weeks.
Bankers Petroleum has planned its 2009 and 2010 capital budget to be
self-funding out of a strong internal cash flow profile, current cash on hand
and existing credit facility. While economists have revisited the oil price
forecast in 2009 to be between $90 and $100 a barrel, Bankers' budget is based
on $84 Brent oil price for 2009 and $80 for 2010.
While our short and long term goals to achieve production and reserve
growth remain unchanged at this stage, Bankers capital program is flexible and
can be modified at any time to address prevailing economic conditions. Our
team will remain focused on achieving our objectives but we will also be
prudent and proactive to maintain a strong balance sheet and carefully manage
our capital requirements".
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 oil field and has a 100% interest in the Kucova oil field. Bankers'
shares are traded on the Toronto Stock Exchange and the AIM Market in London,
England under the stock symbol BNK.
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: firstname.lastname@example.org, 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