Bankers Petroleum Significantly Increases Revenue and Net Operating Income in Second Quarter 2007



    Promising Woodford Shale Sections Encountered in Several Oklahoma Wells

    Unless otherwise noted, all figures contained in this release are in U.S.
    dollars.

    CALGARY, Aug. 9 /CNW/ - Bankers Petroleum Ltd. (TSX: BNK, AIM: BNK) today
announced strong results and improvements in all financial areas in its second
quarter of 2007. Revenue for the quarter increased 74% to $12.9 million
compared to $7.4 million in the second quarter of 2006. Net operating income
grew to 1.4 million in the quarter from a loss of $0.7 million in the second
quarter of 2006. Funds from operations were $4.8 million, compared to
$3.2 million for the comparable period in 2006.
    "Our ability to increase exports, capturing the discount relative to our
domestic sales and higher international oil prices, have substantially
contributed to increasing our netback to over $16 per barrel in the quarter,"
said Richard Wadsworth, President. "Our continuing efforts to improve
operations on all fronts have resulted in gains in production, revenue,
netback and funds from operations while decreasing operating costs in
Albania."
    Mr. Wadsworth continued, "In the U.S., we've advanced our exploration
program substantially with the drilling of our first horizontal wells in
Oklahoma and participation in numerous others. While we're still undergoing
testing on the first horizontal well, preliminary flowback results have been
positive, leading us closer to a development plan for the Ardmore basin. This
basin represents a significant growth opportunity for the Company if
production and reserve levels from our wells are similar to those of other
operators in the area. In addition, we continue to work towards showing
repeatability in our drilling activities for the Palo Duro basin, and are
making continuous progress."

    Second Quarter Highlights:

    
    -   Average production increased 49% to 4,746 bopd from 3,193 bopd for
        the same period in 2006, and 8% compared to 4,380 bopd for the first
        quarter of 2007.

    -   Exit production for June 2007 was approximately 5,000 bopd.

    -   Oil and gas revenue rose 74% to $12.9 million from $7.4 million in
        the comparable period in 2006, and 21% from $10.7 million in the
        first quarter of 2007.

    -   The netback in Albania improved to $16.14 per barrel from $11.42 in
        the preceding quarter and $11.09 per barrel for the same period in
        2006.

    -   Funds from operations increased to $4.8 million from $2.9 million and
        $3.3 million for the first quarter of 2007 and the corresponding
        period in 2006, respectively.

    -   All required equipment for the Company's cyclical steam pilot is in
        country in order to commence testing operations in the second half
        of 2007.

    -   Approximately 60% of the Company's crude oil was exported during the
        second quarter at an average price of $36.15 per barrel.

    -   In Oklahoma, Bankers completed its first horizontal well,
        Greenway (No.) 35-1H, which offsets the Nickel Hill (No.) 1-26
        discovery well. Approximately 2,800 feet of horizontal section was
        successfully fracture stimulated in the upper, middle and lower
        Woodford intervals. The Greenway 35-1H well is currently flowing back
        fracture fluid and undergoing testing.

    -   In Texas, Bankers drilled the Black 4 (No.) 1 well, which encountered
        a 280 foot thick Bend Shale interval as well as numerous potentially
        productive Granite Wash Sands intervals.

    -   A second horizontal well was spudded about 10 miles to the southeast
        of the Greenway well, the W.L.C. 17-1H. The horizontal portion of
        the well is now being drilled, which is projected to extend to a
        length of 3,000 feet. The analysis of the vertical wellbore
        indicates a 325 foot thick Woodford shale section that compares
        favorably with the other wells drilled in the area.
    

    Conference Call:

    A conference call to discuss these results will be held Friday, August 10
at 9:00 a.m. MDT, 11:00 a.m. EDT, 4:00 p.m. BDT. To participate in the
conference call, please dial 1-866-250-4910 or 1-416-915-5648 approximately 10
minutes prior to the call. A live and archived audio webcast of the conference
call will also be available on Bankers' website at www.bankerspetroleum.com.

    About Bankers Petroleum Ltd.

    Bankers Petroleum Ltd. is a Canadian-based oil and gas exploration and
production company focused on opportunities in unconventional petroleum
assets. Bankers holds interests in four prospects in the Northern and Central
regions of the United States, where it is currently pursuing the exploration
of shale and tight gas sand plays. It also operates in the Patos-Marinza
oilfield in Albania pursuant to a license agreement, producing heavy oil.
Bankers shares are traded on the Toronto Stock Exchange and the AIM Market in
London, England under the ticker 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 month periods ended June 30, 2007,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 month periods ended June 30, 2007
and the audited financial statements and MD&A for the year ended December 31,
2006. Additional information relating to Bankers, including its Annual
Information Form, is on SEDAR at www.sedar.com or on the Company's website at
www.bankerspetroleum.com. All dollar values are expressed in U.S. dollars,
unless otherwise indicated.
    This report is prepared as of August 9, 2007.

    NON-GAAP MEASURES

    Funds from operations are a non-GAAP measure that represents cash
generated from (used in) operating activities before changes in non-cash
working capital. The Company considers this a key measure as it demonstrates
its ability to generate the cash flow necessary to fund future growth.
    Netback per barrel and its components are calculated by dividing revenue,
royalties, operating, sales and transportation expenses by the gross sales
volume during the period. Netback per barrel is a non-GAAP measure but 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 and sales and transportation expenses.
The Company believes that net operating income is a useful supplemental
measure to analyze operating performance and provide an indication of the
results generated by the Company's principal business activities prior to the
consideration of other income and expenses.
    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.

    CAUTION REGARDING FORWARD-LOOKING INFORMATION

    Certain information contained in this news release and MD&A respecting
the Company and the Company's properties constitute forward-looking
statements. The use of any of the words "target", "plans", "anticipate",
"continue", "estimate", "expect", "may", "will", "project", "should",
"believe" and similar expressions are intended to identify forward-looking
statements. Such forward-looking information, including but not limited to
statements as to production targets, timing of the Company's planned work
program and management's belief as to the potential of certain properties,
involve known and unknown risks, uncertainties and other factors which may
cause the actual results of the Company and its operations to be materially
different from estimated costs or results expressed or implied by such
forward- looking statements.
    Such factors include, among others general risks and uncertainties
associated with exploration, petroleum operations and risks associated with
equipment procurement and equipment failure as well as those described under
"Risk Factors" in the Company's Annual Information Form and in each management
discussion and analysis. Although the Company has attempted to take into
account important factors that could cause actual costs or results to differ
materially, there may be other factors that cause costs of the Company's
program or results not to be as anticipated, estimated or intended. There can
be no assurance that such statements will prove to be accurate as actual
results and future events could differ materially from those anticipated in
such statements. Accordingly, readers should not place undue reliance on
forward-looking information.

    
    OVERVIEW

                    Three months ended June 30      Six months ended June 30
                  ----------------------------- -----------------------------
    Results at
     a Glance         2007      2006         %      2007      2006         %
    -------------------------------------------------------------------------
    Financial
     ($000s, except
     as noted)
    Oil and gas
     revenue        12,913     7,407        74    23,652    13,096        81
    Net operating
     income          6,332     3,205        98    10,842     5,101       125
    Income (loss)
     for the period    600      (253)      337      (450)   (1,246)       64
    Funds from
     operations      4,792     3,251        47     7,644     3,975        92
    Additions to
     property,
     plant and
     equipment      23,257    29,106       (20)   37,271    42,500       (12)
    Total assets                                 175,550   124,321        41
    Shareholders'
     equity                                      136,596   112,229        22

    Operating
    Average daily
     production
     (bopd)          4,746     3,193        49     4,564     2,888        58
    Average sales
     volume (bopd)   4,314     3,175        36     4,351     2,826        54
    Average price
     ($/barrel)      32.89     25.64        28     30.03     25.60        17
    Netback
     ($/barrel)      16.14     11.09        46     13.77      9.97        38

    Bankers continued to increase production, revenues, netback and funds from
operations during the three month period ended June 30, 2007:

    -   Average production was 4,746 bopd compared to 4,380 bopd for the
        first quarter of 2007 and 3,193 bopd for the same period in 2006,
        increases of 8% and 49% respectively.

    -   Exit production for June 2007 was approximately 5,000 bopd.

    -   Higher production and average oil sales price resulted in increased
        revenues of $12.9 million for the quarter compared to $10.7 million
        in the preceding quarter and $7.4 million for the same period in
        2006.

    -   Netback improved to $16.14 per barrel from $11.42 per barrel in the
        preceding quarter and $11.09 per barrel for the same period in 2006,
        increases of 41% and 46% respectively.

    -   Net income for the period was $600,000 compared to losses of
        $1.1 million and $253,000 for the preceding quarter and the
        corresponding period in 2006.

    -   Funds from operations increased to $4.8 million from $2.9 million and
        $3.3 million for the three months ended March 31, 2007 and the
        corresponding period in 2006, respectively.
    

    Albania

    The Company exported 60% of its crude during the second quarter of 2007
at an average price of $36.15 per barrel. In comparison, exports made up 39%
of the sales during the previous quarter at an average price of $28.67 per
barrel. Domestic sale price averaged $28.10 per barrel compared to $26.26 per
barrel for the preceding quarter and $23.58 per barrel for the same period in
2006.
    The increased export volumes and prices helped Bankers to receive a
substantially higher average oil price. The Company averaged $32.89 per barrel
during the second quarter of 2007 compared to $27.19 per barrel for the
previous quarter and $25.64 for the same period in 2006, increases of 21% and
28% respectively.
    Of significance in the quarter was the arrival of equipment required for
the steam pilot project. Bankers intends to commence testing operations on one
or more wells during the second half of the year to test the equipment,
injection parameters and assumptions in order to optimize operations for a
steam pilot during 2008. The 2008 steam pilot would involve the drilling of
new directional wells from a single pad location, including building the
necessary production facilities for initial cyclic steam injection followed by
steam flooding. Final approvals for this program are being sought from
Albpetrol and the Albanian government.

    United States

    In Oklahoma, Bankers drilled and completed its first horizontal well,
Greenway (No.) 35-1H, in the second quarter. The Greenway (No.) 35-1H well
offsets the Nickel Hill (No.) 1-26 discovery well and is currently flowing
back fracture fluid and undergoing testing. Other events in the quarter
include:

    
    -   A production facility for the Nickel Hill and Greenway wells is
        currently being constructed with an expected end of August completion
        date.

    -   Bankers is in the process of drilling a second horizontal well about
        10 miles to the southeast of the Greenway well, the W.L.C. 17-1H. The
        vertical portion is complete, encountering a 325 foot thick Woodford
        shale section.

    -   The Company has also participated in four vertical wells operated by
        others; all wells encountered promising Woodford shale sections in
        its Carter and Johnson County play.

    -   Bankers participated in another vertical well in Hughes County, which
        encountered a Woodford shale section that was similar to those
        encountered in the Lake Holdenville 35-1 well and other wells in the
        area.
    

    In Texas, Bankers air drilled and completed the vertical Cogdell
(No.) 64-1 well in the Palo Duro Basin during the first quarter. The Granite
Wash Sand was successfully fracture stimulated and produced at an average rate
of 325 Mcf/d with no condensate and about 24 bbls/d of fracture fluid on the
last 7 days of a 10-day flow test. In the second quarter, Bankers fracture
stimulated the Bend shale interval, which is flowing back fracture fluid and
undergoing testing. In addition:

    
    -   Bankers drilled the Black 4 (No.) 1 well, which encountered a more
        thermally mature 280 foot thick Bend shale interval as well as
        numerous potentially productive Granite Wash Sands intervals.

        -  A brief test of the sand is planned, which will be followed by
           fracture stimulating the primary target, the Bend shale.

    -   Bankers intends to drill a horizontal test of the Granite Wash Sands
        in an attempt to substantially increase the 325 Mcf/d flow rate
        achieved from the vertical well in this interval.
    

    DISCUSSION OF OPERATING RESULTS

    Production and Revenue

    During the quarter, production continued to increase as more wells were
re-activated and worked over in Albania, bringing the active well count to 163
from 134 in the preceding quarter. As at June 30, 2007, the Company also had
37 wells waiting for servicing and reactivation. Average production increased
to 4,746 bopd during the quarter from 4,380 bopd for the preceding quarter and
from 3,193 bopd from the same period a year ago. The arrival of the third
workover rig during March helped increase the quarterly production gains
closer to forecasted levels. Planned accelerated well take-overs and work
overs during the balance of the year are anticipated to enable Bankers to meet
its previously announced production targets for 2007.
    During the quarter, the Company exported approximately 60% of its crude
oil to two refineries in Italy at an average price of $36.15 per barrel. By
comparison, exports made up 39% of sales in the preceding quarter at an
average price of $28.67 per barrel. Bankers intends to keep its exports at or
above 50% during the balance of the year in order to continue to capture the
significant difference between domestic and export prices.
    The Company's average oil price for the quarter was $32.89 per barrel, up
from $27.19 per barrel for the preceding quarter and $25.64 per barrel for the
same period in 2006.
    Oil and gas revenues for the quarter were $12.9 million up from
$10.7 million for the quarter ended March 31, 2007, and $7.4 million for the
corresponding quarter a year ago, increases of 20% and 74% respectively.

    Royalties, Direct Expenses and Netbacks

    Royalties are calculated pursuant to the Petroleum Agreement with
Albpetrol Sh. A (Albpetrol) in Albania and consist of Albpetrol's pre-existing
production and a 1% gross overriding royalty on production. Royalties
increased to $4.28 per barrel from $3.65 per barrel in the preceding quarter
and $2.98 per barrel for the corresponding period in 2006. The increase in
royalties during the second quarter of 2007 was related to wells taken over
from Albpetrol that increased pre-existing production without a corresponding
increase in the Company's incremental production due to slower than
anticipated growth. Increases in the domestic sale price from $23.58 per
barrel in June 2006 to $26.26 per barrel in March 2007 and $28.10 per barrel
in June 2007 also contributed to the unit increase in royalties.
    Operating expenses per barrel declined moderately to $9.91 per barrel
from $10.16 per barrel in the preceding quarter but were at the same level
with the corresponding period in 2006. The operating expenses are typically
lower during spring/summer months due to reduced energy costs.
    Sales and transportation expenses increased to $2.56 per barrel from
$1.96 per barrel in the preceding quarter and $1.66 per barrel for the same
period in 2006. This increase was directly related to incremental costs of
additional transportation, inspection and port fees associated with the higher
amount of crude oil exports.
    The Company's netback per barrel improved significantly to $16.14 per
barrel from $11.42 per barrel in the preceding quarter and $11.09 per barrel
for the same period in 2006. The increase resulted from higher oil prices.

    
                    Three months ended June 30      Six months ended June 30
                  ----------------------------- -----------------------------
    Netback           2007      2006         %      2007      2006         %
    -------------------------------------------------------------------------
    Average price
     ($/barrel)      32.89     25.64        28     30.03     25.60        17
    Royalties         4.28      2.98        44      3.96      3.01        32
    Sales and
     transportation   2.56      1.66        54      2.26      1.67        35
    Operating         9.91      9.91         -     10.04     10.95        (8)
                  ----------------------------- -----------------------------
    Netback
     ($/barrel)      16.14     11.09        46     13.77      9.97        38
                  ----------------------------- -----------------------------
                  ----------------------------- -----------------------------
    

    General and Administrative Expenses

    General and administrative expenses (G&A) before capitalization were
$2.4 million for the quarter compared to $2.5 million for the preceding
quarter and $1.8 million for the same period in 2006. Despite the effect of
strengthening Canadian dollar against its U.S. counterpart, the Company
managed a modest reduction in G&A for the quarter. The increase in G&A
compared to the same period in 2006 reflect higher personnel costs with the
addition of new employees, higher consulting fees and travel expenses related
to the Company's operating and financing activities.
    During the quarter, the Company charged $1.8 million of G&A to operations
and capitalized $592,000. During the preceding quarter the comparable figures
were $1.7 million and $799,000. For the corresponding period in 2006, the
Company charged $1.5 million of G&A to operations and capitalized $269,000.
Capitalized G&A were directly related to acquisition, exploration and
development activities in Albania and the United States.

    Depletion, Depreciation and Accretion

    Depletion, depreciation and accretion (DDA) expense for the quarter ended
June 30, 2007 were $1.9 million, which was comparable to the preceding
quarter. For the same period in 2006, DDA was $961,000. Depletion expense on a
per barrel basis was $4.02 for the quarter compared to $4.36 and $3.07,
respectively for the preceding quarter and the same period in 2006.

    Future Income Tax Expense

    The net book value of the Albanian assets exceeds their tax values by
$11.8 million. The Company recorded a future income tax expense of
$1.7 million for the quarter compared to $1.0 million for both the preceding
quarter and the same period in 2006 using a tax rate of 50% as a result of
this temporary difference between the carrying and tax values of its assets
and liabilities.
    Bankers is presently not paying cash taxes in any jurisdiction.

    Net Income for the Period and Funds from Operations

    The Company recorded a net income of $600,000 ($0.00 per share) during
the quarter compared to a loss of $1.1 million ($0.00 per share) for the
preceding period and a loss of $253,000 ($0.00 per share) for the same period
in 2006.
    Bankers generated funds from operations of $4.8 million during the
quarter compared to $2.9 million for the preceding quarter and $3.3 million
for the same period in 2006. The increase in funds from operations reflects
higher production and oil prices obtained during the period as well as a
foreign exchange gain of $773,000.

    OPERATIONS UPDATE

    Albania

    Bankers continues to implement its work program for 2007 through well
take-overs and re-activations. Production is currently over 5,000 bopd and is
expected to continue to increase through the remainder of the year. While
production growth continues, the current pace remains below forecast due to
severe hot weather in Albania and constraints on the Company's water disposal
system. Approximately 300 to 400 bopd of production is reduced in the
short-term as a result of these circumstances. Bankers is in the process of
implementing initiatives to remediate this.
    The Company is currently in the process of accelerating well take-overs
in order to increase production by year-end and help overcome the shortfall
experienced in the first half of the year. The capital impact of the
accelerated program is minimal as equipment will be re-deployed from
unsuccessful wells.
    Bankers is expected to commence the testing of steam generation equipment
in Albania during the second half of 2007. The objective of these tests is
twofold: to learn the reservoir response, and to implement the steaming
techniques in field conditions. Following these tests the Company intends to
undertake a pilot with newly drilled wells on a pattern for cyclic steam
injection in 2008 and subsequent steam flooding.
    Further studies and engineering are underway to pursue potential
integration, secondary and other EOR technologies that will be undertaken
during 2008. Bankers is looking to these initiatives as a means of
significantly increasing production and reserve recovery in the Patos Marinza
oilfield.
    The Albanian government recently announced plans for the privatization of
ARMO, the state owned refineries. Headquartered in Fier, ARMO is the only
refiner in Albania, a key wholesaler and one of the main retailers of refined
products in the Albanian market. ARMO's market share in the retail sector is
currently estimated at 20%. Bankers is interested in and intends to pursue
this acquisition opportunity in order to seize the potential
upstream/downstream synergies, which is expected to not only increase
reservoir recovery and production but result in the Company extracting a
higher value for its production.

    United States

    Bankers has advanced its potential development of its Oklahoma Woodford
shale prospect in Carter and Johnston Counties with the following activities:

    
    -   Drilled its first horizontal Woodford shale well in Carter County,
        the Greenway (No.) 35-1H well, which is an offset to the Nickel Hill
        (No.) 1-26 discovery well. This well was drilled to a total vertical
        depth of about 9,800 feet and the horizontal portion of the wellbore
        was drilled through the upper, middle and lower Woodford intervals.
        While 2,800 horizontal feet was successfully fracture stimulated in
        five stages, early indications are that some intervals much more
        effectively stimulated the entire Woodford section.

        -  Although the well is currently flowing natural gas, the total flow
           rate isn't as high as management had anticipated. Further testing
           is continuing as more fracture fluid is recovered. More
           information will become available in the coming weeks. This data
           has been incorporated in the drilling design of Bankers' second
           horizontal well in the basin, the WLC 17-1H, which will be drilled
           in one interval so that Bankers can more effectively stimulate the
           entire 320 foot thick Woodford section throughout the entire
           length of the wellbore.

    -   Negotiated a pipeline connection and surface tie-in for the Nickel
        Hill (No.) 1-26 vertical well and the Greenway horizontal well. A
        facility to handle production from both wells is currently being
        constructed and is expected to be completed and tied in by the end
        of August.

    -   In the process of acquiring a 115 square mile, 3D seismic survey in
        Carter and Johnston Counties to aid in the development of its
        acreage. Permitting for the entire survey is nearly complete and
        acquisition of data has begun.

    -   Drilling a second horizontal Woodford shale well in Johnston County,
        approximately 10 miles from the first two wells, near the far south
        east corner of the Company's acreage. The WLC 17-1H well vertical
        pilot hole has been drilled to 6,700 feet and logged. Bankers is
        currently drilling the horizontal portion of the well, which is
        projected to be drilled to a length of 3,000 feet. Analysis of the
        vertical wellbore indicates a 325 foot thick Woodford shale section
        that compares favorably with the other wells drilled in the area.

    -   Participated in four vertical wells in the Carter and Johnson
        Counties operated by others. Bankers interest in these wells ranges
        from six to 30 percent. Each of the wells has encountered a promising
        Woodford shale section and two of them have in addition encountered a
        prospectively productive Sycamore formation.
    

    In Hughes County, Bankers plans to drill a horizontal well in the fourth
quarter after having completed an updated geologic/engineering study on the
Lake Holdenville (No.) 35-1H well and other operators' wells in the area.
Results from another vertical Woodford shale well, approximately two and a
half miles away from Bankers' well, had a reported initial production rate of
330 Mcf/d after stimulation, providing confirmation of gas productivity.

    
    -   Bankers also participated in a non-operated vertical well in Hughes
        County in which it has a 51 percent interest. This well encountered
        a promising Woodford shale section as well as three other potentially
        productive intervals. The Company has been told by the operator that
        they intend to begin completion operations in the near future.

    In Palo Duro, Texas, the Company believes it has narrowed down the area of
the basin that has the best potential productive Bend shale. This core area
will be where Bankers plans to focus its activities going forward. Some of the
key events in its progress include:

    -   Successfully drilled and fracture stimulated the Cogdell (No.) 64-1
        well in the Granite Wash Sand with rates of approximately 325 Mcf/d.
        In the second quarter, the shale interval in this same well was
        fracture stimulated. It encountered a casing problem after the
        fracture stimulation but is still able to flow back fracture fluid.
        The well is still recovering fracture fluid and gas flow rates are
        being tested. Bankers is planning to re-enter this well and drill a
        horizontal lateral in the Granite Wash Sand in the third quarter in
        an attempt to substantially increase the flow rate achieved from the
        vertical wellbore. Horizontal drilling often substantially increases
        flow rates over that of vertical wells in many established shale
        basins.

    -   Drilled an additional vertical well, the Black 4 (No.) 1, which
        reached total depth in July. The well was drilled underbalanced,
        using nitrogen and encountered a prospective 280 foot thick Bend
        shale interval and numerous potentially productive Granite Wash
        Sands, which had good electric log responses as well as good mud
        logging sample shows.

        -  The Black 4 (No.) 1 well targeted what was perceived to be a more
           thermally mature portion of the basin; preliminary analysis
           indicates that this was successful. The gas encountered in mud
           logging shows while drilling the Bend shale in the Black well
           indicates a much higher ratio of methane gas, with less heavier
           ends than in Bankers' first three wells it drilled in the basin.
           This supports the Company's opinion on the core area of the basin.

        -  Bankers is expecting to show repeatability over a larger area by
           establishing productivity from the shale in vertical wells similar
           to the results seen by Tyner Resources in their Stephens well,
           which has produced at a stable 225 Mcf/d rate for over six months
           from the Bend shale interval. Once this repeatability is
           confirmed, Bankers can begin drilling horizontal wells in the
           shale in an attempt to substantially increase the productivity of
           the wells. Bankers anticipates being able to test the productivity
           of drilling horizontal wells into the shale later this year.

    In New York, Bankers reprocessed high quality aeromagnetic data covering
all of the Wayne County in the second quarter. The Company believes that its
own 19,000 acre block has more potential for a hydrothermal dolomite play than
the option acreage where most of its drilling and fracture stimulation work
has occurred so far.

    -   Bankers fracture stimulated two existing wells in New York with
        disappointing results, indicating that, in the Company's opinion, the
        original Trenton resource play concept would not work in this area.
        As a result, Bankers did not exercise its option to acquire the
        additional acreage in New York that was located around these wells.
        The option exercise would have required Bankers to make a cash
        payment of almost a million dollars and finish drilling three earning
        wells. Management feels that its resources are better focused on its
        19,000 existing acres by exploring for potential hydrothermal
        dolomite plays.

    -   Bankers is currently planning the acquisition of 2D seismic on its
        existing acreage to help evaluate the hydrothermal dolomite concept.
        Regionally, over 125 million barrels of oil and 200 BCF of gas have
        been produced from Trenton/Blackriver hydrothermal dolomite fields.
        Recent field discoveries south of Bankers' acreage block have
        extended the play into the Appalachian basin from south central
        Michigan.

    In Mississippi and Alabama, Bankers is continuing with Pottsville Tight
Gas Sands and Floyd shale prospect development through additional geologic and
geophysical work on the Black Warrior Basin project. In addition, Bankers is
monitoring the activity of a number of other operators that are drilling and
testing wells in the Floyd shale in this project area.

    CAPITAL EXPENDITURES

                                      Three months ended    Six months ended
                                             June 30             June 30
    -------------------------------------------------------------------------
    ($000)                                2007      2006      2007      2006
    -------------------------------------------------------------------------
    Albania                             14,367    13,140    24,206    21,547
    United States                        8,861    15,952    12,884    20,913
    Canada                                  29        14       181        40
                                      ---------------------------------------
                                        23,257    29,106    37,271    42,500
                                      ---------------------------------------
    

    The Company incurred $7.2 million in capital expenditures in Albania
during the quarter for well re-activations and $2.4 million on central
treatment facilities. The balance of the expenditures was related to
miscellaneous asset acquisitions and capitalized G&A. The capital expenditures
also included an increase in prepayments to suppliers of $1.8 million for
equipment in transit to Albania. For the same period in 2006, the Company
incurred $13.1 million in capital expenditures in Albania, $7.1 million of
which was incurred in well re-activations and the balance was primarily
related to increase in field inventory and miscellaneous asset acquisition.
    In the United States, the Company incurred $2.5 million on the drilling
and evaluation of wells drilled and tested in Texas and Oklahoma. Lease
acquisition costs were $4.0 million. The balance of the capital expenditures
was related to seismic reprocessing and capitalized G&A. The Company incurred
$15.9 million in capital expenditure in United States for the same period in
2006 of which $10.0 million was incurred in lease acquisitions and the balance
on drilling, testing and other asset acquisitions.

    ASSET RETIREMENT OBLIGATIONS

    Bankers estimated its undiscounted asset retirement obligations in
Albania as $11.7 million based on the 259 wells taken over from Albpetrol to
date. This amount will be settled at the end of the Company's 25-year license
of which 24 years are remaining. The net present value of $1.5 million of
asset retirement obligations was estimated based on a credit-adjusted risk
free rate of 9%. Asset retirement obligations were increased to $1.6 million
at June 30, 2007 as a result of accretion.
    In the United States, the Company estimated the total undiscounted amount
required to settle the asset retirement obligations as $780,000. These
obligations are expected to be settled in 15 years. The undiscounted liability
has been discounted using a credit adjusted risk-free interest rate of 5.5% to
arrive at asset retirement obligations of $506,000.

    LIQUIDITY AND CAPITAL RE

SOURCES As of June 30, 2007, the Company had cash resources of approximately $19.4 million. Subsequent to quarter-end, Raiffeisen Bank in Albania increased Banker's operating line facility by $10.0 million to $30.0 million. The agreement is expected to be executed by mid-August. The remaining capital expenditures in Albania for 2007 are estimated to be $22.0 million which includes the capital expenditures associated with an accelerated well re-activation program for 30 additional wells. The Company expects to fund this capital program from cash flows estimated at $14.0 million and an available debt facility of $10.0 million. In the U.S., the remaining capital expenditures are estimated at $24.0 million of which approximately half are contingent on drilling success. Available cash resources are sufficient to fund approximately $10.0 to $12.0 million of U.S. capital expenditures under the existing exploration program. The Company will review financing alternatives subject to commercial field success through debt, equity, or joint venture arrangements, as appropriate at the time. RELATED PARTY TRANSACTIONS Bankers contracts with a Canadian drilling company for the provision of rigs and other oil well services at industry competitive rates. Victor Redekop, a Director of Bankers, is a principal shareholder and officer of this company. During the quarter ended June 30, 2007, the Company transacted $2.4 million of services compared to $2.0 million for the preceding quarter and $2.5 million for the corresponding period in 2006. The services can be terminated upon 60 days notice at the election of the Company. During the second quarter, Bankers incurred legal fees of $91,000 in transactions with a legal firm of which the corporate secretary of the Company is a partner. The legal fees charged by this firm were $136,000 for the preceding quarter and $207,000 for the three months ended June 30, 2006. Bankers also paid $13,000 (three months ended March 31, 2007 - $12,000; three months ended June 30, 2006 - $13,000) for rent and office services to a company related by way of common directors. COMMITMENTS In March 2006, the Company's Plan of Development for the Patos Marinza heavy oilfield in Albania was approved by the Albanian National Agency of Natural Resources (AKBN). Under the Plan of Development, the Company estimated the remaining capital expenditures as at January 1, 2007 between $124.8 million to $183.3 million during the life of the Patos Marinza project. The estimated capital expenditures during the next five years are as follows: ($ millions) Case I Case II ------------------------------------------------------------------------- 2007 38.3 42.2 2008 31.6 29.4 2009 9.5 41.6 2010 10.9 15.5 2011 9.5 10.7 Remaining 25.0 43.9 ------------------------------------------------------------------------- 124.8 183.3 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The difference between Case I and Case II relates to maximum future production levels. Under the Petroleum Agreement, Bankers is required to submit an annual program to AKBN that 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. In the event that Bankers is not able to generate sufficient capital resources, it may be required to renegotiate the Plan of Development or relinquish all or part of the contract area. The Company spent $24.2 million towards its 2007 commitment during the six months ended June 30, 2007. Office Premises The Company has long-term lease commitments in Canada and Albania. The minimum lease payments for the next five years are as follow: ($000s, except as noted) ------------------------------------------------------------------------- 2007 152 2008 202 2009 162 2010 162 2011 162 Thereafter 7 --------------------- $ 847 --------------------- --------------------- Term Loan The term loan has no scheduled repayments during the first twelve months after which it is repayable in equal monthly installments over a 48-month period. As at June 30, 2007, the entire available term loan was drawn down, of which $2.8 million was classified as a current liability and $12.2 million as long-term debt. Principal repayments of the term loan over the next five years are as follows: ($000s, except as noted) ------------------------------------------------------------------------- 2007 940 2008 3,515 2009 3,515 2010 3,515 2011 3,515 --------------------- $ 15,000 --------------------- --------------------- QUARTERLY SUMMARY Below is a summary of Bankers' performance over the last eight quarters. ($000s, except June 30, March 31, Dec 31, Sept 30, June 30, as noted) 2007 2007 2006 2006 2006 ------------------------------------------------------------------------- Average daily production (bopd) 4,746 4,380 4,165 4,000 3,193 Average sales volume (bopd) 4,314 4,388 4,113 3,776 3,175 Average price ($/barrel) 32.89 27.19 24.44 26.63 25.64 Royalties 4.28 3.65 3.04 3.04 2.98 Sales and transportation 2.56 1.96 1.77 2.10 1.66 Operating 9.91 10.16 9.88 9.05 9.91 ------------------------------------------------ Netback ($/barrel) 16.14 11.42 9.75 12.44 11.09 ------------------------------------------------ ------------------------------------------------ Oil and gas revenues 12,913 10,739 9,250 9,240 7,407 Royalties 1,682 1,440 1,149 1,055 860 Sales and transportation 1,007 775 670 728 480 Operating 3,892 4,014 3,737 3,141 2,862 ------------------------------------------------ Net operating income 6,332 4,510 3,694 4,316 3,205 ------------------------------------------------ ------------------------------------------------ General and administrative 1,824 1,659 1,916 1,422 1,450 Funds from operations 4,792 2,852 1,588 2,950 3,251 Income (loss) for the period 600 (1,173) (107) (208) (253) Basic and diluted loss per share - - - - - Total assets 175,550 168,005 138,030 127,106 124,321 Term loan (including current portion) 15,000 12,268 2,000 - - ($000s, except March 31, Dec 31, Sept 30, as noted) 2006 2005 2005 ----------------------------------------------------- Average daily production (bopd) 2,579 2,173 1,793 Average sales volume (bopd) 2,474 2,184 1,791 Average price ($/barrel) 25.55 23.13 22.28 Royalties 3.05 2.77 2.59 Sales and transportation 1.68 1.20 0.97 Operating 12.31 12.46 12.23 ------------------------------ Netback ($/barrel) 8.51 6.69 6.49 ------------------------------ ------------------------------ Oil and gas revenues 5,689 4,644 3,670 Royalties 679 564 426 Sales and transportation 373 241 161 Operating 2,741 2,246 1,946 ------------------------------ Net operating income 1,896 1,593 1,138 ------------------------------ ------------------------------ General and administrative 972 904 1,415 Funds from (used in) operations 723 650 (94) Loss for the period (993) (755) (315) Basic and diluted loss per share - - - Total assets 98,930 56,846 53,083 Term loan (including current portion) - - - OUTSTANDING SHARE DATA There were approximately 448 million shares outstanding as at June 30, 2007 and August 9, 2007. In addition, the Company had approximately 63 and 67 million stock options and warrants outstanding as of the same dates. 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. CHANGES IN ACCOUNTING POLICIES On January 1, 2007, the Company adopted the new Canadian accounting standards for financial instruments-recognition and measurement and financial instruments-presentation and disclosures. Prior periods have not been restated. Financial Instruments - Recognition and Measurement This new standard requires all financial instruments within its scope, including all derivatives, to be recognized on the balance sheet initially at fair value. Subsequent measurement of all financial assets and liabilities except those held-for-trading and available for sale are measured at amortized cost determined using the effective interest rate method. Held-for-trading financial assets are measured at fair value with changes in fair value recognized in earnings. Available-for-sale financial assets are measured at fair value with changes in fair value recognized in comprehensive income and reclassified to earnings when derecognized or impaired. Embedded Derivatives On adoption, the Company elected to recognize, as separate assets and liabilities, only for those embedded derivatives in hybrid instruments issued, acquired or substantively modified after January 1, 2003. The Company did not identify any material embedded derivatives which required separate recognition and measurement. Two new Canadian accounting standards have been issued which will require additional disclosure in the Company's financial statements commencing January 1, 2008 about the Company's financial instruments as well as its capital and how it is managed. INTERNAL CONTROLS Disclosure controls and procedures have been designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the Company's management, as appropriate, to allow timely decisions regarding required disclosure. The President and Chief Financial Officer have concluded, based on their evaluation as of June 30, 2007 that the Company's disclosure controls and procedures are effective to provide reasonable assurance that material information related to the Company, including its consolidated subsidiaries, is made known to them by others within those entities. During the three months ended June 30, 2007, there have been no changes in the Company's internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect the Company's internal controls over financial reporting. OUTLOOK In Albania, production growth from primary techniques continues to progress towards the Company's long-term goal of 10,000 to 15,000 bopd by 2010. Due to the effect of water disposal capacity constraints, the Company is revising its estimated 2007 average production target to between 4,900 and 5,100 bopd from 5,200 to 5,500 bopd for 2007. However, with remediation of capacity constraints and acceleration of well take-overs and re-activations, Bankers is still expected to meet its 2007 exit production target of between 6,000 and 6,500 bopd. Bankers is now entering into the next stage of its long-term Albanian growth strategy, having proved its ability to execute on primary extraction methods to increase production. The next stages include several other initiatives that can add significant long-term value to the Company. The first step consists of the testing of the cyclical steaming equipment, scheduled to commence in the second half of the year. This will lead to a new enhanced oil recovery (EOR) cyclic steam project that will be undertaken during 2008. At the same time, further EOR techniques are being reviewed. As not one single technology will work effectively across the entire field due to the varying multiple zones and depths of the reservoir, Bankers will undertake appropriate projects in a step-by-step fashion. Over the long-term, EOR and secondary recovery techniques, expanded export opportunities and the possible acquisition of ARMO will provide significant upside for future growth. In the United States, Bankers has established natural gas from successful discovery wells in two of its basins: the Ardmore in Oklahoma and Palo Duro in Texas. Preliminary positive results from the Company's first horizontal well indicate opportunity for a commercial development program in Oklahoma later in the year, and first natural gas production. A development program from this basin alone could provide significant benefit to the Company, providing funds while Bankers moves exploration and evaluation forward on other shale basins that are at varying stages of development. In addition to providing strong production growth from current operations, Bankers' portfolio of assets offers substantial upside opportunities for its shareholders both in the near and over the long-term. The Company is focused on accessing this potential in a staged approach, increasing reservoir recovery, reserves, production and cash flow for the future. BANKERS PETROLEUM LTD. CONSOLIDATED BALANCE SHEETS (Unaudited, expressed in Thousands of United States dollars) ------------------------------------------------------------------------- ASSETS June 30 December 31 2007 2006 ------------------------- Current assets Cash and cash equivalents $ 18,903 $ 6,329 Investment (Note 2) 4,500 - Accounts receivable 11,592 7,214 Crude oil inventory 1,010 713 Deposits and prepaid expenses 2,127 1,121 ------------------------- 38,132 15,377 Property, plant and equipment (Note 3) 137,418 122,653 ------------------------- $ 175,550 $ 138,030 ------------------------- ------------------------- LIABILITIES Current liabilities Operating loan (Note 4) $ 4,471 $ 4,772 Accounts payable and accrued liabilities 11,424 11,369 Current portion of term loan (Note 4) 2,813 125 ------------------------- 18,708 16,266 Term loan (Note 4) 12,187 1,875 Asset retirement obligations (Note 5) 2,155 1,593 Future income tax liability 5,904 3,126 SHAREHOLDERS' EQUITY Share capital (Note 6) 134,820 116,696 Warrants (Note 6) 2,004 - Contributed surplus (Note 6) 6,204 4,456 Deficit (6,432) (5,982) ------------------------- 136,596 115,170 ------------------------- $ 175,550 $ 138,030 ------------------------- ------------------------- Commitments (Note 9) See accompanying notes to consolidated financial statements. BANKERS PETROLEUM LTD. CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30 (Unaudited, expressed in Thousands of United States dollars, Except PerShare Amounts) ------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 ------------------- ------------------- 2007 2006 2007 2006 ------------------- ------------------- Revenue Oil and gas revenue $ 12,913 $ 7,407 $ 23,652 $ 13,096 Royalties (1,682) (860) (3,122) (1,539) --------------------------------------- 11,231 6,547 20,530 11,557 --------------------------------------- Expenses Operating 4,048 2,862 8,062 5,603 Sales and transportation 1,007 480 1,782 853 General and administrative 1,824 1,450 3,483 2,422 Interest on term loan 519 - 849 - Stock-based compensation (Note 6) 530 1,520 1,490 1,744 Depletion, depreciation and accretion 1,925 961 3,826 1,912 --------------------------------------- 9,853 7,273 19,492 12,534 --------------------------------------- 1,378 (726) 1,038 (977) --------------------------------------- Other income Interest 186 247 336 394 Foreign exchange gain 773 1,249 954 902 --------------------------------------- 959 1,496 1,290 1,296 --------------------------------------- Income before income taxes 2,337 770 2,328 319 Future income tax expense (1,737) (1,023) (2,778) (1,565) --------------------------------------- Net income (loss) for the period 600 (253) (450) (1,246) Deficit, beginning of period (7,032) (5,414) (5,982) (4,421) --------------------------------------- Deficit, end of period $ (6,432) $ (5,667) $ (6,432) $ (5,667) --------------------------------------- --------------------------------------- Basic and diluted earnings (loss) per share $ 0.00 $ 0.00 $ 0.00 $ 0.00 --------------------------------------- --------------------------------------- See accompanying notes to consolidated financial statements. BANKERS PETROLEUM LTD. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30 (Unaudited, expressed in Thousands of United States dollars) ------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 ------------------- ------------------- 2007 2006 2007 2006 ------------------- ------------------- Cash provided by (used in) Operating activities Net income (loss) for the period $ 600 $ (253) $ (450) $ (1,246) Items not involving cash: Depletion, depreciation and accretion 1,925 961 3,826 1,912 Future income tax expense 1,737 1,023 2,778 1,565 Stock-based compensation 530 1,520 1,490 1,744 --------------------------------------- 4,792 3,251 7,644 3,975 Change in non-cash working capital (Note 10) (1,123) (4,008) (4,204) (4,829) --------------------------------------- 3,669 (757) 3,440 (854) --------------------------------------- Investing activities Additions to property, plant and equipment (23,257) (29,106) (37,271) (42,500) Proceeds from sale of property, plant and equipment 15,000 - 15,000 - Change in non-cash working capital (Note 10) 132 5,716 (1,422) 4,824 --------------------------------------- (8,125) (23,390) (23,693) (37,676) --------------------------------------- Financing activities Issue of common shares and warrants for cash, net of issue costs 9 18 20,128 40,934 Operating loan 752 - (301) - Term loan 2,732 - 13,000 - --------------------------------------- 3,493 18 32,827 40,934 --------------------------------------- Increase (decrease) in cash and cash equivalents (963) (24,129) 12,574 2,404 Cash and cash equivalents, beginning of period 19,866 40,062 6,329 13,529 --------------------------------------- Cash and cash equivalents, end of period (Note 10) $ 18,903 $ 15,933 $ 18,903 $ 15,933 --------------------------------------- --------------------------------------- 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, 2006. 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: On January 1, 2007, the Company adopted the new Canadian accounting standards for financial instruments-recognition and measurement and financial instruments-presentation and disclosures. Prior periods have not been restated. Financial instruments-recognition and measurement This new standard requires all financial instruments within its scope, including all derivatives, to be recognized on the balance sheet initially at fair value. Subsequent measurement of all financial assets and liabilities except those held-for-trading and available for sale are measured at amortized cost determined using the effective interest rate method. Held-for-trading financial assets are measured at fair value with changes in fair value recognized in earnings. Available-for-sale financial assets are measured at fair value with changes in fair value recognized in comprehensive income and reclassified to earnings when impaired. Cash and cash equivalents are held-to-maturity investments and the fair values approximate their carrying value due to their short-term nature. Accounts receivable, operating loan, accounts payable and accrued liabilities are classified as loans and receivables and the fair value approximates their carrying value due to the short-term nature of these instruments. The term loan is classified as a loan and its fair value approximates its carrying value as it bears interest at market rates. The Company has not designated any financial instruments as held-for-trading. The Company has designated its investment in the units of Palo Duro Energy Inc. as available-for-sale. The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned operating subsidiaries, Bankers Petroleum Albania Ltd. and Bankers Petroleum (U.S.) Inc. Unless where otherwise noted, the unaudited interim consolidated financial statements and their accompanying notes are presented in thousands of United States dollars. Certain prior period figures have been re-classified to conform to the current period's presentation. 2. INVESTMENT 2007 2006 --------------------- 15,152,142 units of Palo Duro Energy Inc. $ 4,500 $ - --------------------- --------------------- In May 2007, the Company sold a 27% working interest in the Palo Duro basin, Texas to a wholly owned U.S. subsidiary of a Canadian public company. This transaction is satisfied by a payment of $15 million in cash and the issue of 15,152,142 units of Palo Duro Energy Inc. Each unit consists of one common share and one half of one common share purchase warrant. Each warrant entitles the holder to acquire an additional common share at a price of CAD $0.50 per share until March 21, 2009. The units are subject to a four month hold period expiring on September 25, 2007. As at June 30, 2007, the cost of the units approximates the fair market value. 3. PROPERTY, PLANT AND EQUIPMENT The following table summarizes the Company's property, plant and equipment as at June 30, 2007 and December 31, 2006: 2007 2006 --------------------------------------- Accumu- lated depletion and deprec- Net Book Net Book Cost iation Value Value --------------------------------------------------------------------- Oil and gas properties - Albania $ 85,970 $ 10,217 $ 75,753 $ 55,084 Oil and gas properties - United States 60,118 - 60,118 66,520 Equipment, furniture and fixtures 1,986 439 1,547 1,049 --------------------------------------- $148,074 $ 10,656 $137,418 $122,653 --------------------------------------- --------------------------------------- The Company capitalized general and administrative expenses of $592 and $1,391 during the three and six month periods ended June 30, 2007 ($269 and $506 for the corresponding periods in 2006) in Albania and the United States that were directly related to exploration and development activities. Depletable assets for the depletion calculation for the six months ended June 30, 2007 included $113,000 (2006 - $99,000) for estimated future development costs associated with proved undeveloped reserves in Albania. 4. TERM AND OPERATING LOAN FACILITY The term and operating loan facility is comprised of a $5 million operating loan and a $15 million five-year term loan. The facility is secured by all of the assets of Bankers Petroleum Albania Ltd., assignment of proceeds from the Albanian domestic and export crude oil sales contracts, a pledge of the common shares of Bankers Petroleum Albania Ltd., and a guarantee by the Company. (a) Operating Loan The operating loan has a one year term and bears interest at one year LIBOR plus 3.5%. The term of the operating loan may be extended for further twelve month periods up to four times upon request by the Company and acceptance by the lender. As at June 30, 2007, $4,471 of the operating loan was drawn down. (b) Term Loan The term loan has no scheduled repayments during the first twelve months after which it is repayable in equal monthly instalments over a 48-month period. The term loan bears interest at one year LIBOR plus 4.5%. As at June 30, 2007, the entire term loan was drawn down of which $2,813 was classified as a current liability and $12,187 as long-term debt. Principal repayments of the term loan over the five years are as follows: --------------------------------------------------------------------- 2007 $ 940 2008 3,515 2009 3,515 2010 3,515 2011 3,515 $ 15,000 ---------- ---------- 5. ASSET RETIREMENT OBLIGATIONS In Albania, the Company estimated the total undiscounted amount required to settle the asset retirement obligations at $11,712. These obligations will be settled at the end of the Company's 25-year license of which 24 years are remaining. The undiscounted liability has been discounted using a credit-adjusted risk-free interest rate of 9% to arrive at asset retirement obligations of $1,649. In the United States, the Company estimated the total undiscounted amount required to settle the asset retirement obligations at $780. These obligations are expected to be settled in 15 years. The undiscounted liability has been discounted using a credit-adjusted risk-free interest rate of 5.5% to arrive at asset retirement obligations of $506. --------------------------------------------------------------------- Asset retirement obligations, December 31, 2006 $ 1,593 Liabilities incurred during the period 495 Accretion 67 ---------- Asset retirement obligations, June 30, 2007 $ 2,155 ---------- ---------- 6. SHAREHOLDERS' EQUITY (a) Share Capital and Contributed Surplus Authorized Unlimited number of common shares with no par value. Issued Number of Contributed Common Shares Amount Surplus --------------------------------------------------------------------- Balance, December 31, 2005 327,986,533 $ 53,205 $ 2,014 Shares issued pursuant to a private placement 50,000,000 43,200 - Issue of common shares for oil and gas properties 25,971,715 20,000 - Exercise of compensation options 784,636 381 - Shares issued on exercise of warrants 7,323,750 2,608 - Share issuance costs - (2,698) - Stock-based compensation - - 2,442 ---------------------------------------- Balance, December 31, 2006 412,066,634 116,696 4,456 Shares issued pursuant to a public offering 36,042,858 19,227 - Share issuance costs - (1,103) - Stock-based compensation - - 1,748 ---------------------------------------- Balance, June 30, 2007 448,109,492 $ 134,820 $ 6,204 ---------------------------------------- ---------------------------------------- Weighted average number of common shares used in the calculation of basic earnings (loss) per share was 448,109,492 and 436,360,715 for the three and six month periods ended June 30, 2007 (391,458,635 and 366,964,427 for the same periods in 2006). The weighted average number of common shares used in the calculation of diluted earnings per share was 451,854,037 for the three month period ended June 30, 2007. In March 2007, the Company issued an aggregate of 36,042,858 units at a price of CDN$0.70 per unit on a bought-deal basis, resulting in net proceeds of approximately $20,119 after commissions and share issue expenses. Each unit consists of one common share and one-half of one common share purchase warrant. The Company determined the fair value of warrants as CDN$0.15 using the Black-Scholes option pricing model. As a result, $2,307 of the proceeds were allocated to warrants. Each whole warrant will entitle the holder to purchase one common share of the Company at a price of CDN$0.90 for a period of five years from the closing of the offering. (b) Warrants A summary of the changes in warrants is presented below. Weighted Average Exercise Number of Price Warrants Amount (CAD $) --------------------------------------------------------------------- Balance, December 31, 2006 15,902,023 $ - 0.95 Warrants issued pursuant to a public offering 18,021,429 2,307 0.90 Issue costs (303) --------------------------------------- Balance, June 30, 2007 33,923,452 $ 2,004 0.92 --------------------------------------- --------------------------------------- The following table summarizes the outstanding and exercisable warrants at June 30, 2007. Weighted Average Number of Warrants Expiry Date Exercise Price (CAD $) --------------------------------------------------------------------- 15,902,023 November 10, 2009 0.95 18,021,429 January 14, 2012 0.90 ------------------ 33,923,452 ------------------ ------------------ (c) Stock Options A summary of the changes in stock options is presented below: Number of Weighted Average Options Exercise Price (CAD $) --------------------------------------------------------------------- Balance, December 31, 2006 23,530,000 0.83 Options granted 5,535,000 0.64 --------------------------------------- Balance, June 30, 2007 29,065,000 0.79 --------------------------------------- --------------------------------------- (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 month periods ended June 30, 2007 as $605 and $1,748 ($1,520 and $1,744 for the same periods in 2006) for the stock options vested and/or granted to officers, directors, employees and service providers. Of these amounts, $530 and $1,490 ($1,520 and $1,744 for the same periods in 2006) was charged to earnings and $75 and $258 (nil for the same periods in 2006) 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 month periods ended June 30, 2007 and 2006 and the assumption used in their determination were as follows: Three months ended Six months ended June 30 June 30 --------------------------------------------------------------------- 2007 2006 2007 2006 --------------------------------------------------------------------- Weighted average fair value per option $0.33 $0.48 $0.37 $0.48 Risk-free interest rate (%) 4.05 3.66 4.06 3.66 Average volatility (%) 67 54 67 54 Expected life (years) 5 5 5 5 7. SEGMENTED INFORMATION The Company defined its reportable segments based on geographic locations. Six months ended United June 30, 2007 Albania States Canada Total --------------------------------------------------------------------- Revenue Oil and gas revenue, net of royalties $ 20,530 $ - $ - $ 20,530 ---------------------------------------- Expenses Operating 7,906 156 - 8,062 Sales and transportation 1,782 - - 1,782 General and administrative 1,141 535 1,807 3,483 Interest on term loan 849 - - 849 Stock-based compensation 384 251 855 1,490 Depletion, depreciation and accretion 3,762 24 40 3,826 ---------------------------------------- 15,824 966 2,702 19,492 ---------------------------------------- Segment income (loss) 4,706 (966) (2,702) 1,038 ------------------------------ Other income 1,290 Future income tax expense (2,778) ---------------------------------------- Loss for the period $ (450) ---------------------------------------- ---------------------------------------- Assets, June 30, 2007 $ 88,307 $ 73,656 $ 13,587 $175,550 ---------------------------------------- ---------------------------------------- Additions to property, plant and equipment $ 24,206 $ 12,884 $ 181 $ 37,271 ---------------------------------------- ---------------------------------------- Cash proceeds from sale of property, plant and equipment $ - $ 15,000 $ - $ 15,000 ---------------------------------------- ---------------------------------------- Six months ended United June 30, 2006 Albania States Canada Total --------------------------------------------------------------------- Revenue Oil and gas revenue, net of royalties $ 11,557 $ - $ - $ 11,557 ---------------------------------------- Expenses Operating 5,603 - - 5,603 Sales and transportation 853 - - 853 General and administrative 967 215 1,240 2,422 Stock-based compensation 263 431 1,050 1,744 Depletion, depreciation and accretion 1,889 5 18 1,912 ---------------------------------------- 9,575 651 2,308 12,534 ---------------------------------------- Segment income (loss) 1,982 (651) (2,308) (977) ------------------------------ Other income 1,296 Future income tax expense (1,565) ---------------------------------------- Loss for the period $ (1,246) ---------------------------------------- ---------------------------------------- Assets, June 30, 2006 $ 51,848 $ 58,517 $ 13,956 $124,321 ---------------------------------------- ---------------------------------------- Additions to property, plant and equipment $ 21,547 $ 20,913 $ 40 $ 42,500 ---------------------------------------- ---------------------------------------- Three months ended United June 30, 2007 Albania States Canada Total --------------------------------------------------------------------- Revenue Oil and gas revenue, net of royalties $ 11,231 $ - $ - $ 11,231 ---------------------------------------- Expenses Operating 3,892 156 - 4,048 Sales and transportation 1,007 - - 1,007 General and administrative 583 125 1,116 1,824 Interest on term loan 519 - - 519 Stock-based compensation 137 82 311 530 Depletion, depreciation and accretion 1,886 15 24 1,925 ---------------------------------------- 8,024 378 1,451 9,853 ---------------------------------------- Segment income (loss) 3,207 (378) (1,451) 1,378 ------------------------------ Other income 959 Future income tax expense (1,737) ---------------------------------------- Income for the period $ 600 ---------------------------------------- ---------------------------------------- Additions to property, plant and equipment $ 14,367 $ 8,861 $ 29 $ 23,257 ---------------------------------------- ---------------------------------------- Cash proceeds from sale of property, plant and equipment $ - $ 15,000 $ - $ 15,000 ---------------------------------------- ---------------------------------------- Three months ended United June 30, 2006 Albania States Canada Total --------------------------------------------------------------------- Revenue Oil and gas revenue, net of royalties $ 6,547 $ - $ - $ 6,547 ---------------------------------------- Expenses Operating 2,862 - - 2,862 Sales and transportation 480 - - 480 General and administrative 527 137 786 1,450 Stock-based compensation 241 345 934 1,520 Depletion, depreciation and accretion 947 4 10 961 ---------------------------------------- 5,057 486 1,730 7,273 ---------------------------------------- Segment income (loss) 1,490 (486) (1,730) (726) ------------------------------ Other income 1,496 Future income tax expense (1,023) ---------------------------------------- Loss for the period $ (253) ---------------------------------------- ---------------------------------------- Additions to property, plant and equipment $ 13,140 $ 15,952 $ 14 $ 29,106 ---------------------------------------- ---------------------------------------- 8. RELATED PARTY TRANSACTIONS During the three and six month periods ended June 30, 2007 and 2006, the Company incurred the following expenses with companies related by way of common directors and/or officers: Three months ended Six months ended June 30 June 30 --------------------------------------------------------------------- 2007 2006 2007 2006 --------------------------------------------------------------------- Legal fees $91 $207 $227 $263 Rent and office services 13 13 25 29 Oil well servicing 2,397 2,522 4,396 4,298 At June 30, 2007 and 2006, included in accounts payable and accrued liabilities are the following amounts which are payable to companies related by way of directors and/or officers in common: 2007 2006 --------------------------------------------------------------------- Legal fees $ 24 $ 22 Oil well servicing 1,424 1,121 These transactions, occurring in the normal course of operations, are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. 9. COMMITMENTS a) Capital expenditures In March 2006, the Company's Plan of Development for the Patos Marinza heavy oilfield in Albania was approved by Albanian National Agency of Natural Resources (AKBN). Under the Plan of Development submitted to AKBN, the Company estimated the remaining capital expenditures as at January 1, 2007 between $125 million to $183 million during the life of the Patos Marinza project. The estimated capital expenditures during the next five years are as follows: ($ millions) Case I Case II --------------------------------------------------------------------- 2007 38.3 42.2 2008 31.6 29.4 2009 9.5 41.6 2010 10.9 15.5 2011 9.5 10.7 Remaining 25.0 43.9 --------------------------------------------------------------------- 124.8 183.3 --------------------------------------------------------------------- --------------------------------------------------------------------- The difference between Case I and Case II relates to maximum future production levels. The Petroleum Agreement stipulates that the Company submit to AKBN each year an annual program which includes the nature and the amount of capital expenditures to be incurred in that year. Significant deviations in this annual program from the Plan of Development will be subject to AKBN approval. 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. Any relinquishment will reduce the associated capital expenditure commitments. If only a portion of the contract area is relinquished then the Company will continue to conduct petroleum operations on the portion retained and the future capital expenditures will be adjusted accordingly. The Company spent $24.2 million towards its 2007 commitment during the six months period ended June 30, 2007. b) Office Premises The Company leases office premises. The minimum lease payments for the next five years are as follows: ($000s) --------------------------------------------------------------------- 2007 $ 152 2008 202 2009 162 2010 162 2011 162 Thereafter 7 --------------------- $ 847 --------------------- --------------------- 10. SUPPLEMENTAL CASH FLOW INFORMATION Three months ended Six months ended June 30 June 30 --------------------------------------------------------------------- 2007 2006 2007 2006 --------------------------------------------------------------------- Operating activities Increase in current assets Accounts receivable $ (2,249) (826) $ (4,378) (3,233) Crude oil inventory (377) 77 (297) - Deposit and prepaid expenses (1,059) (408) (1,006) (301) Increase in (decrease) in current liabilities Accounts payable and accrued liabilities 2,562 (2,851) 1,477 (1,295) ---------------------------------------- $ (1,123) (4,008) $ (4,204) (4,829) ---------------------------------------- ---------------------------------------- Investing activities (Decrease) increase in current liabilities Accounts payable and accrued liabilities $ 132 5,716 $ (1,422) 4,824 ---------------------------------------- ---------------------------------------- Cash and cash equivalents Cash $ 10,672 5,500 $ 10,672 5,500 Fixed income investments 8,231 10,433 8,231 10,433 ---------------------------------------- $ 18,903 15,933 $ 18,903 15,933 ---------------------------------------- ---------------------------------------- Interest paid $ 610 - $ 849 - ---------------------------------------- ----------------------------------------

For further information:

For further information: Susan J. Soprovich VP, Investor Relations and
Corporate Governance, Ph: (403) 513-2681, Email:
investorrelations@bankerspetroleum.com, Website: www.bankerspetroleum.com; AIM
NOMAD: Ryan Gaffney, +44 20 7050 6777

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Bankers Petroleum Ltd.

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