PetroBakken Announces First Quarter 2011 Results with Production of 41,600 and an Operating Netback of $52.42 Per Boe

CALGARY, ALBERTA--(Marketwire - May 9, 2011) - PetroBakken Energy Ltd. ("PetroBakken" or the "Company") (TSX:PBN), a 59% owned subsidiary of Petrobank Energy and Resources Ltd. (TSX:PBG), is pleased to announce first quarter 2011 financial and operating results. PetroBakken first quarter 2011 financial and operating results were highlighted by funds flow from operations of $173.0 million ($0.92 per basic share), a top decile operating netback of $52.42 per barrel of oil equivalent ("boe") and average production (87% light oil and NGLs) of 41,562 barrels of oil equivalent per day ("boepd"). Production increased in the first quarter over the fourth quarter as the Company continued to execute a 16 to 18 rig light oil drilling program, reaching 43,000 boepd in March. Post spring break-up, we will continue to expand our production base employing 13 rigs focusing primarily on our Cardium and Bakken light oil resource plays. We also continued to build our inventory of new light oil resource opportunities and to further confirm the productive capability of our tight gas portfolio.

FINANCIAL & OPERATING RESULTS

The following table provides a summary of PetroBakken's financial and operating results for the three months ended March 31, 2011 and 2010. Interim consolidated financial statements with Management's Discussion and Analysis ("MD&A") are available on the Company's website at www.petrobakken.com and will also be available on the SEDAR website at www.sedar.com.

• PetroBakken's production averaged 41,562 boepd in the first quarter of 2011, 87% light oil and NGLs, representing a 1% increase compared to the fourth quarter of 2010, and a 4% decrease over the prior year period. Light oil production increases, primarily from our Cardium play, outpaced declines in our natural gas production base.
• Our operating netback (excluding hedging gains) of $52.42/boe increased 9%, compared to the fourth quarter of 2010, primarily as a result of higher pricing, and decreased slightly by 1% from the prior year period, primarily due to increased production expenses.
• Our production and strong operating netback resulted in funds flow from operations of $173.0 million ($0.86 per diluted share), an 8% increase from the fourth quarter of 2010, primarily due to higher operating netbacks, and an 8% reduction from the prior year, primarily as a result of lower overall production before asset disposition.
• Capital expenditures were $307.5 million in the first quarter, up 66% from a year ago and 17% from the fourth quarter of 2010. The increases were primarily driven by our aggressive drilling program and extensive facility investments.
• PetroBakken drilled 110 (77.4 net) wells with a 99% success rate in the first quarter; including 51 (37.7 net) wells in the Cardium, 45 (33.1 net) wells in the Bakken, 12 (4.6 net) wells in conventional plays in southeast Saskatchewan, and 2 (2.0 net) wells in northeast BC. At the end of the quarter, 35.3 net wells were waiting to be completed and/or placed on production. The majority of these wells are in our Cardium area, 14.4 of which are anticipated to be put on production during the second quarter.

Production for the first quarter averaged 41,562 boepd, comprised of 36,140 bopd of light oil and natural gas liquids and 32,534 Mcf/d of natural gas. Liquids production increased 4% in the first quarter 2011 from the fourth quarter of 2010 due to drilling in the Cardium play in central Alberta. Gas production decreased 18% primarily due to declines in base production and facility maintenance issues temporarily shutting in non-core production. Completion activity was accelerated in March 2011, allowing us to significantly increase the number of new Cardium wells on-production. We expect our production to decrease slightly in the second quarter due to natural declines and reduced new well activity during spring break-up. In addition, wet surface conditions, particularly in southeast Saskatchewan, are inhibiting access to existing wells, resulting in shut-in production. Production for April 2011 is estimated to be 38,000 boepd, based on field estimates, with more than 10% of production shut-in due to the inability to service wells and transport oil from single well oil batteries. We will bring this deferred production back on-line as soon as weather conditions permit.

Drilling activity in the first quarter of 2011 resulted in 110 (77.4 net) wells, an increase of 37 (17.9 net) wells over the same period last year. Activity levels were consistent with fourth quarter levels and we once again achieved a 99% success rate in our drilling program. Compared to the fourth quarter of 2010, drilling remained fairly consistent in the Bakken but decreased in our southeast conventional Mississippian plays, which require significantly expanded facility capacity to handle and optimize our incremental production capacity. New salt water disposal facilities are expected to be in place mid-year, which will allow us to increase the drilling pace for this area. Consistent with our capital plan, Cardium activity increased over fourth quarter 2010 levels. We also drilled 2 (2.0 net) Montney wells at Monias in northeast BC in order to maintain and further evaluate this acreage. The first of these Montney wells is on-stream at a restricted flow rate of 750 mcf/day and 160 bbl/day of condensate. At the end of the quarter, we had an inventory of 55 (35.3 net) wells either waiting to be completed or brought on production. Of these wells, 16 (8.5 net) were in the Bakken and 29 (21.9 net) were in the Cardium. During the second quarter we plan to bring on at least an additional 19 (14.4 net) of these Cardium wells.

Bakken Business Unit Update

Bakken production was essentially flat between the first quarter of 2011 and the fourth quarter of 2010, with a modest decline of 2%. Our adoption of new completion techniques is improving well performance in the northern areas of the fairway resulting in lower water cuts and higher initial oil rates. We are also applying this technology to expand the boundaries of our Bakken drilling fairway. During the quarter we spent $17 million on facilities in our Bakken fairway. We completed two batteries that began construction in the fourth quarter of 2010, which will allow us to conserve gas, increase our fluid handling capabilities and reduce trucking costs as the batteries are pipeline connected. In addition, we added sour gas handling facilities at the Midale gas plant which allows us to process third party gas in the area. With the completion of our new facilities, we have increased fluid handling capabilities, allowing us to ultimately increase production by optimizing certain existing wells with high water cuts.

We drilled 45 (33.1 net) wells in the Bakken in the first quarter, of which 24 (21.2 net) wells were bilaterals. At the end of the quarter we had 9 (7.0 net) wells waiting to be frac'd and placed on production and another 14 (13.7 net) wells that are currently on production but have not yet been frac'd. Our inventory of 23 (20.7 net) wells will benefit from our new frac technique, which we now plan to apply to all Bakken wells. We expect to frac these wells late in the second quarter or third quarter.

Progress continues on our enhanced oil recovery projects ("EOR") in the Bakken. Our first pilot project utilizing natural gas injection commenced in mid-March at continuous rates between 250 to 500 Mcf/d. This pilot is designed to determine optimal injection rates and reservoir permeability to natural gas. We expect to begin natural gas injection in our next pilot in the third quarter of this year. This pilot is designed to test an injection configuration applicable to both single leg and bilateral horizontal wells. Injection wells are expected to be drilled in the second half of 2011 for the remaining three pilots. The pilots are located throughout our Bakken acreage to test EOR response in multiple areas of the field.

Cardium Business Unit Update

Activity levels remained high in the Cardium in the first quarter of 2011. We drilled 51 (37.7 net) wells in the quarter, an increase of 11 (5.1 net) wells from the fourth quarter of 2010. Completion crews frac'd 54 (40.4 net) wells in the quarter, an increase of 19 (9.7 net) wells over the preceding quarter. Most of this activity occurred in March. As a result, we were able to bring 48 (36.9 net) new wells on during the quarter and expect to bring an additional 19 (14.4 net) wells on production during the second quarter. The remaining inventory of 13 (9.5 net) wells that are either waiting to be completed or brought on production, represents a normal operating back log, given our high activity levels.

Results from the Cardium play, particularly in West Pembina are meeting or exceeding our expectations. In our view, slick water frac completions are providing superior results at lower costs. We continue to gather more information through micro seismic to improve our techniques and assess appropriate distances between frac stages as well as the optimal inter-well distance. The thicker reservoir in West Pembina, where we have the majority of our Cardium acreage, is generally providing the highest flow rates. All of our Cardium areas are generating excellent economic returns across the play area. We have now drilled 89.9 net wells and maintained our inventory of 650 net remaining locations as we continue to validate our acreage. Production for the Cardium Business Unit was 8,743 boepd for the quarter, representing an increase of 32% over the fourth quarter of 2010, and April production averaged approximately 9,500 boepd, based on field estimates.

Higher oil prices, while improving cash flows, have also lead to increased industry activity, which is creating price increases for most services. Our efficiencies in cycle times for drilling and completing wells have offset most cost increases to-date. We now expect our efficiency gains to be slowly out-paced by price escalation, leading to an increase of approximately 15% in drill, case, complete and tie-in costs. Higher WTI prices have significantly improved the economics of these wells, even with the anticipated increase in costs.

FINANCIAL UPDATE

PetroBakken's financial performance continued to be strong in the first quarter of 2011 with solid production and high operating netbacks due to our light oil focus, resulting in funds flow from operations of $173.0 million ($0.92 per basic and $0.86 per diluted share). Our operating netback increased 9% compared to the fourth quarter of 2010, driven primarily by higher WTI prices and increased liquids production.

Net income of $53.4 million ($0.29 per basic share and $0.28 per diluted share) increased 12% compared to the fourth quarter of 2010, as the increase in net operating income and unrealized foreign exchange and derivative liability gains associated with the convertible debentures, which more than offset the unrealized loss on risk management contracts.

Capital expenditures for the quarter were $307.5 million, related mainly to our drilling program. Net debt increased from the fourth quarter primarily due to increased capital expenditures. At March 31, 2011, our financial position remained strong with a bank debt to first quarter annualized funds flow from operations ratio of 1.4 to 1 and $234.1 million of available bank credit.

OUTLOOK AND SUMMARY

Capital spending for the year is now expected to be $900 million. The $100 million increase is comprised of $30 million of additional facility costs and an additional $70 million of drilling, completion and equipping costs. We are maintaining our exit production projection of between 46,000 and 49,000 boepd.

As resource plays mature, they generate excess cash flow and require less capital to sustain production. We are seeing this shift in southeast Saskatchewan, and in 2011 we are reinvesting only 65% of the cash flow to maintain production levels. The excess cash flow from this area is being invested in the Cardium, where we expect to generate most of our production growth this year. In addition, we have accumulated more than 100,000 net acres on a number of emerging Alberta resource plays. We plan to drill three wells in the remainder of 2011 to test the initial potential of the Nordegg, Swan Hills, and Duvernay light oil plays and one well to test an oil or liquids-rich gas Montney opportunity. These new plays complement our existing inventory of 2,300 locations focused on light oil and leverage the industry-leading experience of our technical staff who, to-date have drilled more than 800 horizontal wells with multi-stage fracs.

INVESTOR CONFERENCE CALL

Management of PetroBakken will be holding a conference call for investors, financial analysts, media and any interested persons on Tuesday, May 10, 2011 at 9:00 am, MST (11:00 a.m., ET) to discuss PetroBakken's first quarter financial and operating results. The investor conference call details are as follows:

The live audio webcast link is: http://events.digitalmedia.telus.com/petrobakken/051011/index.php.

PetroBakken Energy Ltd. is an oil and gas exploration and production company combining light oil Bakken and Cardium resource plays with conventional light oil assets, delivering industry leading operating netbacks, strong cash flows and production growth. PetroBakken is applying leading edge technology to a multi-year inventory of Bakken and Cardium light oil development locations, along with a significant inventory of opportunities in the Horn River and Montney gas resource plays in northeast BC. Our strategy is to deliver accretive production and reserves growth, along with an attractive dividend yield.

Non-GAAP Measures.This press release contains financial terms that are not considered measures under International Financial Reporting Standards ("IFRS"), which are considered to be generally accepted accounting principles ("GAAP"), such as funds flow from operations, net debt and operating netback.These measures are commonly utilized in the oil and gas industry and are considered informative for management and stakeholders. Specifically, funds flow from operations reflects cash generated from operating activities before changes in non-cash working capital. Management considers funds flow from operations important as it helps evaluate performance and demonstrate the ability to generate sufficient cash to fund future growth opportunities, pay dividends and repay debt. Net debt includes bank debt outstanding plus accounts payable less accounts receivable and prepaid expense and is used to evaluate PetroBakken's financial leverage. Profitability relative to commodity prices per unit of production is demonstrated by an operating netback. Operating netback reflects revenues less royalties, transportation costs, and production expenses divided by production for the period. Funds flow from operations, net debt and operating netbacks may not be comparable to those reported by other companies nor should they be viewed as an alternative to cash flow from operations or other measures of financial performance calculated in accordance with IFRS.

Forward Looking Statements.Certain information provided in this press release constitutes forward-looking statements. Specifically, this press release contains forward-looking statements relating to financial results, results from operations, future capital costs, future production rates, proposed exploration and development activities, the potential for EOR projects, our drilling prospect inventory, the timing of certain projects, capital spending levels, future dividends and anticipated sources of capital. The forward-looking statements are based on certain key expectations and assumptions, including expectations and assumptions concerning the availability of capital, the success of future drilling, completion, recompletion and development activities, the performance of new and existing wells, prevailing commodity prices and economic conditions, the availability and cost of labour and services, weather and access to drilling locations and the geological nature of the formations targeted. Although we believe that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because we can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, reliance on industry partners, availability of equipment and personnel, uncertainty surrounding timing for drilling and completion activities resulting from weather and other factors, changes in applicable regulatory regimes and health, safety and environmental risks), commodity price and exchange rate fluctuations and general economic conditions. Certain of these risks are set out in more detail in our Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com. Except as may be required by applicable securities laws, PetroBakken assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.