PetroBakken Provides Operational Update Highlighted by Production of Over 43,000 boepd at the End of September 2011, A 22% Increase Over Q2 2011

CALGARY, ALBERTA--(Marketwire - Oct. 3, 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 report drilling and operating results for the third quarter of 2011.

Production at the end of September exceeded 43,000 barrels of oil equivalent per day ("boepd") (87% light oil and NGLs), a 22% increase over second quarter 2011 production levels, based on field estimates. Our Bakken business unit production is again over 20,000 boepd while our Cardium business unit production now exceeds 14,000 boepd, with the remainder of the production generated by our southeast Saskatchewan Conventional and AB/BC business units. We estimate that we have approximately 3,000 boepd of additional productive capacity currently down due to well maintenance, site access constraints (primarily related to flooding originating in the second quarter) and facility maintenance.

Drilling activity in the quarter resulted in 96 (69.9 net) wells, a decrease of 19 (5.1 net) wells over the same period last year. Third quarter activity saw 32 (25.2 net) wells drilled in the Bakken, 44 (31.3 net) wells drilled in the Cardium, 19 (12.4 net) wells drilled in our Saskatchewan Conventional business unit and 1 (1.0 net) well in our AB/BC business unit. Consistent with an active program, at the end of the quarter we had an inventory of 47.7 net wells either waiting to be completed or to be placed on production. Of these wells, 13.7 net wells were in the Bakken (6.8 net of which are on production but not stimulated) and 24.5 net wells were in the Cardium.

We continue to execute on our business plan and currently have 18 drilling rigs operating: 8 within the Cardium fairway of Alberta, 6 within the Bakken fairway in southeast Saskatchewan, 2 drilling conventional prospects in southeast Saskatchewan and 2 drilling exploration wells in central Alberta. We anticipate that an additional 48 net wells will be drilled and a total of 75 net wells will be brought on stream by the end of the year. This would leave an anticipated inventory of 21 net wells which would be expected to be brought on stream in the first quarter of 2012.

At the end of September, PetroBakken had $1.14 billion drawn (essentially unchanged from the end of June 2011) on our three year, $1.35 billion credit facility, leaving us with over $200 million of credit capacity available on the current line in addition to our growing cash flow. Recently, there has been some market focus on our convertible debentures which mature in February 2016. The debentures have a one-time, one-day early put option on February 8, 2013 that allows those holders that elect to exercise the option to request payment in full for their debentures. In the event that holders request payment, PetroBakken has the option to repay in cash or through the issuance of PetroBakken shares based on the then current share price.

The Company has been, and will continue to be, pursuing various options to provide additional flexibility in order to repay any bonds that may be put back to us with either cash or shares. In addition to our growing production base and the potential for increasing cash flow over time, those options include: modifying our capital program and/or altering our dividend to provide additional free cash flow; issuing additional debt instruments; instituting a dividend reinvestment program; renegotiating the terms of the existing convertible debentures; or realizing on asset sales. Early in the second quarter of 2011, the Company engaged TD Securities Inc. as financial advisor, to assist the Company in our assessment and pursuit of certain options to provide increased liquidity, and we continue to actively evaluate alternatives going forward. Further announcements on the progress of this process will be made at the appropriate time.

We have positioned our asset base to focus on value creation for our shareholders, and decisions on how best to manage the business are made with both a short term and long term strategic outlook in mind. PetroBakken has built a strong portfolio of assets with a multi-year inventory of light oil drilling locations from which we can generate accretive, long term, growth. This portfolio includes over 440,000 net acres with over 1,400 net drilling locations in the well established Bakken and Cardium light oil resource plays; more than 480,000 net undeveloped acres and 300 light oil net drilling locations for conventional opportunities in southeast Saskatchewan; over 120,000 net undeveloped acres on new potential light oil resource plays (many that have seen significant attention by the industry in recent land sales); and a material land position in northeast British Columbia for future natural gas opportunities. With this asset base, and based on our current activity plans, we intend to deliver year-end 2011 production of 46,000 to 49,000 boepd. At the mid-point of this range, and based on US$85 WTI per barrel, we would expect to generate annualized cash flow of approximately $850 million. With expected continued growth in production in 2012, we would anticipate funds flow from operations (based on a similar WTI price) to grow further to equal or exceed our total capital expenditures and dividend payments. However, if conditions change, we will not hesitate to evaluate the other alternatives available to us, including altering our dividend and/or capital spending levels.

Current economic conditions and market rumours have caused shareholder focus to be turned away from the high quality, light oil assets that underpin the Company, to the perceived strength of our balance sheet in light of the convertible debenture put date (that is 16 months away) and our current capital and dividend plans. We are aware of the concern over our debt position and, as outlined above, we have several options at our disposal which we are actively assessing to effectively manage this situation in varying commodity price environments while continuing to pursue our strategies for long term, accretive, growth.

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.

BOEs. Natural gas volumes have been converted to barrels of oil equivalent ("boe"). Six thousand cubic feet ("Mcf") of natural gas is equal to one barrel of oil equivalent based on an energy equivalency conversion method primarily attributable at the burner tip and does not represent a value equivalency at the wellhead. Boes may be misleading, especially if used in isolation.

Forward Looking Statements. Certain information provided in this press release constitutes forward-looking statements. Specifically, this press release contains forward-looking statements relating to future financial results, results from operations, future capital costs, future production rates, proposed exploration and development activities, our drilling prospect inventory, the timing of certain projects, capital spending levels, anticipated sources of capital, future debt levels, the potential repayment of convertible debentures, and possible strategic alternatives available to the Company. The forward-looking statements are based on certain key expectations and assumptions, including expectations and assumptions concerning the availability of debt and equity 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, and weather and access to drilling locations. 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.