Petrobank Energy and Resources Ltd.

Petrobank Energy and Resources Ltd.

August 13, 2012 18:20 ET

Petrobank Reports Q2 2012 Financial Results and Operational Update

CALGARY, ALBERTA--(Marketwire - Aug. 13, 2012) - Petrobank Energy and Resources Ltd. (TSX:PBG) announces our 2012 second quarter financial and operating results highlighted by funds flow from operations of $1.13 per diluted share and increasing production from Kerrobert.

Petrobank's results include the financial and operating results of PetroBakken Energy Ltd. (TSX:PBN), 58% owned by Petrobank at June 30, 2012. PetroBakken announced second quarter financial and operating results on August 8, 2012.

This news release includes forward-looking statements and information within the meaning of applicable securities laws. Readers are advised to review "Forward-Looking Information and Statements" at the conclusion of this news release. Readers are also referred to "Non-GAAP Measures" at the end of this news release for information regarding the presentation of the financial information in this news release. A full copy of our 2012 Second Quarter Financial Statements and MD&A have been filed on our website at and under our profile on SEDAR at

In this report, quarterly comparisons are second quarter 2012 compared to second quarter 2011 unless otherwise noted. All financial figures are unaudited and in Canadian dollars ($) unless otherwise noted.


Q2 2012 Financial and Operating Highlights

  • Funds flow from operations decreased 20 percent from the second quarter of 2011 to $118.9 million, or $1.13 per diluted share, primarily as a result of lower commodity prices and increased differentials to WTI leading to lower gross operating netbacks at PetroBakken, partially offset by higher production.
  • PetroBakken's second quarter production, after dispositions, averaged 38,715 barrels of oil equivalent per day ("boepd") (83% light oil and liquids weighted), a 10% increase over the second quarter of 2011.
  • Capital expenditures before dispositions totalled $114.3 million in the second quarter with PetroBakken drilling 9 net wells.
  • Production from Petrobank's Kerrobert project averaged 236 barrels of upgraded THAI (R)oil per day ("bopd") in Q2 2012, an increase from 193 bopd in Q1 2012. Production in July 2012 averaged 280 bopd and field estimates for August production to date averaged approximately 400 bopd.
  • In mid-July, we completed our Normal Course Issuer Bid ("NCIB") and have repurchased and cancelled our approved limit of 7,273,401 Petrobank shares at a cost of approximately $88 million.
  • Through our Automatic Share Repurchase and PetroBakken Share Sale Plan, we sold 5.5 million PetroBakken shares for proceeds of $67 million to fund a portion of the Petrobank share repurchases. The sale of one PetroBakken share for each Petrobank share repurchased under this plan resulted in net cash proceeds to Petrobank of $4.6 million.
  • We increased the number of PetroBakken shares owned per Petrobank share outstanding to approximately 1.08 from 1.03 at December 31, 2011 through our participation in PetroBakken's dividend reinvestment plan, the repurchase of our shares under our NCIB and the sale of PetroBakken shares.


Kerrobert THAI® Project

THAI® production continues to increase. Full field production in the second quarter of 2012 averaged 236 bopd compared to 193 bopd in the first quarter of 2012. These production volumes represent actual sale volumes for each period reported. Production in July 2012 averaged 280 bopd and field estimates for August production to date averaged approximately 400 bopd. Our operating philosophy remains unchanged with a focus on increasing the air injection into the wells across the field and gradually increasing production and reducing operating costs. We are currently injecting air at approximately eight percent of full field design capacity and intend to continue to increase air injection to build out the THAI® combustion front.

Dawson THAI® Project

We received regulatory approval in early August to start the cold production phase on the two-well demonstration project. We expect to cold produce the wells for a period of time in order to condition the reservoir prior to initiating THAI® operations. With this approval we expect to commence cold production in Q3 2012.

Saskatchewan Conventional Cold Heavy Oil Production

As previously reported, we identified multiple opportunities to re-enter certain wells on our Saskatchewan lands for conventional cold heavy oil production. We have recently re-completed and placed on production five wells, which are expected to stabilize and produce oil in the fourth quarter.


In mid-July, we completed our NCIB and have repurchased and cancelled our approved limit of 7,273,401 Petrobank shares at a cost of approximately $88 million. Through our Automatic Share Repurchase and PetroBakken Share Sale Plan, we sold 5.5 million PetroBakken shares for proceeds of $67 million to fund a portion of the Petrobank share repurchases. The sale of one PetroBakken share for each Petrobank share repurchased under this plan resulted in net cash proceeds to Petrobank of $4.6 million. We expect to renew our NCIB and PetroBakken share sale plan as soon as permitted under securities regulations, which is anticipated to be in mid-September.

Petrobank and PetroBakken manage their capital structure independently, generate their own cash flows and have the ability to fund their operations through the issuance of secured and unsecured debt as well as equity financing. Petrobank's capital resources are focused on funding corporate and Heavy Oil Business Unit expenditures. At June 30, 2012, on a standalone basis independent of PetroBakken, Petrobank's HBU and Corporate operating segment had cash and cash equivalents of $103.6 million and a net working capital surplus (including cash) of $95.1 million.

Based on Petrobank's current ownership and PetroBakken's current annual dividend of $0.96 per PetroBakken share, Petrobank expects to receive approximately $103 million of dividends annually from PetroBakken, paid monthly. PetroBakken instituted a DRIP in early 2012, which allows shareholders to reinvest monthly cash dividends in new shares at a five percent discount to the then current market price. Due to Petrobank's significant positive working capital balance, we elected to participate at a 100% level in PetroBakken's DRIP starting with the March dividend. We believe that receiving additional shares in PetroBakken is an attractive investment at this time. Petrobank may change our participation level in the future.

Petrobank currently expects to fund our future working capital requirements and HBU capital expenditure program with available cash and cash from operations.


The following table provides a summary of Petrobank's financial and operating results for the three and six months ending June 30, 2012 and 2011. Unaudited condensed interim consolidated financial statements with Management's Discussion and Analysis ("MD&A") will be available on the Company's website at and on the SEDAR website at

Summary of Results

Three months ended
June 30,
Six months ended
June 30,
2012 2011 % Change 2012 2011 % Change
($000s, except where noted)
Oil and natural gas sales 240,205 274,952 (13 ) 570,566 556,249 3
Funds flow from operations (1) 118,890 148,440 (20 ) 300,180 316,824 (5 )
Per share - basic ($) 1.14 1.40 (19 ) 2.85 2.98 (4 )
- diluted ($) 1.13 1.38 (18 ) 2.82 2.93 (4 )
Adjusted net income attributable to Petrobank shareholders (1) 31,999 30,659 4 114,306 30,638 273
Per share - basic ($) 0.31 0.29 7 1.09 0.29 276
- diluted ($) 0.31 0.28 11 1.07 0.28 282
Capital expenditures (1)
PetroBakken 109,756 113,010 (3 ) 316,177 420,491 (25 )
Heavy Oil Business Unit ("HBU") 4,525 55,641 (92 ) 22,403 109,896 (80 )
Total capital expenditures 114,281 168,651 (32 ) 338,580 530,387 (36 )
Total assets 6,290,114 6,571,119 (4 ) 6,290,114 6,571,119 (4 )
Common shares outstanding, end of period (000s)
Basic 100,875 106,303 (5 ) 100,875 106,303 (5 )
Diluted (2) 104,867 110,155 (5 ) 104,867 110,155 (5 )
PetroBakken operating netback ($/boe) (1) (3)
Oil, NGL and natural gas revenue (4) 67.89 85.02 (20 ) 73.07 79.34 (8 )
Royalties 9.44 13.15 (28 ) 10.80 12.45 (13 )
Production expenses 13.37 15.24 (12 ) 12.95 12.52 3
Operating netback (1) (3) (5) 45.08 56.63 (20 ) 49.32 54.37 (9 )
Average daily production (3)
PetroBakken - oil and NGL (bbls) 32,236 29,676 9 36,286 32,890 10
PetroBakken - natural gas (Mcf) 38,874 33,746 15 38,597 33,143 16
Total conventional (boe) (3)(6) 38,715 35,300 10 42,719 38,414 11
(1) Non-GAAP measure. See "Non-GAAP Measures" section.
(2) Consists of common shares, stock options, directors deferred common shares, deferred common shares, and incentive shares as at the period end date.
(3) Six Mcf of natural gas is equivalent to one barrel of oil equivalent ("boe").
(4) Net of transportation expenses.
(5) Excludes hedging activities.
(6) HBU heavy oil volumes are excluded from average daily production as HBU operations are considered to be in the exploration and evaluation phase and accordingly are capitalized.


Management of Petrobank will be holding a conference call for investors, financial analysts, media and any interested persons on Tuesday, August 14, 2012 at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) to discuss Petrobank's second quarter financial and operating results. The investor conference call details are as follows:

Live call dial-in number(s): 416-340-2217 / 866-696-5910

Live pass code: 5264057

Replay dial-in numbers: 905-694-9451 / 800-408-3053

Replay pass code: 8414187

The live audio webcast link is: and is also available on our website at:

Petrobank Energy and Resources Ltd. is a Calgary-based oil and natural gas exploration and production company with operations in western Canada. The Company operates high-impact projects through two business units and a technology subsidiary. Petrobank's 57% owned TSX-listed subsidiary, PetroBakken Energy Ltd. (TSX:PBN), is an oil and gas exploration and production company combining light oil Bakken and Cardium resource plays with conventional light oil assets. Whitesands Insitu Partnership, a partnership between Petrobank and its wholly-owned subsidiary Whitesands Insitu Inc., applies Petrobank's patented THAI® heavy oil recovery process in the field. THAI® is an evolutionary in-situ combustion technology for the recovery of bitumen and heavy oil. THAI® and CAPRI® are registered trademarks of Archon Technologies Ltd., a wholly-owned subsidiary of Petrobank Energy and Resources Ltd., for specialized methods for recovery of oil from subterranean formations through in-situ combustion techniques and methodologies with or without upgrading catalysts. Used under license by Petrobank Energy and Resources Ltd.

Non-GAAP Measures. This press release contains financial terms that are not considered measures under IFRS, such as funds flow from operations, adjusted net income, funds flow per share, adjusted net income per share, operating netback and capital expenditures. 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. Adjusted net income is determined by adding back any losses or deducting any gains on the derivative liabilities, adding back any losses or deducting any gains on settlement of convertible debentures, and adding back impairments. Management considers funds flow from operations, funds flow per share, adjusted net income, and adjusted net income per share important as it helps evaluate performance and demonstrate the ability to generate sufficient cash to fund future growth opportunities. 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. Capital expenditures represent expenditures on property, plant and equipment, exploration and evaluation expenditures and other expenditures. Funds flow from operations, funds flow per share, adjusted net income, adjusted net income per share, operating netbacks, and net capital expenditures 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. Further information in respect of these non-GAAP measures is set forth in our MD&A.

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, the timing of certain projects, timing for regulatory filings for future normal course issuer bids and anticipated sources of available financing. Forward-looking statements are necessarily based on a number of assumptions and judgments, including but not limited to, assumptions relating to the outlook for commodity and capital markets, the success of future resource evaluation and development activities, the successful application of our technology, the performance of producing wells and reservoirs, well development and operating performance, general economic conditions, weather and the regulatory and legal environment. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. You can find a discussion of those risks and uncertainties in our Canadian securities filings. Such factors include, but are not limited to: general economic, market and business conditions; weather conditions and access to our properties; fluctuations in oil prices; the results of exploration and development drilling, recompletions and related activities; timing and rig availability; outcome of exploration contract negotiations; fluctuation in foreign currency exchange rates; the uncertainty of reserve estimates; changes in environmental and other regulations; uncertainties associated with the regulatory review and approval process in respect to our projects; risks associated with the application of early stage technology; risks associated with oil and gas operations; and other factors, many of which are beyond the control of the Company. There is no representation by Petrobank that actual results achieved during the forecast period will be the same in whole or in part as those forecasted. Except as may be required by applicable securities laws, Petrobank 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.

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.

Contact Information

  • Petrobank Energy and Resources Ltd.
    John D. Wright
    President and Chief Executive Officer

    Petrobank Energy and Resources Ltd.
    Chris J. Bloomer
    Senior Vice President and Chief Operating Officer, Heavy Oil

    Petrobank Energy and Resources Ltd.
    Peter Cheung
    Vice President Finance and Chief Financial Officer

    Petrobank Energy and Resources Ltd.
    Suite 3000, 525 - 8th Avenue S.W.
    Calgary, Alberta, T2P 1G1