LONDON (Alliance News) - Bankers Petroleum Ltd Thursday said its loss swelled in the first quarter of 2016 as expected following a steep decline in revenue partly driven by lower production, as the company warned production has continued to fall since then as it scales back its investment.
Bankers said its pretax loss in the first three months of the year amounted to USD27.1 million compared to the USD8.2 million loss reported a year earlier as revenue plummeted to USD33.1 million from USD72.4 million.
Funds generated from operations also fell to only USD1.5 million from USD34.3 million a year earlier.
The fall in revenue was the result of production dropping to 17,363 barrels of oil equivalent per day from 18,137 barrels a day a year earlier. That production is also considerably lower than the average throughout the whole of 2015 of 19,676 barrels and has fallen even further in the second quarter of this year.
More importantly, the fall in oil prices squeezed its cash margin to only USD6.91 per barrel in the quarter compared to USD24.01 a barrel. The company's average oil priced fell to USD21.04 per barrel in the period from USD33.31 per barrel a year ago.
"The first quarter was challenging for the company. We navigated the volatile and competitive heavy oil commodity markets and maintained firm footing as a business," said Chief Executive and President David French.
However, other costs fell in the quarter. Operating expenses fell to USD17.7 million from USD23.5 million, sales and transportation costs decreased to USD7.7 million from USD13.9 million and depreciation costs fell to USD26.7 million from USD30.1 million. Administrative costs were one of the only areas to rise, increasing to USD7.1 million from USD4.7 million.
Overall, those costs totalled USD59.5 million in the first quarter compared to USD73.7 million in the previous quarter, but that was not enough to stop Bankers from slipping into the red as it produced an operating loss of USD27.0 million compared to the small USD651,000 profit booked a year ago.
In light of the current circumstances, Bankers has been stringent with its expenditure, spending only USD13.0 million in the quarter compared to the USD25.0 million spent in the last three months of 2015 and the USD50.0 million spent a year earlier. No new wells were drilled during the first quarter of 2016.
Bankers remains in a strong cash position with a balance of USD53.0 million at the end of March and working capital of USD144.0 million.
However, production has continued to decline as investment dwindles, dropping to an average of only 16,704 barrels a day in the second quarter so far, 3.5% lower than the first quarter average.
"The company is focused on optimization of current production levels and is monitoring the economic return of all wells in accordance with the current oil price environment," said Bankers.
The main focus for Bankers and its shareholders, however, is currently on the proposed takeover of the company by affiliates of the Chinese oil and gas giant Geo-Jade Petroleum Corp, which shareholders will vote on later this month.
The offer was made last month by two companies that are affiliates of Geo-Jade Petroleum Corp, which states it is "aspiring to become a China-based international petroleum company," and valued Bankers Petroleum at around CAD575.4 million, which roughly equates to around GBP317.0 million.
The offer that has been made is CAD2.20 per Bankers Petroleum share, which at the time was a 98% premium to Bankers' closing share price on the Toronto Stock Exchange on the last trading day prior to the offer being made.
Bankers Petroleum shares would be delisted from both the London Stock Exchange and the Toronto Stock Exchange should the deal go ahead.
"It was an exciting quarter, as the proposed acquisition by Geo-Jade Petroleum Corp brings forth the opportunity for shareholders to crystallise value at a significant premium to the prevailing market valuation," said French.
"Bankers has been working alongside Geo-Jade to complete the necessary steps to ensure a timely close of the proposed transaction. Our management team and board of directors remain in full support of the transaction, and believe it to be in the best interest of shareholders," he added.
Bankers Petroleum shares were trading up 3.8% to 110.0 pence per share on Thursday, giving it a market capitalisation of around GBP287.7 million - still way below the valuation implied through the proposed takeover.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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