13 Nov 2008 13:00
Bankers Petroleum announces third quarter financial and operational results and provides KuĤova reserves and budget updates
CALGARY, Nov. 13 /CNW/ - Bankers Petroleum Ltd. achieved record production and net income and significantly improved itsrevenues and funds from operations during the period ended September 30, 2008: - Average production was 5,880 bopd compared to 4,753 bopd for the same period in 2007 an increase of 24%. Production at the end of September 2008 was approximately 6,200 bopd and current production exceeds 6,600 bopd. - Net income was $4.9 million ($0.026 per share) during the quarter, compared to a net income of $572,000 ($0.004 per share) for the same period in 2007. - Funds from continuing operations were $14.8 million, an increase of 130% from $6.4 million for the three months ended September 30, 2007. For the comparable nine month periods in 2008 and 2007, funds from operations totalled $41.4 million and $14.7 million, respectively.
- An independent evaluation of the KuĤova oil field estimates Bankers
share of reserves to be 8.6 million barrels of proved plus probable reserves and 33.6 million barrels of proved, probable and possible reserves. - With recent sharp declines in oil prices Bankers has chosen a measured reduction of its capital expenditure program in 2009 with an objective to remain self-funding from cash flow, cash on hand and available credit facilities. PATOS MARINZA
Revenue from the third quarter was $33.5 million ($62.08 per barrel) as compared to $16.2 million ($37.14 per barrel) for the same period in 2007.
Net operating income (netbacks) for the three months ended September 30 2008 increased to $16.3 million ($30.79 per barrel) from $8.7 million ($19.93 per barrel) in the corresponding 2007 quarter, an increase of 87%.
Bankers initiated its vertical infill drilling program on June 21, 2008to evaluate the different producing horizons and undrilled spacing units inthe field. Seven successful oil wells have been drilled as of September 30,2008. The initial production rates from these wells have been between 15 and45 bopd per well from four different zones and it is expected that productionrates from each individual well will continue to increase. Overall theproduction levels from the new wells are in line with forecast. Since the endof the third quarter an additional three vertical oil wells have been drilledand will shortly be completed and put on production. Current averageproduction from the new wells is between 15 and 60 bopd.
The drilling program is continuing with the rig currently drilling the 11th vertical location following which the rig will be mobilized to drill the first ever horizontal well in Albania, in the Patos Marinza oil field.
The well re-activation and re-completion program continued concurrently in the third quarter and into the fourth quarter with good results. The recent re-completion and workovers initiatives have demonstrated improved productivity from the wells and have contributed to the production increase.
KUƒâ€¡OVA
An independent reserves evaluation to define the reserves and productionpotential of the KuĤova oil field, compliant with National Instrument 51-101with an effective date of September 30, 2008 has now been completed. Thefollowing table represents a summary of the KuĤova oil field reserves:
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Forecast Price and Costs
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Before After Before Tax Tax Disc. After Tax Tax Disc. Oil Undiscounted At 10% Undiscounted At 10%
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(Mbbl) ($000) ($000) ($000) ($000)
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Proved Undeveloped 1,518 30,406 14,583 20,137 9,294 Probable 7,042 278,209 122,265 162,622 71,291
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Total Proved Plus Probable 8,560 308,615 136,848 182,759 80,585 Possible 25,067 1,122,460 337,416 652,337 164,163
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Total Proved,
Probable & Possible 33,627 1,431,075 474,264 835,096 244,748
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2009 CAPITAL BUDGET
With recent sharp declines in oil prices, Bankers has decided to slowdown its capital expenditure program in 2009 with an objective to remain selffunding from cash flow, cash on hand and available credit facilities.Strategic allocation of the work program and budget is designed to proveadditional recoverable reserves at the Patos Marinza and KuĤova oil fields andstill achieve an appropriate growth in production. The revised capital program for 2009 includes the following: - Reactivation and recompletion of existing wells: - Drilling of vertical and horizontal wells including three field delineation wells and one exploration well; - A waterflood program; - A cyclic thermal steam pilot project; and - Field evaluation program at KuĤova. Capital investment is estimated to be in the range of $60 million and is
intended to achieve a forecast exit production rate for 2009 of 9,000 bopd.The budget for 2010 remains unchanged however the exit production target hasbeen adjusted to 14,000 bopd to reflect the reduced investment in 2009.Bankers corporate presentation will be updated and posted on its website nextweek.
To implement this slow down the Company terminated its recently awarded contract for an additional drilling rig and three service rigs, and will maintain its existing drilling rig and service rig agreements for 2009. Bankers will consider adding additional equipment when warranted.
LIQUIDITY
At September 30, 2008, Bankers had working capital of $17.5 million(including cash of $32.2 million). A total of $27.6 million was drawn on thefacility at September 30, 2008. The Company is examining proposals for anadditional expansion to its credit facility. The additional funds will beprovided under a reserve-based facility and will be utilized to reacceleratethe capital spending program when favourable oil prices and economic returnswould support such initiatives.
Caution Regarding Forward-looking Information
Information in this news release respecting matters such as the expectedfuture production levels from wells, future prices and netback, work plans,anticipated total oil recovery of the Patos Marinza and KuĤova oil fieldsconstitute forward-looking information. Statements containing forward-lookinginformation express, as at the date of this news release, the Company's plans,estimates, forecasts, projections, expectations, or beliefs as to futureevents or results and are believed to be reasonable based on informationcurrently available to the Company. Exploration for oil is a speculative business that involves a high degreeof risk. The Company's expectations for its Albanian operations and plans aresubject to a number of risks in addition to those inherent in oil productionoperations, including: that Brent oil prices could fall resulting in reducedreturns and a change in the economics of the project; availability offinancing; delays associated with equipment procurement, equipment failure andthe lack of suitably qualified personnel; the inherent uncertainty in theestimation of reserves; exports from Albania being disrupted due to unplanneddisruptions; and changes in the political or economic environment. Production and netback forecasts are based on a number of assumptionsincluding that the rate and cost of well takeovers, well reactivations andwell recompletions of the past will continue and success rates will be similarto those rates experienced for previous wellrecompletions/reactivations/development; that further wells taken over andrecompleted will produce at rates similar to the average rate of productionachieved from wells recompletions/reactivations/development in the past;continued availability of the necessary equipment, personnel and financialresources to sustain the Company's planned work program; continued politicaland economic stability in Albania; approval of the Addendum to the Plan ofDevelopment; the existence of reserves as expected; the continued release byAlbpetrol of areas and wells pursuant to the Plan of Development and Addendum;the absence of unplanned disruptions; the ability of the Company tosuccessfully drill new wells and bring production to market; and general risksinherent in oil and gas operations. Forward-looking statements and information are based on assumptions thatfinancing, equipment and personnel will be available when required and onreasonable terms, none of which are assured and are subject to a number ofother risks and uncertainties described under "Risk Factors" in the Company'sAnnual Information Form and Management's Discussion and Analysis, which areavailable on SEDAR under the Company's profile at www.sedar.com.
There can be no assurance that forward-looking statements will prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. Readers should not place undue reliance on forward-looking information and forward looking statements.
Review by Qualified Person
This release was reviewed by Abdel F. (Abby) Badwi, CEO of Bankers Petroleum Ltd., who is a "qualified person" under the rules and policies of AIM in his role with the Company and due to his training as a professional petroleum geologist (member of APEGGA) with over 39 years experience in domestic and international oil and gas operations.
About Bankers Petroleum Ltd.
Bankers Petroleum Ltd. is a Canadian-based oil and gas exploration and production company focused on developing large oil and gas reserves. In Albania, Bankers operates and has the full rights to develop both the Patos Marinza and the KuĤova heavy oil fields. Bankers' shares are traded on the Toronto Stock Exchange and the AIM Market in London, England under the stock symbol BNK.
MANAGEMENT'S DISCUSSION AND ANALYSIS The following management's discussion and analysis (MD&A) reports on thefinancial condition and results of operation of Bankers Petroleum Ltd.(Bankers or the Company) for the three and nine month periods endedSeptember 30, 2008, compared to the preceding quarter and the correspondingperiod in the prior year, as well as information and expectations concerningthe Company's outlook based on currently available information. The MD&Ashould be read in conjunction with the unaudited interim consolidatedfinancial statements for the three and nine month periods ended September 30,2008 and the audited consolidated financial statements and MD&A for the yearended December 31, 2007. Additional information relating to Bankers, includingits Annual Information Form, is on SEDAR at www.sedar.com or on the Company'swebsite at www.bankerspetroleum.com. All dollar values are expressed in U.S.dollars, unless otherwise indicated, and are prepared in accordance withCanadian generally accepted accounting principles ("GAAP"). The Companyreports its heavy oil production in barrels. This report is prepared as of November 13, 2008. NON-GAAP MEASURES Netback per barrel and its components are calculated by dividing revenueless royalties, operating, sales and transportation expenses by the grossproduction volume during the period. Netback per barrel is a non-GAAP measurebut it is commonly used by oil and gas companies to illustrate the unitcontribution of each barrel produced. Net operating income is similarly a non-GAAP measure that representsrevenue net of royalties and operating, sales and transportation expenses. TheCompany believes that net operating income is a useful supplemental measure toanalyze operating performance and provides an indication of the resultsgenerated by the Company's principal business activities prior to theconsideration of other income and expenses. Funds from operations is a non-GAAP measure that represents cash providedby (used in) operating activities, as per the consolidated statements of cashflows, before changes in non-cash working capital. The Company considers thisa key measure as it demonstrates its ability to generate the funds necessaryto provide for future growth. Significant fluctuations in non-cash workingcapital balances as a result of activity level changes can distort the actualfunds generated from operations. Reconciliation to the GAAP measure is asfollows: Three months ended Nine months ended September 30 September 30 ------------------------ ------------------------ ($000s) 2008 2007 % 2008 2007 %
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Cash provided by (used in) continuing operating activities 13,124 6,549 100 39,522 12,615 213 Change in non-cash working capital 1,671 (113) 1,579 1,852 2,060 (10) ------------------------ ------------------------ Funds from continuing operations 14,795 6,436 130 41,374 14,675 182 ------------------------ ------------------------ ------------------------ ------------------------
The non-GAAP measures referred to above do not have any standardizedmeaning prescribed by GAAP and therefore may not be comparable to similarmeasures used by other companies. The Company plans its cash requirements, inpart, based on funds available from continuing operations. This allows for theeffective management of payables in accordance with the collection ofreceivables and other non-cash working capital items.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This MD&A offers our assessment of the Company's future plans andoperations as of November 13, 2008 and contains forward-looking information.Such information is generally identified by the use of words such as"anticipate", "continue", "estimate", "expect", "may", "will", "project","should", "believe" and similar expressions are intended to identifyforward-looking statements. Statements relating to "reserves" or "resources"are also forward-looking statements, as they involve the implied assessment,based on certain estimates and assumptions that the resources and reservesdescribed can be profitably produced in the future. All such statementsinvolve known and unknown risks, uncertainties and other factors that maycause actual results or events to differ materially from those anticipated insuch forward-looking statements. Management believes the expectationsreflected in those forward-looking statements are reasonable but no assurancecan be given that these expectations will prove to be correct and suchforward-looking statements included in this MD&A should not be unduly reliedupon. These statements speak only as of the date hereof.
In particular, this MD&A contains forward-looking statements pertaining to the following:
- performance characteristics of the Company's oil and natural gas properties; - crude oil production estimates and targets; - the size of the oil and natural gas reserves; - capital expenditure programs and estimates; - projections of market prices and costs; - supply and demand for oil and natural gas; - expectations regarding the ability to raise capital and to
continually add to reserves through acquisitions and development; and
- treatment under governmental regulatory regimes and tax laws.
These forward-looking statements are based on a number of assumptions, including but not limited to: those set out herein and in the Company's Form 51-101F1 Statement of Reserves Data and Other Oil and Gas Information ("NI 51-101 Report"), availability of funds for capital expenditures, a consistent and improving success rate for well re-completions at Patos-Marinza, increasing production as contemplated by the Plan of Development, stable costs, availability of equipment and personnel when required, continuing favourable relations with Albanian governmental agencies and continuing strong demand for oil and natural gas.
Actual results could differ materially from those anticipated in these forward-looking statements as a result of the risks and uncertainties set forth below:
- volatility in market prices for oil and natural gas; - risks inherent in oil and gas operations; - uncertainties associated with estimating oil and natural gas reserves; - competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; - the Company's ability to hold existing leases through drilling or lease extensions; - incorrect assessments of the value of acquisitions; - geological, technical, drilling and processing problems; - fluctuations in foreign exchange or interest rates and stock market volatility; - rising costs of labour and equipment; and - changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry. The Company's policy is to update its forward-looking information basedon the events and circumstances that occurred during the period. In addition,the Company regularly reviews and, if necessary, updates the assumptions andrisk factors associated with its forward-looking information.
Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statements contained in this MD&A are expressly qualified by this cautionary statement.
OVERVIEW Three months ended Nine months ended September 30 September 30 ------------------------ ------------------------
Results at a Glance(x) 2008 2007 % 2008 2007 %
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Operating Average production (bopd) 5,880 4,753 24 5,646 4,486 26 Average price ($/bbl) 62.08 37.14 67 59.71 32.57 83 Netback ($/bbl) 30.79 19.93 54 30.68 15.97 92
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Financial ($000s,
except as noted)
Oil revenue 33,543 16,239 107 92,377 39,891
132
Net operating income 16,318 8,714 87 47,463 19,556 143
Net income 4,876 572 752 6,420 992
547
Cash provided by
operating activities 13,124 6,549 100 39,522 12,615 213 Changes in non-cash working capital 1,671 (113) 1,579 1,852 2,060 (10) ------------------------ ------------------------
Funds from operations 14,795 6,436 130 41,374 14,675 182
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Additions to property, plant and equipment 25,502 13,066 95 56,367 37,453 51 September 30 ------------------------ 2008 2007 % ------------------------ Assets/liabilities
Cash and cash equivalents 32,168 8,331 286 Total assets 216,978 109,765 98 Bank loans 27,583 25,967 6 Other long-term liabilities 34,615 22,030 57
Shareholders' equity 131,262 60,790
116
(x) Excludes results from discontinued US operations.
Bankers achieved record production and significantly improved its revenues, netback and funds from operations during the three and nine month periods ended September 30, 2008 as compared to the same periods in 2007:
- Average production was 5,880 bopd compared to 4,753 bopd for the same
period in 2007 and 5,826 from the second quarter of 2008, an increase
of 24% and 1% respectively. Production at the end of September 2008 was approximately 6,200 bopd. - Revenue from the third quarter was $33.5 million ($62.08/bbl) and $92.4 million ($59.71/bbl) for the nine months ended September 30, 2008, as compared to $16.2 million ($37.14/bbl) and $38.9 million ($32.57/bbl) for the same periods in 2007. - Net operating income (netbacks) for the three months ended September 30 2008 increased to $16.3 million ($30.79/bbl) from $8.7 million ($19.93/bbl) in the corresponding 2007 quarter, an increase of 87%. - Funds from continuing operations were $14.8 million, an increase of 130% from $6.4 million for the three months ended September 30, 2007.
For the same periods, cash provided by (used in) operating activities
was $13.1 million compared to $16.1 million in the second quarter of 2008 and $6.5 million for the same period in 2007, a decrease of 19% and an increase of 54% respectively. Other significant events during the quarter included: - Continuation of drilling operations in the Patos Marinza oil field and commencement of production from new wells. Seven successful oil
wells have been drilled as of September 30. The wells are programmed
to test the potential of multiple Gorani and Driza sandstone
formations from undrilled spacing units in the field that the Company
interprets as being undrained areas.
- Continuation of geological analysis and data gathering on the KuĤova
field, of which the Company controls 100% of the working interest. The KuĤova oil field has approximately 300 million barrels of oil in place. - At the beginning of July 2008, Bankers completed its plan of arrangement whereby all of the US operations and assets were split into a new and independent company, BNK Petroleum Inc. ("BKX"). BKX commenced trading on the Toronto Stock Exchange on July 10, 2008 ; all future activities related to BKX are reported separately. All historical financial information is referred to as Discontinued Operations. QUARTERLY SUMMARY Below is a summary of Bankers' performance over the last eight quarters. 2007 2008 -------------------- -------------------- ($000s, except as noted) Fourth Quarter First Quarter
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$/bbl
$/bbl
--------------------------------------------------- -------------------- Albania - crude oil -------------------- -------------------- Average production (bopd) 5,429 5,218 -------------------- -------------------- Oil revenue 21,398 42.84 24,676 51.96 Royalties 2,207 4.42 4,298 9.05 Sales and transportation 1,332 2.67 1,664 3.50 Operating expenses 5,303 10.93 5,706 12.02 -------------------- -------------------- Net operating income 12,556 24.82 13,008 27.39 -------------------- -------------------- -------------------- -------------------- 2008
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($000s, except as noted) Second Quarter Third Quarter
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$/bbl
$/bbl
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Albania - crude oil
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Average production (bopd) 5,826 5,880
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Oil revenue 34,157 64.36 33,543 62.08 Royalties 6,601 12.43 7,790 14.40 Sales and transportation 1,727 3.27 1,932 3.57 Operating expenses 7,693 14.03 7,503 13.32
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Net operating income 18,136 34.63 16,318
30.79
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2006 2007 -------------------- -------------------- ($000s, except as noted) Fourth Quarter First Quarter
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$/bbl
$/bbl
--------------------------------------------------- -------------------- Albania - crude oil -------------------- -------------------- Average production (bopd) 4,113 4,388 -------------------- -------------------- Oil revenue 9,250 24.44 10,739 27.19 Royalties 1,149 3.04 1,440 3.65 Sales and transportation 670 1.77 775 1.96 Operating expenses 3,737 9.88 4,014 10.16 -------------------- -------------------- Net operating income 3,694 9.75 4,510 11.42 -------------------- -------------------- -------------------- -------------------- 2007
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($000s, except as noted) Second Quarter Third Quarter
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$/bbl
$/bbl
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Albania - crude oil
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Average production (bopd) 4,314 4,753
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Oil revenue 12,913 32.89 16,239 37.14 Royalties 1,682 4.28 1,922 4.40 Sales and transportation 1,007 2.56 1,068 2.44 Operating expenses 4,048 9.91 4,535 10.37
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Net operating income 6,176 16.14 8,714
19.93
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2007 2008 ---------
-------------------------------
Fourth First Second Third
($000s, except as noted) Quarter Quarter Quarter Quarter
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General and administrative 2,667 2,091 2,034 2,157 Funds from continuous operations 9,680 9,488 16,753 14,795 Net income (loss) from continuous operations (2,126) 539 1,005 4,876
Basic/diluted earnings (loss)
0.027/ per share(1) (0.014) 0.003 0.006 0.026 Total assets 204,295 272,469 315,631 216,978 Bank loans 30,850 30,218 29,004 27,583 2006 2007 ---------
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Fourth First Second Third Quarter Quarter Quarter
Quarter
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General and administrative 1,650 1,249 1,699 1,779 Funds from continuous operations 1,750 3,247 4,946 6,453 Net income (loss) from continuous operations (372) (477) 897 572
Basic and diluted earnings
(loss) per share(1) (0.003) (0.003) 0.006 0.004 Total assets 138,030 168,005 175,550 185,652 Bank loans 6,772 15,987 19,471 25,967
(1) On July 30, 2008, the Company completed the consolidation of its
shares on the basis of one (1) new post-consolidation share for each three (3) pre-consolidation shares. The computations of basic and diluted earnings (loss) per share for all the periods presented are based on the new number of shares after giving effect to the share consolidation. DISCUSSION OF OPERATING RESULTS Production, Revenue and Netback Three months ended Nine months ended September 30 September 30 ------------------------ ------------------------ 2008 2007 % 2008 2007 %
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Average production (bopd) 5,880 4,753 24 5,646 4,486 26 Oil and gas revenue ($000) 33,543 16,239 107 92,377 39,891 132 Netback ($/bbl) Average price 62.08 37.14 67 59.71 32.57 83 Royalties 14.40 4.40 227 12.08 4.12 193 Sales and transportation 3.57 2.44 46 3.44 2.33 48 Operating 13.32 10.37 28 13.51 10.16 33 Netback 30.79 19.93 54 30.68 15.97 92
For the three months ended September 30, 2008, Bankers continued itsproduction increase as more wells were re-activated and re-completed inAlbania, bringing the active well count to 195 with the re-activation of29 wells in the quarter. At September 30, 2008, the Company also had 43 wellswaiting for minor servicing and three wells awaiting reactivation. Averageproduction increased to 5,880 bopd during the quarter, an increase of 24% from4,753 bopd from the same quarter a year ago. For the nine months endedSeptember 30, 2008, average production increased by 26% to 5,646 bopd from4,486 bopd for the comparable nine months in 2007.
Even though commodity prices commenced a retrenchment during the third quarter, the Company received an average of $62.08/bbl as compared to $37.14/bbl for the same period in 2007, an increase of 67%. For the nine months ended September 30, 2008, Bankers averaged $59.71/bbl, an increase of 83%, as compared to $32.57/bbl for the same period in 2007.
Oil revenue for the third quarter was $33.5 million, an increase of 107%from $16.2 million for the corresponding quarter a year ago. Oil revenue was$92.4 million for the nine months ended September 30, 2008, compared to$39.9 million for the same period in 2007, an increase of 132%.
For the 2008 third quarter, the Company's netback (revenue less royalties, operating costs and sales/transportation expenses) increased to $30.79/bb from $19.93/bbl for the same period in 2007. For the nine months ended September 30, 2008, the average netback increased by 92% to $30.68/bbl from $15.97/bbl in the comparable 2007 period. The improvement in netback resulted from higher oil prices and improved economics of higher production.
Royalties
Royalties in Albania are calculated pursuant to the Petroleum Agreementwith Albpetrol, and consist of Albpetrol's pre-existing production and a grossoverriding royalty on new production. For the third quarter, royaltiesincreased to $14.40/bbl (23% of oil revenue) from $4.40/bbl (12%) for thecorresponding period in 2007. Royalties increased primarily in relation toimplementation of a higher royalty rate, effective April 1, 2008, and higherdomestic sales prices. Bankers had previously proposed a 9% increase in thegross overriding royalty during the cost recovery period in exchange forexpanded development opportunities of the Patos Marinza oil field, andeffective August 12, 2008 the Albanian Parliament approved an amendment to thehydrocarbon fiscal system by establishing a 10% royalty tax. Bankers isawaiting approval of amendments to the Petroleum and License Agreements thatwill, effectively offset the royalty tax against future income taxes. For thenine months ended September 30, 2008, royalties increased to $12.08/bbl (20%)from $4.12/bbl (13%) in the same 2007 period.
Operating Expenses
Operating expenses for the third quarter increased to $13.32/bbl from$10.37/bbl for the same period in 2007, mainly due to higher averagefuel/diluent costs. Correspondingly, the sales and transportation costs forthe quarter increased to $3.57/bbl from $2.44/bbl for the 2007 third quarter.For the nine months ended September 30, 2008, operating costs averaged$13.51/bbl while sales and transportation costs averaged $3.44/bbl, ascompared to $10.16/bbl and $2.33/bbl, respectively for the comparable 2007periods. Lower commodity prices in the third quarter of 2008 have resulted inlower fuel and diluent costs as compared to the 2008 second quarter whichreported operating costs of $14.03/bbl. Sales and transportation expensesincreased in the third quarter to $3.57/bbl compared to $3.27/bbl in thepreceding quarter due to an inventory adjustment recorded in the secondquarter which reduced the average costs for that period.
General and Administrative Expenses
General and administrative expenses (G&A) were $2.2 million for thequarter compared to $2.0 million for the preceding quarter and $1.8 millionfor the same period in 2007. G&A increased to $6.3 million for the nine monthsended September 30, 2008, from $4.7 million for the same period in 2007. Theincrease in general and administrative expenses primarily reflected increasedpersonnel costs and higher travel expenses related to the Company's operatingand financing activities. During the quarter, the Company capitalized Albanian general andadministrative expenses of $786,000 compared to $1.1 million for the precedingquarter and $583,000 for the same period in 2007. These expenses were directlyrelated to acquisition, exploration and development activities. Non-cash stock-based compensation expense pertaining to options vestedand/or granted to officers, directors, employees and service providers were$1.4 million compared to $4.1 million for the preceding quarter and $816,000for the same period in 2007. Of this amount, $1.1 million was charged toearnings during this quarter, compared to $3.5 million and $780,000 that wascharged to earnings for the preceding period and the period ending September30, 2007.
Depletion, Depreciation and Accretion
Depletion, depreciation and accretion expense for the quarter endedSeptember 30, 2008 were $3.3 million, compared to $3.2 million for thepreceding quarter and $2.1 million for the same period in 2007. The increasein depletion, depreciation and accretion expense reflects an overall increasein the depletable base, commensurate with production level for the period.Depletion expense represented $5.68/bbl for the quarter compared to $5.67/bbland $4.46/bbl, respectively for the preceding quarter and the same period in2007. For the nine months ended September 30, 2008, the depletion expenseattributable to the Albanian production was $8.7 million ($5.67/bbl), comparedto $5.6 million ($4.41/bbl) for the same period in 2007.
Income Taxes
Future income tax liabilities result from the temporary differencesbetween the carrying value and tax values of its Albanian assets andliabilities. As of September 30, 2008, the net book value of the Albaniaproperty, plant and equipment exceeded their tax value by $62.8 million,compared to $26.8 million on December 31, 2007. Applying a tax rate of 50%,the Company recorded a $31.4 million future income tax liability, compared to$13.4 million at the end of 2007. The Company recorded a future income taxexpense of $4.2 million for the quarter compared to $9.0 million for thepreceding quarter and $2.9 million for the same period in 2007. The reductionwas mainly due to the prior period cost recovery adjustment and inclusion of10% royalties as a component of cost recovery pool.
The cost recovery pool represents deductions for income taxes in Albania. Bankers is presently not paying cash taxes in any jurisdiction.
Net Income and Funds from Continuous Operations
The Company recorded net income of $4.9 million ($0.027 per share) duringthe quarter, $1.0 million ($0.006 per share) for the preceding quarter and netincome of $572,000 ($0.004 per share) for the same period in 2007. For thenine months ended September 30, 2008, Bankers recorded net income of$6.2 million compared to $992,000 for the same period in 2007. Bankers generated funds from operations of $14.8 million during thequarter compared to $16.8 million for the preceding quarter and $6.4 millionfor the same period in 2007. For the nine months ended September 30, 2008,$41.4 million of funds from operations were generated compared to $14.7million in 2007. The increase in funds from operations is mainly due toproduction increases and higher commodity prices obtained during the period.Cash provided by continuing operating activities amounted to $13.1 millionduring the quarter compared to $16.1 million for the preceding quarter and$6.5 million in 2007. OPERATIONS UPDATE Albania Patos Marinza Field ------------------- As outlined in the Addendum to the Plan of Development for the PatosMarinza oil field, the Company initiated its vertical infill drilling programon June 21, 2008 with the first of four new wells drilled off the first wellpad. The wells encountered multiple producing horizons and have been cased andcompleted in different zones to test their potential. As of September 30, 2008 seven wells have been drilled and cased with thelatter three wells drilled off a second well pad. The initial production ratesfrom these wells have been between 15 and 60 bopd from four different zones.All zones are producing sand at various concentrations of up to 30 percent,which is typical of initial production in heavy oil reservoirs and encouragingin that it demonstrates the initiation of the Cold Heavy Oil Production withSand ("CHOPS") process. As the wells continue to clean up, it is expected thatproduction rates from each individual well will continue to increase. Overall,the production levels from the new wells are in line with our forecasts.
Since the end of the quarter, the Company has continued drilling the eighth, ninth, tenth and eleventh wells in the program off a third well pad to target other infill spacing units and continue testing the production potential of the different producing horizons.
The well re-activation and re-completion program continued concurrently in the third quarter and into the fourth quarter with good results. The recent re-completion and workovers initiatives have demonstrated improved productivity from the wells and have contributed to the recent production increase.
Expansion of the second train of the 8,000 bopd Central Treating Facilitywith the construction of a second emulsion receiving and water tank wascompleted during the quarter. The tanks are aimed toward improving the waterquality for disposal purposes and as potential source water for the upcomingwaterflood program.
Initial waterflood formation and area selection, pattern layout and design have been finalized. Injectivity tests will commence this month on selected injection wells to determine expected rates and pressures. Initial pattern conversions are anticipated to commence before year end. Detailed third party reservoir simulation work has commenced to optimize waterflood performance and production rate predictions.
Export Capacity
---------------
Bankers has signed an agreement with the developers of the Port of Vloreoil export terminal for the storage and handling of its oil in a 13,000 cubicmetre Company-dedicated oil tank. The storage facility will improve theCompany's export operations and allow for larger oil liftings when theterminal is ready to receive larger vessels next year.
KuĤova Field
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As of June 2008, Bankers has acquired 100% of Sherwood InternationalPetroleum Ltd., which owns a 100% working interest in the KuĤova oil field. Asa result, Bankers holds the exclusive right to evaluate and redevelop theKuĤova heavy oil field pursuant to a Petroleum Agreement with Albpetrol Sh.A.,the state-owned petroleum company, and a License Agreement with the NationalAgency of National Resources (AKBN). The terms of the Petroleum Agreement aresubstantially the same as those governing Bankers' Petroleum Agreement for thePatos Marinza oil field in Albania.
An independent reserves evaluation to define the remaining reserves and production potential of the KuĤova oil field, compliant with National Instrument 51-101, has been completed, with an effective date of September 30, 2008, and is summarized below:
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Forecast Price and Costs
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Before After Before Tax Tax Disc. After Tax Tax Disc. Oil Undiscounted At 10% Undiscounted At 10%
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(Mbbl) ($000) ($000) ($000) ($000)
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Proved Undeveloped 1,518 30,406 14,583 20,137 9,294 Probable 7,042 278,209 122,265 162,622 71,291
----------------------------------------------------
Total Proved Plus Probable 8,560 308,615 136,848 182,759 80,585 Possible 25,067 1,122,460 337,416 652,337 164,163
----------------------------------------------------
Total Proved,
Probable & Possible 33,627 1,431,075 474,264 835,096 244,748
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CAPITAL EXPENDITURES Three months ended Nine months ended September 30 September 30
-------------------------------------------------------------------------
($000) 2008 2007 2008
2007
-------------------------------------------------------------------------
Albania 25,497 13,010 56,266 37,216 Canada 5 56 101 237
---------------------------------------
Total capital expenditure 25,502 13,066 56,367
37,453
---------------------------------------
---------------------------------------
The Company incurred $25.5 million of capital expenditures in Albaniaduring the quarter primarily on the well re-activation and drilling programsat $8.2 million and $8.3 million, respectively. In preparation for futuredrilling activities, Bankers invested $5.4 million in casing, tubing andcapital equipment inventory. The remaining expenditures related to assetacquisitions and capitalized general and administrative expenses. The Companyspent $13.0 million in capital expenditures in Albania for the same period in2007, which were mainly incurred on well re-activation and construction of thecentral treatment facilities.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2008, Bankers had working capital of $17.5 million(including cash of $32.2 million) and a long-term bank loan of $7.8 million.At September 30, 2008, a total of $27.6 million was drawn on the facility; therevolving operating loan at $14.5 million, $1.5 million bridge facility andthe four-year term loan at $11.6 million. Repayments of $3.4 million were madeduring the nine months ended September 30, 2008. Bankers is examiningadditional proposals for an expansion to its credit facility. The additionalfunds will be provided under a reserve-based facility that is more closelyaligned with the $205 million 10%-discounted valuation of the proved reservesat December 31, 2007. The Company's approach to managing liquidity is to ensure a balancebetween capital expenditure requirements and, funds from operations, availablecredit facilities and working capital. In recognition that significant changesin expected commodity prices could impact funds from operations, capitalexpenditures for the fourth quarter will be reduced accordingly.
In March 2008, the Company completed a non-brokered private placement, issuing an aggregate of 22,222,222 common shares at CAD$2.7 per share, resulting in net proceeds of $58.3 million. During the nine months ended September 30, 2008, Bankers received proceeds of $11.0 million from the exercise of an aggregate of 6,179,624 options and $8.9 million from the exercise of an aggregate of 3,301,838 warrants.
With the separation of the US operations into a new independent entityBNK Petroleum Inc. ("BKX") in July 2008, Bankers will no longer be funding anyfurther capital expenditures for those assets. Bankers had provided a $23.0million loan to BKX to be used as a guarantee to a U.S. bank as security for anew credit facility for BKX. The interest-bearing note from BKX is due inOctober 2012 and will be reduced from BKX's equity issues and reservevaluation increases. On August 10, 2008, $10.0 million was repaid to Bankers,reducing the note to $13.0 million at September 30, 2008. As of September 30, 2007, the Company had a working capital deficiency of$3.9 million and a term loan of $11.3 million. Bankers had a working capitaldeficiency of $9.6 million and a term loan of $11.3 million at December 31,2007.
On July 30, 2008, the Company completed the consolidation of its shares on the basis of one (1) new post-consolidation share for each three (3) pre-consolidation shares. The exercise price and number of stock options and common share purchase warrants were adjusted proportionately.
There were approximately 183 million of shares outstanding as at September 30, 2008 and November 13, 2008, on a post-consolidation basis. In addition, the Company had approximately 9 million and 9 million stock options and warrants outstanding as of the same dates.
Plan of Development
Bankers has provided an Addendum to the Plan of Development for the PatosMarinza oil field. The annual work program and budget has been submitted toAlbpetrol and AKBM which includes the nature and the amount of capitalexpenditures to be incurred during that year. Significant deviations in thisannual program from the Plan of Development will be subject to AKBN approval.
Commitments
The Company has long-term lease commitments in Canada and Albania. The minimum lease payments for the next five years are $664,000 and outlined as follows:
($000) Canada Albania Total
-------------------------------------------------------------------------
2008 41 44 85 2009 162 49 211 2010 162 37 199 2011 162 - 162 2012 7 - 7 ------------------------ 534 130 664 ------------------------ ------------------------
The Company has an $11.6 million term loan with a European financial institution that is repayable in equal monthly instalments over a 48-month period commencing January 1, 2008. Of the amount outstanding, $3.75 million was classified as a current liability and $7.81 million as long-term debt. Principal repayments of the term loan over the next four years are as follows:
($000)
-------------------------------------------------------------------------
2008 938 2009 3,750 2010 3,750 2011 3,125 -------- 11,563 -------- --------
The Company has committed to contribute (euro)1,355,000 to a dedicated oil export terminal facility ((euro)855,000 by December 31, 2008 and (euro)500,000 upon service commencement in the second half of 2009), and will pay a throughput rate when the facility is operational.
PRINCIPAL BUSINESS RISKS
Bankers' business and results of operations are subject to a number of risks and uncertainties, including but not limited to the risks described below:
Exploration, development, production and marketing of oil and natural gasinvolves a wide variety of risks which include but are not limited to theuncertainty of finding oil and gas in commercial quantities, securing marketsfor existing reserves, commodity price fluctuations, exchange and interestrate exposure and changes to government regulations, including regulationsrelating to prices, taxes, royalties and environmental protection. The oil andgas industry is intensely competitive and the Company competes with a largenumber of companies, many of which have 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 ofrisks associated with conducting foreign operations over which the Company hasno control, including political instability, potential and actual civildisturbances, ability to repatriate funds, changes in laws affecting foreignownership and existing contracts, environmental regulations, oil and gasprices, production regulations, royalty rates, income tax law changes,potential expropriation of property without fair compensation and restrictionon exports. Additional risks that may affect the Company and its operationsare set out in its most recent AIF filed under the Company's profile onwww.sedar.com.
RESTRUCTURING AND DISCONTINUED OPERATIONS
Pursuant to shareholders' approval at the Annual and Special GeneralMeeting on June 27, 2008, the Company completed its plan of arrangement,effective at the beginning of July 2008, which resulted in all of theCompany's US operations and assets being transferred into a new, independentcompany: BNK Petroleum Inc. ("BKX"). BKX commenced trading on the TorontoStock Exchange on July 10, 2008. This transaction will allowBankers to focus on development of heavy oil properties in Albania, its corebusiness. Accordingly the operations of BKX have now been classified asdiscontinued operations. This transaction is considered a distribution toshareholders, and no gain or loss has been realized. Restructuring costs of$2.8 million, pertaining to the completion of the above transaction, have beencharged to retained earnings (deficit). Details were as follows:
- Shareholders of the Company received shares of BKX on a proportional
basis to their interest in Bankers, namely one (1) share in BKX for every ten (10) common shares held in Bankers. - The exercise price for Company's outstanding common share purchase warrants and stock options were reduced by approximately 13% to reflect the valuation impact of the BKX spinout. RELATED PARTY TRANSACTIONS
The Company currently does not have any material related party transactions that require to be reported.
NEW ACCOUNTING STANDARDS
The Canadian Institute of Chartered Accountants ("CICA") has released new accounting standards for implementation effective January 1, 2008, as follows:
- Inventories (Section 3031): the new standard replaces the previous
inventories standard and prescribes certain methods for valuing
inventories. The adoption of this standard has had no material impact
on the Company's consolidated financial statements. - Financial Instruments - Disclosures and Presentation (Section 3862/3): the new standard requires increased disclosure regarding the Company's financial instruments, the risks associated with these instruments and how the risks are managed. The required disclosures are contained in Note 1 to the Company's interim unaudited consolidated financial statements. - Capital Disclosures (Section 1535): the new standard requires the Company to disclose its definition of capital and its objectives, policies and processes for managing its capital structure. The
required disclosures are contained in Note 1 to the Company's interim
unaudited consolidated financial statements. - Transition to International Financial Reporting Standards ("IFRS") - In February 2008, the Canadian Accounting Standards Board confirmed January 1, 2011 as the effective date for the requirement to report under IFRS along with conversion of comparative 2010 periods. The impact of IFRS on our results of operations and future financial position is not reasonably determinable at this time. The Company has supported staff training programs and has engaged external advisors
to plan the IFRS initiative, including an assessment of transitional
requirements in the 2008 fourth quarter and to identify expected impacts on the Company. Regular reports on the IFRS transition status will be made to Management and the Audit Committee. INTERNAL CONTROLS Disclosure controls and procedures have been designed to ensure thatinformation required to be disclosed by the Company is accumulated andcommunicated to the Company's management, as appropriate, to allow timelydecisions regarding required disclosure. The Company's Chief Executive Officerand Chief Financial Officer have concluded, based on their evaluation as ofSeptember 30, 2008 and advisory reports, that the Company's disclosurecontrols and procedures are effective to provide reasonable assurance thatmaterial information related to the Company, including its consolidatedsubsidiaries, is made known to them by others within those entities. Duringthe three months ended September 30, 2008, there have been no changes in theCompany's internal control over financial reporting that have materiallyaffected, or are reasonably likely to materially affect, the Company'sinternal control over financial reporting. On April 18, 2008, the Canadian Securities Administrators published thenotice and request for comments for the proposed repeal and replacement ofMultilateral Instrument 52-109 Certification of Disclosure in Issuers' Annualand Interim Filings. The proposed changes would include the requirement toprovide certification of the effectiveness of internal controls over financialreporting for years ending after December 15, 2008. On July 11, 2008, theCanadian Securities Administrators issued Staff Notice 52-322 recommendingsecurities commissions proceed with the December 15, 2008 effective date. TheCompany is developing plans to test the operating effectiveness of internalcontrols over financial reporting and provide the required certification.
OUTLOOK
Bankers' strategic objective is to remain focused on exploration andproduction activities in Albania. The three-year strategic plan for the PatosMarinza oil field provides significant potential for growth in production andreserves through primary, secondary and tertiary extraction techniques, suchas infill vertical and horizontal drilling, waterflood and thermal recoverytechniques. The various technologies will be focused to maximize therecoveries from each formation through disciplined and staged exposure ofcapital and an overall 'field to formation' development plan. Now that the Company has completed an independent reserves evaluation todefine the remaining reserves and production potential of the KuĤova oilfield. Bankers will create a plan of development for this field, incorporatingmany of the extraction techniques utilized in the Patos Marinza field. With recent sharp declines in oil prices, Bankers has elected to slowdown its capital expenditures program in 2009 with an objective to remain selffunding from cash flow, cash on hand and available credit facilities. The 2009budget is designed to prove additional recoverable reserves at Patos Marinzaand KuĤova oil fields and achieve an appropriate growth in production. Therevised forecast exit production rate for 2009 is expected to be 9,000 bopd. BANKERS PETROLEUM LTD. CONSOLIDATED BALANCE SHEETS (Unaudited, expressed in Thousands of United States dollars)
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ASSETS September 30 December 31 2008 2007 ------------------------- Current assets
Cash and cash equivalents (Note 12) $ 32,168 $
2,599
Restricted cash (Note 2) 1,500 - Investments (Note 3) 824 1,120 Accounts receivable 20,187 15,378 Crude oil inventory 2,204 985 Deposits and prepaid expenses 3,948 850 Assets of discontinued operations (Note 13) -
7,462 ------------------------- 60,831 28,394 Note receivable (Note 4) 13,000 - Property, plant and equipment (Note 5) 143,147
94,107
Property, plant and equipment of discontinued
operations (Note 13) - 81,794 ------------------------- $216,978 $204,295 ------------------------- ------------------------- LIABILITIES Current liabilities Operating loans (Note 6) $ 16,020 $ 15,805 Accounts payable and accrued liabilities 23,518
11,104
Current portion of term loan (Note 6) 3,750
3,750
Accounts payable and accrued liabilities of
discontinued operations (Note 13) -
7,340 ------------------------- 43,288 37,999 Term loan (Note 6) 7,813 11,250
Asset retirement obligations (Note 7) 3,187
2,177
Future income tax liability (Note 8) 31,428
13,400
Asset retirement obligations of discontinued
operations (Note 13) - 433 SHAREHOLDERS' EQUITY Share capital (Note 9) 121,907 136,513 Warrants (Note 9) 2,088 2,539
Contributed surplus (Note 9) 10,055
8,308
Deficit (2,492)
(8,324)
Accumulated other comprehensive loss (296) - ------------------------- 131,262 139,036 ------------------------- $216,978 $204,295 ------------------------- ------------------------- Commitments (Note 11) Subsequent event (Note 14) See accompanying notes to consolidated financial statements. BANKERS PETROLEUM LTD. CONSOLIDATED STATEMENT OF CHANGES IN DEFICIT, COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE INCOME (Unaudited, expressed in Thousands of United States dollars)
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Three months ended Nine months
ended
September 30 September 30
------------------------------------
2008 2007 2008
2007
Deficit
Balance, beginning of period $(9,404) $(6,432) $(8,324) $(5,982)
Net income (loss) for the period 4,876 264 6,232 (186)
Discontinued operations (Note 13) 2,396 - 2,396 - Restructuring costs (Note 13) (360) - (2,796) -
------------------------------------
Balance, end of period $(2,492) $(6,168) $(2,492)
$(6,168)
------------------------------------
------------------------------------
Comprehensive income (loss)
Net income (loss) for the period $ 4,876 $ 264 $ 6,232 $ (186)
Unrealized loss on investments
(Note 3) (1,454) (2,767) (296)
(2,767)
------------------------------------
Comprehensive income (loss) $ 3,422 $(2,503) $ 5,936 $(2,953)
------------------------------------
------------------------------------
Accumulated other comprehensive income Balance, beginning of period $ 1,158 $ - $ - $ -
Unrealized loss on investments (1,454) (2,767) (296) (2,767)
------------------------------------
Balance, end of period $ (296) $(2,767) $ (296)
$(2,767)
------------------------------------
------------------------------------
See accompanying notes to consolidated financial statements. BANKERS PETROLEUM LTD. CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited, expressed in Thousands of United States dollars, except per share amounts)
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Three months ended Nine months ended September 30 September 30 ------------------ ----------------- 2008 2007 2008 2007 ------------------ ----------------- Revenue Oil revenue $33,543 $16,239 $92,377 $39,891 Royalties (7,790) (1,922) (18,689) (5,044) Interest 541 91 1,141 331
------------------------------------
26,294 14,408 74,829
35,178
------------------------------------
Expenses
Operating 7,503 4,535 20,902
12,441
Sales and transportation 1,932 1,068 5,323
2,850
General and administrative 2,157 1,779 6,282
4,727
Interest and bank charges 361 242 897 553 Interest on term loan 184 338 812 876 Foreign exchange loss (gain) 661 10 876
(944)
Stock-based compensation (Note 9) 1,137 780 5,922 2,019
Depletion, depreciation and
accretion 3,327 2,140 9,367
5,942
------------------------------------
17,262 10,892 50,381
28,464
------------------------------------
Income from continuing operations
before income tax 9,032 3,516 24,448
6,714
Future income tax expense (Note 8) (4,156) (2,944) (18,028) (5,722)
------------------------------------
Income from continuing operations 4,876 $ 572 $ 6,420 $ 992
Discontinued operations (Note 13) - (308) (188) (1,178)
------------------------------------
Net income (loss) for the period 4,876 264 6,232 (186)
------------------------------------
------------------------------------
Basic earnings per share - continuing
operations $ 0.027 $ 0.004 $ 0.037 $
0.007
------------------------------------
Diluted earnings per share -
continuing operations $ 0.026 $ 0.004 $ 0.035 $ -
------------------------------------
------------------------------------
Basic loss per share - discontinued
operations - (0.002) (0.001)
(0.008)
------------------------------------
------------------------------------
See accompanying notes to consolidated financial statements. BANKERS PETROLEUM LTD. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited, expressed in Thousands of United States dollars)
-------------------------------------------------------------------------
Three months ended Nine months ended September 30 September 30 ------------------ ----------------- 2008 2007 2008 2007
------------------------------------
Cash provided by (used in):
Continuing operations:
Net income from continuing
operations $ 4,876 $ 572 $ 6,420 $
992
Items not involving cash:
Depletion, depreciation and
accretion 3,327 2,140 9,367
5,942
Future income tax expense 4,156 2,944 18,028
5,722
Stock-based compensation 1,137 780 5,922
2,019
Foreign exchange loss 1,299 - 1,637 -
------------------------------------
14,795 6,436 41,374
14,675
Change in non-cash working capital
(Note 12) (1,671) 113 (1,852)
(2,060)
------------------------------------
13,124 6,549 39,522
12,615
------------------------------------
Cash provided by (used in) operating
activities of discontinued
operations - 10,682 10,470
(2,588)
------------------------------------
Investing activities
Additions to property, plant and
equipment (25,502) (13,066) (56,367)
(37,453)
Additions to property, plant and
equipment of discontinued
operations - (13,053) (25,465)
(25,937)
Proceeds from sale of property,
plant and equipment - - -
15,000
Increase in restricted cash - - (1,500) -
Change in non-cash working
capital (Note 12) 2,564 2,961 4,540
1,539
------------------------------------
(22,938) (23,158) (78,792)
(46,851)
------------------------------------
Financing activities
Issue of shares for cash 6,852 - 79,914 21,535 Share issue costs (5) - (1,490) (1,407) Note receivable (2,465) - (13,000) - Restructuring costs (360) - (2,796) - Increase (decrease) in operating loans (484) 6,496 215
6,195
Decrease in term loan (937) - (3,437) - Change in non-cash working capital (Note 12) (1,836) - 600 -
------------------------------------
765 6,496 60,006
39,323
------------------------------------
Foreign exchange loss on cash and cash equivalents held in foreign currencies (1,299) - (1,637) -
------------------------------------
Increase (decrease) in cash and
cash equivalents (10,348) 569 29,569
2,499
Cash and cash equivalents,
beginning of period 42,516 7,762 2,599
5,832
------------------------------------
Cash and cash equivalents, end
of period (Note 12) $32,168 $ 8,331 $32,168 $
8,331
------------------------------------
------------------------------------
See accompanying notes to consolidated financial statements. Notes to the Consolidated Financial Statements (Unaudited, Expressed in Thousands of U.S. dollars)
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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, 2007. In the opinion of the Company, the 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, 2008, the Company adopted a new Canadian accounting standard on inventories which establishes standards for the measurement and disclosure of inventories including guidance on the determination of cost. The adoption of this standard did not have a significant impact on the Company's interim consolidated financial statements. Effective January 1, 2008, the Company adopted the new Canadian accounting standards relating to financial instruments and capital disclosures. Financial risk management Overview The Company has exposure to credit, liquidity and market risk. This note presents information about the Company's exposure to each risk, the Company's objectives, policies and processes for measuring and managing risk, and management of capital. The Board of Directors of the Company has the overall responsibility for the establishment and oversight of the Company's risk management framework. The Board has implemented and monitors compliance with risk management policies. The Company's risk management policies are established to identify and analyze the risks faced, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company's activities. Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from its petroleum refineries. As at September 30, 2008, the Company's receivables consisted of $19,497 (December 31, 2007 - $15,018) of receivables from petroleum and natural gas marketers and $690 (December 31, 2007 - $360) of other trade receivables. In Albania, domestic receivables from a petroleum refinery are collected by the end of the month following production. Export receivables are collected within 30 days from the date of the shipment. The Company's revenues are derived from three independent parties, all of which are solvent. The Company's policy to mitigate credit risk associated with these balances is to establish marketing relationships with large purchasers. The Company historically has not experienced any collection issues with sales to the petroleum refineries. As of September 30, 2008, none of the receivables were considered past due. Cash and cash equivalents consist of cash, bank balances and short-term deposits with original maturities of less than 90 days. The Company manages the credit exposure related to short-term investments by selecting counter parties based on credit ratings and monitors all investments to ensure a stable return, avoiding complex investment vehicles with higher risk such as asset backed commercial paper. The carrying amount of accounts receivable represents the maximum credit exposure. As of September 30, 2008 and December 31, 2007, the Company does not have an allowance for doubtful accounts and did not provide for any doubtful accounts nor was it required to write-off any receivables, as no receivables were considered past due or impaired. Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they are due. The Company's approach to managing liquidity is to plan that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without incurring unacceptable losses or risking harm to the Company's reputation. The Company prepares annual capital expenditure budgets, which are regularly monitored and modified as considered necessary. Further, the Company utilizes authorizations for expenditures on both operated and non-operated projects to further manage capital expenditures. To facilitate the capital expenditure program, the Company has a revolving credit facility with a European financial institution based in Albania, as outlined in note 6, which is reviewed annually by the lender. The Company also attempts to match its payment cycle with collection of petroleum revenues. The Company maintains a close working relationship with the European bank that provides its credit facility and has been advised that the current economic turmoil is not impacting on the bank's ability to fund any credit facilities. The renewal of and increase in the existing credit facility has just been approved (Note 14(a)). Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, commodity prices, and interest rates will affect the Company's net income. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing returns. Foreign currency exchange rate risk Foreign currency exchange rate risk is the risk that the fair value of future cash flows will fluctuate as a result of changes in foreign exchange rates. As at September 30, 2008, a 10% change in the foreign exchange rate of the Canadian dollar against the United States dollar, with all other variables held constant, would affect after tax net income for the three and nine month periods by $800 and $2,400 respectively (nil for the same periods in 2007). The sensitivity is higher in 2008 as compared to 2007 because of an increase in Canadian dollar cash and cash equivalents outstanding. As at September 30, 2008, a 10% change in the foreign exchange rate of the Albanian Lek against United States dollar, with all other variables held constant, would affect after tax net income for the three and nine month periods by $1 and $3 respectively ($21 and $63 respectively for the same periods in 2007). The sensitivity is lower in 2008 compared to 2007 because of a decrease in Albania Lek cash and cash equivalent outstanding. The Company had no forward exchange rate contracts in place as at or during the period ended September 30, 2008. Commodity price risk Commodity price risk is the risk that the value of future cash flows will fluctuate as a result of changes in commodity prices. Commodity prices for petroleum and natural gas are impacted by world economic events that dictate the levels of supply and demand. The Company's primary revenues are from heavy oil sales in Albania, priced on a quality differentiated basis, to the Brent oil price. As at September 30, 2008, a $1 per barrel change in the Brent price, with all other variables held constant, would affect after tax net income for the three and nine month periods ended September 30, 2008 by $112 and $333 respectively ($104 and $290 respectively for the same periods in 2007). The Company has not attempted to mitigate commodity price risk through the use of various financial derivative and physical delivery sales contracts. Interest rate risk Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company is exposed to interest rate fluctuations on its bank debt which bears a floating rate of interest. As at September 30, 2008, a 10% change in the interest rate, with all other variables held constant, would affect after tax net income for the three and nine month periods ending September 30, 2008 by $62 and $186 respectively ($58 and $175 respectively for the same periods in 2007). The Company had no interest rate swap or financial contracts in place as at September 30, 2008. Capital management The Company's policy is to maintain a strong capital base thereby establishing investor, creditor and market confidence and to sustain future business development. The Company manages its capital structure and makes necessary adjustments in light of changes in economic conditions and the risk characteristics of the underlying petroleum and natural gas assets. The Company's capital structure included shareholders' equity, bank debt and working capital. In order to maintain the capital structure, the Company may from time to time issue shares and adjust capital spending to manage current and projected debt levels. The Company monitors capital based on the ratio of debt to annualized cash flow. This ratio is calculated as net debt (outstanding bank debt plus or minus working capital) divided by cash provided by operating activities before changes in non-cash working capital for the most recent quarter, annualized. The Company's strategy is to maintain a debt/cash flow ratio of no more than 1.5 to 1. This ratio may increase at certain times as a result of acquisitions. In order to monitor this ratio, the Company prepares annual capital expenditure budgets, which are updated as necessary depending on varying factors including current and forecast prices, successful capital deployment and general industry conditions. The annual and updated budgets are approved by the Board of Directors. As at September 30, 2008 and December 31, 2007, the Company's ratio of net debt to annualized cash flow were (0.18) and 0.52 to 1, respectively, which were within the range established by the Company. The Company's share capital is not subject to external restrictions; however the bank debt facility is based on certain covenants, all of which were met as at September 30, 2008. The Company has not paid or declared any dividends since the date of incorporation, nor are any contemplated in the foreseeable future.
The unaudited consolidated financial statements include the accounts
of the Company and its wholly-owned operating subsidiary - Bankers Petroleum Albania Ltd. ("BPAL"). Effective July 1, 2008, the operations of Bankers Petroleum (U.S.) Inc., a former wholly-owned subsidiary of the Company, were transferred into a new, independent company (Note 13). As a result, certain prior period figures have been re-classified to conform to the current period's presentation. Unless where otherwise noted, the unaudited interim consolidated financial statements and their accompanying notes are presented in thousands of United States dollars. 2. RESTRICTED CASH As security for a letter of credit issued to secure certain capital projects in Albania by November 2009, $1,500 (December 31, 2007 -
nil) is held on deposit with a Canadian bank. The funds are invested
in an interesting bearing revolving term deposit. 3. INVESTMENTS September 30, December 31, 2008 2007
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Marketable securities $ 824 $ 1,120 ------------------------ ------------------------ As at September 30, 2008, the Company held certain marketable securities which were designated as available-for-sale financial instruments. The fair value of the investments at that date was $824 (2007 - $1,120). Accordingly, an unrealized loss of $296 (2007 - nil) was recorded in other comprehensive income for the nine month period ended September 30, 2008. 4. NOTE RECEIVABLE The note receivable of $13,000 (December 31, 2007 - nil) represents the residual amount due from BNK Petroleum Inc. ("BKX",). The note matures in October 2012 and bears interest at one year LIBOR plus 3.5% and is secured by a floating charge debenture and a general security agreement. There are no scheduled repayments of this note, however, 50% of any future equity financing by BKX and 90% of any increase in BKX's borrowing base by BKX will be directed towards the repayment of this note. The Company has no further obligation to increase the note. 5. PROPERTY, PLANT AND EQUIPMENT The following table summarizes the Company's property, plant and equipment as at September 30, 2008 and December 31, 2007: 2008 2007 -------------------------------- ---------- Accumu- lated Depletion and Deprecia- Net Book Net Book Cost tion Value Value -------------------------------- ---------- Oil and gas properties $ 164,561 $ 23,724 $ 140,837 $ 92,265 Equipment, furniture and fixtures 3,377 1,067 2,310 1,842 -------------------------------- ---------- $ 167,938 $ 24,791 $ 143,147 $ 94,107 -------------------------------- ---------- -------------------------------- ----------
The depletion expense calculation for the three months ended
September 30, 2008, excluded $3,617 (2007 - nil) relating to unproved
and non-producing properties in Albania. Depletable assets for the depletion calculation for the three months ended September 30, 2008, included $143,000 (2007 - $101,000) for
estimated future development costs associated with proved undeveloped
reserves in Albania. The Company capitalized general and administrative expenses and stock-based compensation of $786 and $2,579 during the three and nine months periods ended September 30, 2008, respectively ($583 and $1,387 for the corresponding periods in 2007) that were directly related to exploration and development activities in Albania. 6. TERM AND OPERATING LOAN FACILITY The Company has established credit facilities with a European financial institution based in Albania. The credit facility is comprised of a $16,000 operating loan, a $1,500 ((euro)1 million) bridge facility and an $11,563 term loan. The facility is secured by all of the assets of BPAL, assignment of proceeds from the Albanian domestic and export crude oil sales contracts, a pledge of the common
shares of BPAL and a guarantee by the Company. The credit facilities
are subject to certain covenants requiring the maintenance of certain
financial ratios, all of which were met as at September 30, 2008. a) Operating Loans Included in the operating loans is a one year loan bearing interest at one year LIBOR plus 3.5%. The term of this 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 September
30, 2008, $14,546 (December 31, 2007 - $15,805) of this operating loan was drawn down. In addition, the Company has established a $1,500 bridge facility, of which $1,474 (December 31, 2007 - nil) was drawn at September 30, 2008. b) Term Loan The term loan bears interest at one year LIBOR plus 4.5% and is repayable in equal monthly instalments over a 48-month period. As at September 30, 2008, the entire term loan was drawn down. Of the amount outstanding, $3,750 was classified as a current liability and $7,813 as long-term debt. Principal repayments of the term loan over the four years are as follows:
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2008 $ 938 2009 3,750 2010 3,750 2011 3,125 ---------- $ 11,563 ---------- ---------- 7. ASSET RETIREMENT OBLIGATIONS In Albania, the Company estimated the total undiscounted amount required to settle the asset retirement obligations at $19,808 (December 31, 2007 - $15,058). These obligations will be settled at the end of the Company's 25-year license of which 23 years are
remaining. The liability has been discounted using a credit-adjusted
risk-free interest rate of 9% and an inflation rate of 2.5% to arrive at asset retirement obligations of $3,187 as at September 30, 2008.
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Asset retirement obligations, December 31, 2007 $ 2,177 Liabilities incurred during the period 826 Accretion 184 ---------- Asset retirement obligations, September 30, 2008 $ 3,187 ---------- ---------- 8. INCOME TAXES Future income tax expense relates to the Albanian operations and results from the following: September 30 December 31 2008 2007
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Net book value of property, plant and equipment, net of asset retirement obligations $ 136,067 $ 91,600 Cost recovery pool (73,211) (64,800) --------------------- Timing difference $ 62,856 $ 26,800 --------------------- --------------------- Future income tax liability at 50% $ 31,428 $ 13,400 --------------------- --------------------- The cost recovery pool represents deductions for income taxes in Albania. The provision for income taxes reported differs from the amounts computed by applying the cumulative Canadian federal and provincial income tax rates to the income before income taxes due to the following: Three months ended Nine months ended September 30 September 30
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2008 2007 2008
2007
---------------------------------------------------------------------
Income before income taxes 9,032 3,516 24,448 6,714 Statutory tax rate 29.50% 32.12% 29.50% 32.12%
-------------------------------------------
2,664 1,129 7,212 2,156 Difference in tax rates between Albania and Canada 2,440 908 6,937 1,759 Non-deductible expenses 335 230 1,902 649 Valuation allowance and other (1,283) 677 1,977 1,158
-------------------------------------------
Future income tax expense 4,156 2,944 18,028 5,722
-------------------------------------------
-------------------------------------------
9. SHAREHOLDERS' EQUITY (a) Share Capital Authorized Unlimited number of common shares with no par value. Issued Number of Common Shares Amount
---------------------------------------------------------------------
Balance, December 31, 2006 412,066,634 $
116,696 Prospectus offering 36,042,858 19,227 Private placement 4,400,000 1,703 Share issuance costs - (1,113)
--------------------------
Balance, December 31, 2007 452,509,492
136,513 Consolidation adjustment(x) (301,672,995) - Discontinued operations (Note 13) - (97,472) Private placement 22,222,222 59,749 Stock options exercised 6,179,624 15,038 Warrants exercised 3,301,838 9,569 Share issuance costs - (1,490)
--------------------------
Balance, September 30, 2008 182,540,181 $
121,907 -------------------------- -------------------------- (x) On July 30, 2008, the Company's shares, warrants and options were consolidated on a one-for-three (1:3) basis, as approved by the shareholders. (b) Warrants A summary of the changes in warrants is presented below: Weighted Average Exercise Number of Price Warrants Amount (CAD $)
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Balance, December 31, 2007 38,323,452 $ 2,539 - Consolidation adjustment(x) (25,548,968) - - ------------- ------------ 12,774,484 2,539 2.45 Issued 240,729 255 1.97 Transferred to share capital on exercise (3,301,838) (706) 2.97
----------------------------------------
Balance, September 30, 2008(xx) 9,713,375 $ 2,088 2.46
----------------------------------------
----------------------------------------
The following table summarizes the outstanding and exercisable
warrants on a post consolidation basis, at September 30, 2008.
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Weighted Number of Average Warrants Exercise Outstanding Price Expiry Date and exercisable (CAD $)
---------------------------------------------------------------------
November 10, 2009 3,573,041 2.49 November 15, 2010 1,266,667 2.63 March 1, 2012 4,873,667 2.37
----------------------------------------
9,713,375
2.46
----------------------------------------
----------------------------------------
(c) Stock Options
The Company has established a "rolling" Stock Option Plan. The number
of shares reserved for issuance may not exceed 10% of the total
number of issued and outstanding shares and, to any one optionee, may
not exceed 5% of the issued and outstanding shares on a yearly basis
or 2% if the optionee is engaged in investor relations activities or
is a consultant. The exercise price of each option shall not be less
than the market price of the Company's stock at the date of grant. A summary of the changes in stock options is presented below: Number of Weighted Average Options Exercise Price (CAD $)
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Balance, December 31, 2007 37,155,000 - Consolidation adjustment(x) (24,770,000) - ------------ 12,385,000 1.92 Granted 3,766,667 3.60 Exercised (6,179,624) 1.81 Forfeited (587,000) 2.43
-----------------------------------
Balance, September 30, 2008 (xx) 9,385,043
2.81
-----------------------------------
-----------------------------------
(xx) Reflects post consolidation options outstanding at September 30, 2008. (d) Stock-based Compensation
Using the fair value method for stock-based compensation, the Company
calculated stock-based compensation expense for the three and nine
month periods ended September 30, 2008 as $1,389 and $6,952,
respectively ($816 and $2,131 for the same periods in 2007) for the
stock options vested and/or granted to officers, directors, employees
and service providers. Of these amounts, $1,137 and $5,922 ($780 and $2,019 for the same periods in 2007) was charged to earnings and $252 and $1,030 ($36 and $112 for the same periods in 2007) were capitalized. The Company determined these amounts using the Black- Scholes option pricing model assuming no dividends were paid. The weighted average fair market value per option granted in the three and nine month periods ended September 30, 2008 and 2007 and the assumptions used in their determination were as follows: Three months ended Nine months ended September 30 September 30
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2008 2007 2008
2007
---------------------------------------------------------------------
Weighted average fair value per option ($) 2.24 0.93 2.49 1.05 Risk-free interest rate (%) 3.09 4.51 3.28 4.22 Average volatility (%) 74 66 72 67 Expected life (years) 5 5 5 5 (e) Contributed Surplus The following table summarizes the change in contributed surplus as of September 30, 2008 and December 31, 2007: 2008 2007
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Balance, beginning of period $ 8,308 $ 4,456 Stock-based compensation 7,329 3,852 Discontinued operations (Note 13) (1,591) - Transferred to share capital on exercise (3,991) -
-------------------
Balance, end of period $ 10,055 $ 8,308 ------------------- ------------------- 10. SEGMENT INFORMATION The Company defined its reportable segments based on geographic locations. Nine months ended September 30, 2008 Albania Canada Total
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Revenue Oil revenue, net of royalties $ 73,688 $ - $ 73,688 Interest - 1,141 1,141
--------------------------------
73,688 1,141
74,829
--------------------------------
Expenses Operating 20,902 - 20,902 Sales and transportation 5,323 - 5,323 General and administrative 2,468 3,814 6,282 Interest and bank charges 897 - 897 Interest on term loan 812 - 812 Foreign exchange (gain) loss (412) 1,288 876 Stock-based compensation 611 5,311 5,922 Depletion, depreciation and accretion 9,248 119 9,367
--------------------------------
39,849 10,532
50,381
--------------------------------
Income (loss) from continuing
operations before income taxes 33,839 (9,391) 24,448
Future income tax expense (18,028) -
(18,028)
--------------------------------
Income (loss) from continuing operations $ 15,811 $ (9,391) 6,420 --------------------- --------------------- Discontinued operations (188)
----------
Net income for the period $ 6,232 ---------- ----------
Assets, September 30, 2008 $ 166,257 $ 50,721 $
216,978
--------------------------------
--------------------------------
Additions to property, plant and
equipment $ 56,304 $ 63 $
56,367
--------------------------------
--------------------------------
Nine months ended September 30, 2007 Albania Canada Total
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Revenue Oil revenue, net of royalties $ 34,847 $ - $ 34,847 Interest 2 329 331
--------------------------------
34,849 329
35,178
--------------------------------
Expenses Operating 12,441 - 12,441 Sales and transportation 2,850 - 2,850 General and administrative 1,898 2,829 4,727 Interest and bank charges 553 - 553 Interest on term loan 876 - 876 Foreign exchange gain (50) (894) (944) Stock-based compensation 567 1,452 2,019 Depletion, depreciation and accretion 5,875 67 5,942
--------------------------------
25,010 3,454
28,464
--------------------------------
Income from continuing operations
before income tax 9,839 (3,125)
6,714
Future income tax expense (5,722) -
(5,722)
--------------------------------
Income (loss) from continuing operations $ 4,117 $ (3,125) 992 --------------------- --------------------- Discontinued operations
(1,178)
----------
Net loss for the period $ (186) ---------- ----------
Assets, September 30, 2007 $ 99,297 $ 10,468 $
109,765
--------------------------------
--------------------------------
Additions to property, plant and
equipment $ 37,216 $ 237 $
37,453
--------------------------------
--------------------------------
Three months ended September 30, 2008 Albania Canada Total
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Revenue Oil revenue, net of royalties $ 25,753 $ - $ 25,753 Interest - 541 541
--------------------------------
25,753 541
26,294
--------------------------------
Expenses Operating 7,503 - 7,503 Sales and transportation 1,932 - 1,932 General and administrative 851 1,306 2,157 Interest and bank charges 361 - 361 Interest on term loan 184 - 184 Foreign exchange (gain) loss (387) 1,048 661 Stock-based compensation 118 1,019 1,137 Depletion, depreciation and accretion 3,286 41 3,327
--------------------------------
13,848 3,414
17,262
--------------------------------
Income (loss) from continuing
operations before income tax 11,905 (2,873)
9,032
Future income tax expense (4,156) -
(4,156)
--------------------------------
Net income (loss) for the period $ 7,749 $ (2,873) $ 4,876
--------------------------------
--------------------------------
Additions to property, plant and
equipment $ 25,493 $ 9 $
25,502
--------------------------------
--------------------------------
Three months ended September 30, 2007 Albania Canada Total
---------------------------------------------------------------------
Revenue Oil revenue, net of royalties $ 14,317 $ - $ 14,317 Interest - 91 91
--------------------------------
14,317 91
14,408
--------------------------------
Expenses Operating 4,535 - 4,535 Sales and transportation 1,068 - 1,068 General and administrative 757 1,022 1,779 Interest and bank charges 242 - 242 Interest on term loan 338 - 338 Foreign exchange loss - 10 10 Stock-based compensation 183 597 780 Depletion, depreciation and accretion 2,113 27 2,140
--------------------------------
9,236 1,656
10,892
--------------------------------
Income (loss) from continuing
operations before income tax 5,081 (1,565)
3,516
Future income tax expense (2,944) -
(2,944)
--------------------------------
Income (loss) from continuing operations $ 2,137 $ (1,565) 572 --------------------- --------------------- Discontinued operations (308)
----------
Net income for the period $ 264 ---------- ----------
Additions to property, plant and
equipment $ 13,010 $ 56 $
13,066
--------------------------------
--------------------------------
11. COMMITMENTS The Company leases office premises, of which the minimum lease payments for the next five years are: Canada Albania Total
---------------------------------------------------------------------
2008 $ 41 $ 44 $ 85 2009 162 49 211 2010 162 37 199 2011 162 - 162 2012 7 - 7
--------------------------------
$ 534 $ 130 $
664
--------------------------------
--------------------------------
The Company has signed an agreement with the developers of the Port of Vlore oil export terminal for the storage and handling of its oil in a 13,000 cubic metre Company-dedicated oil tank. Pursuant to this agreement, the Company has committed to contribute (euro)1,355,000 to the dedicated facility ((euro) 855,000 by December 31, 2008 and the balance on service commencement in 2009), and will pay a throughput rate when the facility is operational. 12. SUPPLEMENTAL CASH FLOW INFORMATION Three months ended Nine months
ended
September 30 September 30
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2008 2007 2008
2007
---------------------------------------------------------------------
Operating activities
(Increase) decrease in
current assets
Accounts receivable $ 971 $ 1,387 $ (4,809) $ (1,915)
Crude oil inventory (750) (209) (1,219) (507) Deposit and prepaid expenses (2,738) 48 (3,098) (2) Increase (decrease) in current liabilities Accounts payable and accrued liabilities 846 (1,113) 7,274 364
---------------------------------------
$ (1,671) $ 113 $ (1,852) $
(2,060)
---------------------------------------
---------------------------------------
Investing activities Increase in current liabilities Accounts payable and accrued liabilities $ 2,564 $ 2,961 $ 4,540 $ 1,539
---------------------------------------
---------------------------------------
Financing activities (Decrease) increase in current liabilities Accounts payable and accrued liabilities $ (1,836) $ - $ 600 $ -
---------------------------------------
---------------------------------------
Interest paid $ 454 $ 573 $ 1,709 $
1,422
---------------------------------------
---------------------------------------
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September 30, December 31, 2008 2007
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Cash and cash equivalents Cash $ 380 $ 1,099 Deposit certificates with Canadian chartered banks 31,788 1,500 ----------------------- $ 32,168 $ 2,599 ----------------------- -----------------------
13. DISCONTINUED OPERATIONS
Pursuant to shareholders' approval at the Annual and Special General
Meeting on June 27, 2008, the Company completed its plan of arrangement effective at the beginning of July 2008, which resulted in all of the Company's US operations and assets being transferred into a new, independent company: BNK Petroleum Inc. ("BKX"). Accordingly, the operations of BKX have been classified as discontinued operations. The Company incurred restructuring costs of $360 and $2,796, for the three and nine months periods ended September 30, 2008, respectively. The following table provides additional information with respect to amounts included in the results of discontinued operations: Three months ended Nine months ended September 30 September 30
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2008 2007 2008
2007
---------------------------------------------------------------------
Revenue $ - $ 213 $ 3,144 $ 309 Expenses - 521 3,332 1,487
---------------------------------------
Discontinued operations $ - $ (308) $ (188) $ (1,178)
---------------------------------------
---------------------------------------
The following table provides additional information with respect to
amounts included in the balance sheet of discontinued operations:
---------------------------------------------------------------------
September 30, December 31, 2008 2007
---------------------------------------------------------------------
Cash and cash equivalents $ - $ 961 Accounts receivable - 5,750 Deposits and prepaid expenses - 751 ----------------------- $ - $ 7,462 ----------------------- ----------------------- Property, plant and equipment $ - $ 81,794 ----------------------- ----------------------- Accounts payable and accrued liabilities $ - $ 7,340 ----------------------- ----------------------- Asset retirement obligations $ - $ 433 ----------------------- ----------------------- The following table summarizes the assets, liabilities and shareholders' equity that has been transferred to BKX effective July 1, 2008 as a result of the discontinued operations: ASSETS Current assets Cash and cash equivalents $ 351 Accounts receivable 16,451 Deposits and prepaid expenses 2,441 ----------
19,243
Property, plant and equipment
105,830 ---------- $ 125,073 ---------- ---------- LIABILITIES Current liabilities Notes payable $ 10,535 Accounts payable and accrued liabilities 17,262 ---------- 27,797 Asset retirement obligations 609 SHAREHOLDERS' EQUITY Share capital 97,472 Contributed surplus 1,591 Deficit (2,396) ---------- 96,667 ---------- $ 125,073 ---------- ---------- 14. SUBSEQUENT EVENT On October 31, 2008, the Company terminated a contract for drilling services of which $2,000 was paid and included in deposits and prepaid expenses as at September 30, 2008. The financial costs
associated with the termination of this contract will be represented
by the actual amount spent by the contractor for mobilization of the equipment and are currently being assessed. The total amount is unknown at this time.
For further information: Abby Badwi, President and Chief Executive Officer, (403) 513-2694; Doug Urch, VP, Finance and Chief Financial Officer, (403) 513-2691, Email: investorrelations(at)bankerspetroleum.com, Website: www.bankerspetroleum.com; AIM NOMAD: Canaccord Adams Limited, Ryan Gaffney, Henry Fitzgerald-O'Connor, +44 20 7050 6500; AIM JOINT BROKERS: Canaccord Adams Limited, Ryan Gaffney, Henry Fitzgerald-O'Connor, +44 20 7050 6500; Tristone Capital Ltd., Nick Morgan, +44 20 7355 5800 (BNK.)
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