9 Oct 2008 13:00
Bankers Petroleum provides operational and corporate update
Exit Production Rate for the third quarter exceeds 6,200 bopd
CALGARY, Oct. 9 /CNW/ - Bankers Petroleum Ltd. is pleased to announce the following operational and corporate updates.
Production
Third quarter production averaged 5,881 bopd from the Patos Marinza oil field in Albania compared to second quarter production of 5,826 bopd. Net oil inventory at the end of September was 5,660 barrels higher compared to the second quarter inventory. Timing of successful re-activation and new wells being placed on production impacted average production for the quarter, however, exit production rate exceeded 6,200 bopd and the Company is on track to meet its production target of 7,000 bopd by the end of this year. During the quarter, 39 re-activation operations of existing wells were completed with 24 wells placed on production.
Expansion of the second train of the 8,000 bopd Central Treating Facility with the construction of a second emulsion receiving and water tank was completed during the quarter. The tanks are aimed toward improving the water quality for disposal purposes and as potential source water for the upcoming waterflood 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.
Drilling Update
Bankers initiated its vertical infill drilling program on June 21, 2008 with the first four new wells having been drilled from one pad to evaluate the different producing horizons. The initial production rates from these wells has been between 15 and 40 bopd per well 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 encouraging in that it demonstrates the initiation of the Cold Heavy Oil Production with Sand process ("CHOPS"). As the wells continue to clean up, it is expected that production rates from each individual well will continue to increase. Overall the production levels from the new wells are in line with forecast. Further evaluation of untested zones will continue with added perforations.
In addition, three wells have been drilled and cased from the second pad with completion commencing immediately. The drilling program is continuing with the rig currently drilling the first of five locations from a third pad.
Rig Tender
Bankers has entered into a contract, with an unrelated party, for the provision of drilling and service rigs with Peritus International Oilfield Services Ltd., a subsidiary of Precision Drilling Corporation of Calgary. The contract is for two years with an option to extend for a third year and provides Bankers with one drilling rig and three service rigs with an option for a second drilling rig in 2009. This will bring the total number of rigs available to two drilling rigs and 10 service rigs before the end of this year. The rigs are planned to mobilize in October, arriving in Albania in late November, with an anticipated spud date for the drilling rig of December 1, 2008.
Patos Marinza Oil Price
Third quarter average oil price achieved was $62.55 per barrel (54% of the Brent oil price), 3% lower than the second quarter price of $64.42 per barrel, in line with commodity price changes.
New Royalty Tax Mitigation
Agreement has been reached on the terms of an Amending Agreement to the Petroleum Agreement dated June 19, 2004 with Albpetrol Sh. A., the Albanian national oil company. The Amending Agreement was prepared to include the necessary incentive amendments to the Petroleum Agreement that will mitigate the overall economic impact to Bankers resulting from imposition of the 10% Royalty Tax announced in August by the Albanian Government.
The amendments include: a) establishing the Royalty Tax as an allocation of produced volumes to the Government of Albania, thereby deducting the value from production revenues to arrive at Cost Recovery Petroleum value and b) providing for the addition of an amount equal in value to the amount of Royalty Tax paid which exceeds that which would have been paid under prior arrangements as a Petroleum Cost, thereby allowing deduction of the amount in the calculation of Profit Oil. After the payout period, the full amount of the Royalty Tax paid will be considered excess and thus will be added to Petroleum Costs. These changes will mitigate the overall economic impact to Bankers resulting from imposition of the 10% Royalty Tax and on an undiscounted basis total payments to the government remain unchanged.
While the Company is awaiting the final approval of the new tax law and associated regulations by the Albanian Parliament, these amendments and all other agreements with Albpetrol have been incorporated in the Company's second quarter financial report, in future reporting and in the Plan of Development of Patos Marinza Field.
Kucova
The agreement reached for the above amendments provide the framework that will also be applied to the Kucova oil field contract. The reserves report for this field is currently being finalized and the Company expects to disclose its details by the end of October 2008.
The Company is in an ongoing data acquisition phase of Albpetrol data in Kucova. Plans to start field activities are on target and the Company expects to initiate field testing before year end.
S&P/TSX Composite
The Company is pleased to announce that the Standard & Poor's Canadian index operations have added Bankers Petroleum to the S&P/TSX Composite index effective September 22, 2008.
Director Resignation
Mr. Ford Nicholson a director of the Company has resigned for personal reasons effective October 7, 2008. The management and board would like to thank Mr. Nicholson for his four years of service with Bankers Petroleum.
Equity & Liquidity
Approximately 1.2 million options and 5.6 million warrants were exercised during the third quarter, generating proceeds of approximately $6.9 million. Total cash on deposit at the end of September 2008 was approximately $32 million and $7.8 million working capital excluding cash. The Company's existing credit facility with Raiffeisen Bank of Austria has been recently approved to be increased to $50 million. Current outstanding debt is $27.6 million.
Abby Badwi President and CEO of Bankers said:
"The global financial crisis and the liquidity and volatility issues in the credit markets had a serious negative impact on the equity value of many public companies including Bankers Petroleum. Record oil prices this summer and the subsequent decline to current levels have also contributed to this decline in our share price in the last few weeks.
Bankers Petroleum has planned its 2009 and 2010 capital budget to be self-funding out of a strong internal cash flow profile, current cash on hand and existing credit facility. While economists have revisited the oil price forecast in 2009 to be between $90 and $100 a barrel, Bankers' budget is based on $84 Brent oil price for 2009 and $80 for 2010.
While our short and long term goals to achieve production and reserve growth remain unchanged at this stage, Bankers capital program is flexible and can be modified at any time to address prevailing economic conditions. Our team will remain focused on achieving our objectives but we will also be prudent and proactive to maintain a strong balance sheet and carefully manage our capital requirements".
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 the Patos-Marinza heavy oil field and has a 100% interest in the Kucova oil field. Bankers' shares are traded on the Toronto Stock Exchange and the AIM Market in London, England under the stock symbol BNK.
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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