BNK Petroleum Inc. Announces Second Quarter 2017 Results
21:01 EDT Thursday, August 10, 2017
CAMARILLO, CA, Aug. 10, 2017 /PRNewswire/ -
All amounts are in U.S. Dollars unless otherwise indicated:
SECOND QUARTER HIGHLIGHTS:
- The Company is currently fracture stimulating the Hartgraves 1-6H well and expects to begin flowback next week
- Operating cash flow from continuing operations was $1.4 million for the second quarter of 2017 compared to $1.7 million in the second quarter of 2016
- Revenue, net of royalties was $2.5 million for second quarter of 2017 compared to $2.4 million in the second quarter of 2016 due to higher prices in 2017 offset by decreased production
- Average production for the second quarter of 2017 was 970 BOEPD, a decrease of 16% compared to second quarter 2016 production of 1,149 BOEPD primarily due to three wells that were shut-in for part of the second quarter of 2017, caused by offset fracture stimulation operations on 19 wells by another operator in the Woodford formation beneath the Caney and also due to the normal production decline. This was partially offset by the production from the Chandler 8-6H well that started producing in March 2017. During the second quarter, the three shut-in wells were still pumping off the offset operator's frack water with production levels slowly increasing toward their pre-shut in levels. The shut-in wells decreased second quarter 2017 average production by about 200 BOEPD
- Average netbacks were $21.30 per BOE for the quarter, an increase of 19% compared to the second quarter of 2016 due to higher prices in the second quarter of 2017. If the realized gains from the commodity contracts are included, the average netbacks for the second quarter of 2017 increase to $27.99 per BOE
- Cash and working capital totaled $0.8 million and $1.5 million respectively at June 30, 2017. In addition, we have $4.0 million of unused borrowing capacity on our new credit facility with BOK Financial. The new $75 million credit facility, with an initial borrowing base commitment of $25 million, was signed in the second quarter and matures in June 2022. The Company borrowed $21 million to payoff its existing credit facility which was maturing in July 2018 and also to pay for new loan origination costs
- Net income for the second quarter 2017 was $56,000 compared to a net loss of $5.3 million in the second quarter of 2016. The 2016 net loss included unrealized losses on commodity contracts of $4.7 million compared to unrealized gains on commodity contracts of $0.6 million in the second quarter of 2017
BNK's President and Chief Executive Officer, Wolf Regener commented:
"We are excited to be about 75% complete with the Hartgraves 1-6H (100% working interest) fracture stimulation operations that were announced last week. We expect to be finished within the next week and plan to start flowback of the well immediately thereafter. The Hartgraves 1-6H completion operations have been proceeding as originally designed, which entails increased amounts of proppant and shorter stage spacings. The Hartgraves 1-6H well is the second well to be fracture stimulated under our 2017 drilling program, as we finished drilling and completing the Chandler 8-6H well (99.9% working interest) in the first quarter. We intend to commence completion operations on the previously drilled Brock 9-2H (100% working interest), the third well in our 2017 drilling program, within weeks after the Hartgraves 1-6H well is completed. We are looking forward to the completion of these next two wells which will incorporate our previous learnings including refined placement of the laterals as well as improved completion designs.
During the second quarter, we also obtained a new $75 million credit facility with BOK Financial with a June 2022 maturity date. The Company borrowed $21 million of our initial borrowing commitment of $25 million and used it primarily to payoff our existing credit facility which was maturing in July 2018. In addition, the lower interest rate on the new credit facility will reduce our interest payments by over $650,000 a year. We look forward to working with BOK Financial in the future as we grow and develop the Tishomingo field.
Our net revenue increased by 1% in the second quarter 2017 as the average price increase of 20% offset the 16% decrease in average production as compared to the prior year quarter. Production during the second quarter of 2017 decreased as compared to the second quarter of 2016 primarily due to three wells that were shut-in for all of the first quarter and part of the second quarter of 2017, caused by offset fracture stimulation operations on 19 wells by another operator in the Woodford formation beneath the Caney and also due to the normal production decline. This was partially offset by the production from the Chandler 8-6H well that started producing in March 2017. During the second quarter, the three shut-in wells were still pumping off the offset operator's frack water with production levels improving slowly, but still less than their pre-shut in levels. The shut-in wells decreased second quarter 2017 average production by about 200 BOEPD and year to date 2017 average production by 220 BOEPD. The Company expects the wells to require a few more months to pump off the rest of the offset fracture stimulation fluids in order to fully recover. The Company does not expect any impact on the long-term production of the wells, even though the wells have recovered slower than expected.
The increase in average prices and the addition of the production of Chandler 8-6H well in the second quarter allowed the Company to generate operating cash flow from continuing operations of $1.4 million for the second quarter of 2017, which was an increase of more than $1.1 million from the first quarter of 2017.
The Company's hedging position has continued to allow us to realize higher prices than current market levels for a portion of our production. During the second quarter 2017, the Company was able to realize an average price of $64.00 on more than 65% of its oil production. We expect a comparable level of hedging in the rest of 2017 as the Company has commodity contracts in place to recognize an average price of about $59.00/bbl on almost 70% of existing 2017 production going forward, excluding the new production expected to come on-line from the Hartgraves 1-6H and Brock 9-2H wells.
Average netbacks for the second quarter 2017 were $21.30, an increase of 19% compared to the prior year second quarter due to the 20% average price increase. If we include the impact of the realized gains from the commodity contracts, our average netbacks for the second quarter would be $27.99, which is an increase of 3% compared to the 2016 second quarter.
"In the second quarter of 2017, the Company generated a net income of $56,000 compared to net loss of $5.3 million in the second quarter of 2016. The 2016 net loss included unrealized losses on commodity contracts of $4.7 million compared to unrealized gains on commodity contracts of $0.6 million in the second quarter of 2017."
| | Second Quarter | | First Six Months | |
| | 2017 | 2016 | % | 2017 | 2016 | % |
| | | | | | | |
| Net Income (Loss): | | | | | | |
| $ Thousands | $56 | $(5,310) | - | $1,040 | $(6,560) | - |
| $ per common share | $0.00 | $(0.03) | - | $0.00 | $(0.04) | - |
| assuming dilution | | | | | | |
| | | | | | | |
| Capital Expenditures | $940 | $406 | 132% | $11,484 | $537 | 2,039% |
| | | | | | | |
| Average Production (Boepd) | 970 | 1,149 | (16%) | 862 | 1,250 | (31%) |
| Average Price per Barrel | $36.16 | $30.19 | 20% | $38.46 | $25.61 | 50% |
| Average Netback per Barrel | $21.30 | $17.90 | 19% | $23.26 | $14.88 | 56% |
| Average Price per Barrel including Commodity Contracts | $42.85 | $39.45 | 9% | $45.34 | $37.22 | 22% |
| Average Netback per Barrel including Commodity Contracts | $27.99 | $27.16 | 3% | $30.14 | $26.49 | 14% |
| | | | | | | |
| | June2017 | | March2017 | | December 2016 | |
| | | | | | | |
| Cash and Cash Equivalents | $830 | | $6,988 | | $11,101 | |
| Working Capital | $1,478 | | $1,108 | | $10,640 | |
Second Quarter 2017 versus Second Quarter 2016
Oil and gas gross revenues totaled $3,191,000 in the second quarter 2017 versus $3,157,000 in the second quarter of 2016. Oil revenues were $2,678,000 in the quarter versus $2,592,000 in the second quarter of 2016, an increase of 3% as average oil prices increased 9% or $3.70 a barrel for the quarter while production decreased by 5%. Natural gas revenues increased $1,000 or 1%, as a 50% increase in average natural gas prices compared to the second quarter of 2016 offset natural gas production decreases of 33%. Natural Gas Liquid (NGL) revenue decreased $52,000 or 13% to $342,000 as average production decreased 29% offset by an average NGL price increase of 22%.
Production and operating expenses increased $23,000 between quarters. Operating expenses averaged $6.73 per BOE for the second quarter of 2017 compared to $5.46 per BOE for the same period in 2016. The per BOE operating expense increase for 2017 is due to the additional water hauling and disposal costs once the shut-in wells were returned to production as well as a decrease in production from the shut-in wells. If these water hauling and disposal costs are excluded from the total, the operating expenses for the second quarter of 2017 would be reduced to $5.82 per BOE. As the production from the new wells comes on and the water hauling/disposal costs return to normal we expect our operating expenses to return to the mid-to-low $5 per BOE range.
Depletion and depreciation expense decreased $186,000 between quarters due to decreased production.
General and administrative expenses increased $64,000 between quarters due to a one-time charge, increasing legal and professional fees.
Finance income increased $244,000 due to unrealized gains on financial commodity contracts in 2017. Finance expense decreased $4,595,000 due to 2016 unrealized loss on financial commodity contracts of $4,728,000.
FIRST SIX MONTHS 2017 HIGHLIGHTS
- Operating cash flow from continuing operations was $1.7 million for the first six months of 2017 compared to $3.5 million in the first six months of 2016 due mainly to lower production partially offset by higher prices
- Revenue, net of royalties was $4.7 million for first six months of 2017 compared to $4.5 million for the first six months of 2016, an increase of 5%, due to higher prices in 2017 offset by a decrease in production
- Average production was 862 BOEPD for the first six months, a decrease of 31% compared to the prior year six months production of 1,250 BOEPD due to the shut-in wells and normal production decline partially offset by the production from the Chandler 8-6H well
- Average netbacks were $23.26 per BOE for the first six months of 2017, an increase of 56% compared to the first six months of 2016 due to higher prices in 2017. If the realized gains from the commodity contracts are included, the average netbacks for the first six months of 2017 increase by more than $6/barrel to $30.14 per BOE
- General & administrative expenses decreased by 5% for the first six months of 2017 compared to the first six months of 2016. The decrease relates primarily to management's efforts to reduce staffing, benefit and travel costs throughout the Company which were partially offset by a one-time charge that increased legal and professional fees
- Net income for the first six months of 2017 was $1.0 million compared to net loss of $6.6 million for the first six months of 2016. The 2016 amount included an unrealized mark to market loss on financial commodity contracts of $5.5 million and the 2017 amount included an unrealized mark to market gain of $0.6 million
- Cash and working capital totaled $0.8 million and $1.5 million respectively at June 30, 2017. In addition, we have $4.0 million of unused borrowing capacity on our new credit facility with BOK Financial. The new $75 million credit facility, with an initial borrowing base commitment of $25 million, was signed in the second quarter and matures in June 2022. The Company borrowed $21 million to payoff its existing credit facility which was maturing in July 2018 and also to pay for new loan origination costs
First Six Months of 2017 versus First Six Months of 2016
Gross oil and gas revenues totaled $6,000,000 in the first six months of 2017 versus $5,825,000 in the first six months of 2016. Oil revenues were $5,079,000 in the first six months versus $4,639,000 in the same period of 2016, an increase of 9% as average oil prices increased 32% or $11.39 a barrel offset by a decrease in oil production of 16%. Natural gas revenues decreased $141,000 or 30%, due to an average natural gas production decrease of 53% in the first six months of 2017 offset by an increase in natural gas prices of 51%. NGL revenue decreased $124,000, or 17%, due to a decrease in NGL production of 48%, partially offset by an average NGL price increase of 59% in the first six months of 2017.
Production and operating expenses decreased 9% for the first six months of 2017 due to a decrease in production. Operating expenses averaged $6.54 per BOE for the first six months of 2017 compared to $4.94 per BOE for the same period in 2016. The per BOE operating expense increase for 2017 are due to the decrease in production from the shut-in wells as well as additional water hauling and disposal costs once the shut-in wells were returned to production. If these water hauling and disposal costs are excluded from the total, the operating expenses for the first six months of 2017 would be reduced to $5.77 per BOE.
Depletion and depreciation expense decreased $900,000 due to decreased production.
General and administrative expenses decreased $97,000 primarily due to management's efforts to reduce staffing, benefit and travel costs throughout the Company which were partially offset by a one-time charge that increased legal and professional fees.
Finance income increased $604,000 due to an unrealized gain on financial commodity contracts in 2017 of $2.2 million offset by lower realized gains in 2017. Finance expense decreased $5,449,000 due to a 2016 unrealized loss on financial commodity contracts of $5,520,000.
| BNK PETROLEUM INC. |
| CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) |
| (Unaudited, expressed in Thousands of United States dollars, except per share amounts) |
| |
| | Second Quarter | | First Six Months |
| | | 2017 | | 2016 | | 2017 | | 2016 |
| | | | | | | | | |
| Oil and natural gas revenue, net | $ | 2,473 | | 2,443 | | 4,650 | | 4,507 |
| Other income | | 75 | | - | | 76 | | 1 |
| | | 2,548 | | 2,443 | | 4,726 | | 4,508 |
| | | | | | | | | |
| Exploration and evaluation expenditures | | - | | - | | - | | - |
| Production and operating expenses | | 594 | | 571 | | 1,021 | | 1,123 |
| Depletion and depreciation expense | | 1,238 | | 1,424 | | 2,195 | | 3,095 |
| General and administrative expenses | | 996 | | 932 | | 1,933 | | 2,030 |
| Stock based compensation | | 43 | | 323 | | 87 | | 362 |
| | | 2,871 | | 3,250 | | 5,236 | | 6,610 |
| | | | | | | | | |
| Finance income | | 1,212 | | 968 | | 3,249 | | 2,645 |
| Finance expense | | (638) | | (5,233) | | (1,107) | | (6,556) |
| | | | | | | | | |
| Net income (loss) and comprehensive income (loss) from continuing operations | $ | 251 | | (5,072) | | 1,632 | | (6,013) |
| | Net loss and comprehensive loss from discontinued operations | | (195) | | (238) | | (592) | | (547) |
| | Net income (loss) | | 56 | | (5,310) | | 1,040 | | (6,560) |
| | Net income (loss) per share | $ | 0.00 | | (0.03) | | 0.00 | | (0.04) |
| BNK PETROLEUM INC. |
| SECOND QUARTER 2017 |
| ($000 except as noted) |
| | |
| | | Second Quarter | | First Six Months |
| | | 2017 | 2016 | | 2017 | 2016 |
| Oil revenue before royalties | $ | 2,678 | 2,592 | | 5,079 | 4,639 |
| Gas revenue before royalties | | 172 | 171 | | 329 | 470 |
| NGL revenue before royalties | | 342 | 394 | | 593 | 717 |
| Oil and Gas revenue | | 3,192 | 3,157 | | 6,001 | 5,826 |
| | | | | | | |
| Cash flow from continuing operations | | 1,395 | 1,716 | | 1,674 | 3,543 |
| Additions to property, plant & equipment | | (940) | (406) | | (11,484) | (537) |
| | | | | | | |
| | | | | | | |
| Statistics: | | | | | | |
| | | 2nd Quarter | | First Six Months |
| | | 2017 | 2016 | | 2017 | 2016 |
| Average Oil production (Bopd) | | 638 | 672 | | 592 | 708 |
| Average natural gas production (mcf/d) | | 793 | 1,181 | | 673 | 1,441 |
| Average NGL production (Boepd) | | 200 | 280 | | 158 | 302 |
| Average production (Boepd) | | 970 | 1,149 | | 862 | 1,250 |
| Average oil price ($/bbl) | | $46.11 | $42.41 | | $47.41 | $36.02 |
| Average natural gas price ($/mcf) | | $2.38 | $1.59 | | $2.70 | $1.79 |
| Average NGL price ($/bbl) | | $18.80 | $15.45 | | $20.72 | $13.04 |
| | | | | | | |
| Average price per barrel | | $36.16 | $30.19 | | $38.46 | $25.61 |
| Royalties per barrel | | 8.13 | 6.83 | | 8.66 | 5.79 |
| Operating expenses per barrel | | 6.73 | 5.46 | | 6.54 | 4.94 |
| Netback per barrel | | $21.30 | $17.90 | | $23.26 | $14.88 |
| | | | | | | |
| Average price per barrel including commodity contracts | | $42.85 | $39.45 | | $45.34 | $37.22 |
| Royalties per barrel | | 8.13 | 6.83 | | 8.66 | 5.79 |
| Operating expenses per barrel | | 6.73 | 5.46 | | 6.54 | 4.94 |
| Netback per barrel including commodity contracts | | $27.99 | $27.16 | | $30.14 | $26.49 |