BNK Petroleum Inc. Announces 2nd Quarter 2016 Results

Camarillo, California (ots/PRNewswire) -

All amounts are in U.S. Dollars unless otherwise indicated:

SECOND QUARTER HIGHLIGHTS:

- Operating cash flow from continuing operations was $1.6 million for
the second quarter of 2016 compared to $1.9 million in the second
quarter of 2015
- General & administrative expenses decreased by 29% compared to the
prior year quarter as the Company continues its cost cutting
efforts initiated in 2015
- Revenue, net of royalties was $2.4 million for second quarter of
2016 compared to $4.0 million in the second quarter of 2015 due to
lower prices and production in 2016
- Average production for the second quarter of 2016 was 1,149 BOEPD,
a decrease of 23% compared to second quarter 2015 production of
1,490 BOEPD due to the completion of the Nickel Hill 36-3H well and
the remaining portion of the Emery 17-1H well during the second
quarter and a prior period adjustment which decreased second
quarter 2016 production
- Average netbacks were $17.90 per BOE for the quarter, a decrease of
28% compared to the second quarter of 2015 due to lower prices in
the second quarter of 2016. If the realized gains from the
commodity contracts are included, the average netbacks for the
second quarter of 2016 increase to $27.16 per BOE
- Cash and working capital totaled $2.4 million and $5.3 million
respectively at June 30, 2016
- In April 2016, the Company made a $1.8 million paydown on its
existing credit facility. In July 2016, the Company made an
additional $1.4 million paydown reducing the outstanding balance to
$21.2 million at July 31, 2016, with $3.2 million available to
borrow
- Net loss for the second quarter 2016 was $5.3 million compared to
net loss of $3.7 million in the second quarter of 2015. The second
quarter 2016 included an unrealized loss on financial commodity
contracts of $4.7 million as the average price of oil increased 40%
from first quarter 2016 to the second quarter 2016.

BNK's President and Chief Executive Officer, Wolf Regener
commented:

"Due to the success of our continued cost cutting efforts and the
positive impact of our hedging program, the Company generated $1.6
million of positive operating cash flow during the quarter. Our
global cost cutting efforts led to a decrease in general and
administrative expense of 29% during the second quarter of 2016
compared to the prior year second quarter. I am very pleased to be
able to say that we generated this positive cash flow even though the
industry is still in this prolonged oil price downcycle.

"The Company's hedging program enabled us to realize higher prices
than current market levels for a significant portion of our
production. The Company's commodity contract hedges generated $1.0
million in realized gains during the second quarter of 2016 as we had
over 75% of our oil production hedged at $65.24. Going forward, we
have a comparable percentage of oil hedged at $64.88 for the
remainder of 2016 and $61.93 for 2017 based on our forecasted
existing production.

"In July, the Company made a $1.4 million paydown of its existing
credit facility to reduce the outstanding balance to $21.2 million.
The Company has now paid down $3.2 million on the credit facility
during the year to reduce its ongoing interest payments. The $3.2
million remains available to borrow under the credit facility.

"The Company is exploring options to accelerate its field
development over what can be done using its existing borrowing
capacity and current cash flow.

"Our second quarter production decreased to 1,149 BOEPD, a
decrease of 23% compared to the prior year second quarter, due to the
initial production volumes from the fracture stimulation of the
previously drilled Nickel Hill 36-3H well and the remaining stages in
the Emery 17-1H well during the second quarter of last year. In
addition, a prior period adjustment decreased our second quarter 2016
production.

"Average netbacks for the second quarter 2016 were $17.90, a
decrease of 28% compared to the prior year second quarter due to the
23% average price decrease. If we include the impact of the realized
gains from the commodity contracts, our average netbacks for the
second quarter would be $27.16, which is a decrease of 9% compared to
the 2015 second quarter.

"In the second quarter of 2016, the Company generated a net loss
of $5.3 million compared to net loss of $3.7 million in the second
quarter of 2015. The 2016 net loss included unrealized losses on
commodity contracts of $4.7 million as the Company had to mark its
commodity contracts to market as oil prices increased throughout the
second quarter before falling down to their current levels subsequent
to quarter-end."

Second Quarter
First Six Months
2016 2015
% 2016 2015 %

Net Loss:

$ Thousands
$(5,310) $(3,658) (45%) $(6,560) $(4,418) (48%)

$ per common share $(0.03) $(0.02) (50%) $(0.04)
$(0.03) (33%)
assuming dilution

Capital Expenditures
$406 $4,248 (90%) $537 $8,566 (94%)

Average
Production (Boepd) 1,149 1,490 (23%) 1,250 1,369
(9%)
Average Price per Barrel $30.19 $39.35 (23%)
$25.61 $38.15 (33%)
Average Netback per Barrel $17.90
$24.88 (28%) $14.88 $24.21 (39%)
Average Price per
Barrel
including Commodity Contracts $39.45 $44.31 (11%)
$37.22 $44.38 (16%)
Average Netback per Barrel
including
Commodity Contracts $27.16 $29.84 (9%) $26.49 $30.44
(13%)

June March
December
2016
2016 2015

Cash and Cash Equivalents $2,442
$2,885 $1,666
Working Capital
$5,278 $7,950 $7,298

Second Quarter 2016 versus Second Quarter 2015

Oil and gas gross revenues totaled $3,157,000 in the second
quarter 2016 versus $5,335,000 in the second quarter of 2015. Oil
revenues were $2,592,000 in the quarter versus $4,519,000 in the
second quarter of 2015, a decrease of 43% as average oil prices
decreased 22% or $11.94 a barrel for the quarter while production
decreased by 26%. Natural gas revenues decreased $184,000 or 52%, as
natural gas production decreased 28% in addition to a 33% decrease in
average natural gas prices compared to the second quarter of 2015.
Natural Gas Liquid (NGL) revenue decreased $67,000 or 15% to $394,000
as average production decreased 8% in addition to an average NGL
price decrease of 8%.

Production and operating expenses decreased $101,000 between
quarters. These costs declined from the prior year quarter due to
cost cutting efforts and a decrease in production.

Depletion and depreciation expense decreased $755,000 between
quarters due to decreased production.

General and administrative expenses decreased $441,000 between
quarters due to the Company's continued global cost cutting efforts
which reduced employee salary and benefit costs, legal, accounting
and consulting fees and travel costs.

Finance income increased $262,000 due to realized gains on
financial commodity contracts in 2016. Finance expense increased
$1,727,000 primarily due to 2016 unrealized loss on financial
commodity contracts of $4,728,000 and interest expense of $499,000.

FIRST SIX MONTHS 2016 HIGHLIGHTS

- Operating cash flow from continuing operations was $3.1 million for
the first six months of 2016 compared to $3.8 million in the first
six months of 2015 due mainly to lower prices
- General & administrative expenses decreased by 30% and operating
expenses on a per barrel basis decreased by 1% for the first six
months of 2016 compared to the first six months of 2015 due to the
Company's continued global cost cutting efforts
- Revenue, net of royalties was $4.5 million for first six months of
2016 compared to $7.2 million for the first six months of 2015, a
decrease of 38%, due to lower prices and production in 2016
- Average production was 1,250 BOEPD for the first six months, a
decrease of 9% compared to the prior year six months production of
1,369 BOEPD due to the initial production volumes from the
completion of the Nickel Hill 36-3H well and the remaining portion
of the Emery 17-1H well during the second quarter of 2015
- Average netbacks were $14.88 per BOE for the first six months of
2016, a decrease of 39% compared to the first six months of 2015
due to lower prices in 2016. If the realized gains from the
commodity contracts are included, the average netbacks for the
first six months of 2016 increase by more than $11/barrel to $26.49
per BOE
- In April 2016, the Company made a $1.8 million paydown on its
existing credit facility. In July 2016, the Company made an
additional $1.4 million paydown reducing the outstanding balance to
$21.2 million at July 31, 2016, with $3.2 million available to
borrow
- Net loss for the first six months of 2016 was $6.6 million compared
to net loss of $4.4 million for the first six months of 2015. The
2016 amount included an unrealized mark to market loss on financial
commodity contracts of $5.5 million as the average price of oil has
increased from the 2015 yearend.

First Six Months of 2016 versus First Six Months of 2015

Gross oil and gas revenues totaled $5,826,000 in the first six
months of 2016 versus $9,451,000 in the first six months of 2015. Oil
revenues were $4,639,000 in the first six months versus $8,119,000 in
the same period of 2015, a decrease of 43% as average oil prices
decreased 28% or $14.35 a barrel in addition to a decrease in oil
production of 20%. Natural gas revenues decreased $259,000 or 36%,
due to an average natural gas price decrease of 32% in the first six
months of 2016 in addition to a decrease in natural gas production of
5%. NGL revenue increased $113,000, or 19%, due to an increase in NGL
production of 34%, partially offset by an average NGL price decrease
of 12% in the first six months of 2016.

Production and operating expenses decreased 10% for the first six
months of 2016 due to cost cutting efforts and a decrease in
production.

Depletion and depreciation expense decreased $895,000 due to
decreased production.

General and administrative expenses decreased $1,078,000 primarily
due to the Company's global cost cutting efforts which reduced
employee salary and benefit costs, legal, accounting and consulting
fees and travel costs.

Finance income increased $1,094,000 due to higher realized gains
on financial commodity contracts in 2016. Finance expense increased
$3,546,000 primarily due to 2016 unrealized loss on financial
commodity contracts of $5,520,000 and interest expense of $1,026,000.

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

2016 2015 2016 2015
Oil and natural gas revenue, net $ 2,443 $ 4,044
$ 4,507 $ 7,235
Other income
11 5 17 8

2,454 4,049 4,524 7,243

Exploration and evaluation expenditures - 12
- 44
Production and operating expenses
571 672 1,123 1,244
Depletion and depreciation
expense 1,424 2,179 3,095 3,990

General and administrative expenses 1,077 1,518
2,485 3,563
Stock based compensation
326 178 368 358

3,398 4,559 7,071 9,199

Finance income 972 710
2,652 1,558
Finance expense
(5,232) (3,505) (6,556) (3,010)

Net loss and comprehensive
loss from $ (5,204) $ (3,305) $ (6,451) $ (3,408)

continuing operations

Net loss and comprehensive

loss from discontinued

operations (106) (353) (109) (1,010)

Net loss (5,310) (3,658)
(6,560) (4,418)

Net loss per share $ (0.03) $ (0.02) $ (0.04) $
(0.03)

BNK
PETROLEUM INC.

SECOND QUARTER 2016

($000 except as noted)

First Six

Second Quarter Months

2016 2015 2016 2015

Oil revenue before royalties $ 2,592 4,519
4,639 8,119
Gas revenue before royalties 171
355 470 729
NGL revenue before royalties
394 461 717 604
Oil and Gas
revenue 3,157 5,335 5,826
9,452

Cash flow from continuing operations 1,587
1,914 3,111 3,830
Additions to property, plant &
equipment (406) (4,084) (537) (8,397)

Statistics:

First Six
2nd
Quarter Months

2016 2015 2016 2015
Average Oil
production (Bopd) 672 914 708
890
Average natural gas production (mcf/d) 1,181 1,637
1,441 1,518
Average NGL production (Boepd)
280 303 302 226
Average production
(Boepd) 1,149 1,490 1,250 1,369

Average oil price ($/bbl) $42.41 $54.35
$36.02 $50.37
Average natural gas price ($/mcf) $1.59
$2.38 $1.79 $2.65
Average NGL price ($/bbl)
$15.45 $16.72 $13.04 $14.75

Average
price per barrel $30.19 $39.35 $25.61
$38.15
Royalties per barrel 6.83
9.51 5.79 8.94
Operating expenses per barrel
5.46 4.96 4.94 5.00
Netback per barrel
$17.90 $24.88 $14.88 $24.21

Average price per barrel including
commodity contracts
$39.45 $44.31 $37.22 $44.38
Royalties per
barrel 6.83 9.51 5.79 8.94

Operating expenses per barrel 5.46 4.96
4.94 5.00
Netback per barrel including
commodity
contracts $27.16 $29.84 $26.49
$30.44

The information outlined above is extracted from and should be
read in conjunction with the Company's unaudited financial statements
for the three months ended June 30, 2016 and the related management's
discussion and analysis thereof, copies of which are available under
the Company's profile at http://www.sedar.com.

NON-GAAP MEASURES

Netback per barrel, net operating income and funds from operations
(collectively, the "Company's Non-GAAP Measures") are not measures
recognized under Canadian generally accepted accounting principles
("GAAP") and do not have any standardized meanings prescribed by
GAAP.

The Company's Non-GAAP Measures are described and reconciled to
GAAP measures in the management's discussion and analysis which are
available under the Company's profile at http://www.sedar.com.

CAUTIONARY STATEMENTS

In this news release and the Company's other public disclosure:

(a) The Company's natural gas production is reported in
thousands of cubic feet
("Mcfs"). The Company also uses
references to barrels ("Bbls") and barrels of oil
equivalent
("Boes") to reflect natural gas liquids and oil production and sales.
Boes may be misleading, particularly if used in isolation. A
Boe conversion ratio
of 6 Mcf:1 Bbl is based on an energy
equivalency conversion method primarily
applicable at the
burner tip and does not represent a value equivalency at the

wellhead. Given that the value ratio based on the current price of
crude oil as
compared to natural gas is significantly
different from the energy equivalency of
6:1, utilizing a
conversion on a 6:1 basis may be misleading as an indication of

value.
(b) Discounted and undiscounted net present value of
future net revenues attributable
to reserves do not represent
fair market value.
(c) Possible reserves are those additional
reserves that are less certain to be
recovered than probable
reserves. There is a 10% probability that the quantities

actually recovered will equal or exceed the sum of proved plus
probable plus
possible reserves.
(d) The Company
discloses short-term production rates. Readers are cautioned that
such
production rates are preliminary in nature and are not
necessarily indicative of
long-term performance or of
ultimate recovery.

Caution Regarding Forward-Looking Information

This release contains forward-looking information including
information regarding the Company's commodity contract hedges,
anticipated results from the Company's cost reduction measures, the
proposed timing and expected results of exploratory and development
work including production from the Company's Tishomingo field,
Oklahoma acreage, availability of funds from the Company's reserves
based loan facility, the effect of design and performance
improvements on future productivity, the Company's European projects,
planned capital expenditure programs and cost estimates, planned use
and sufficiency of cash on hand and cash flow from operations and the
Company's strategy and objectives. The use of any of the words
"target", "plans", "anticipate", "continue", "estimate", "expect",
"may", "will", "project", "should", "believe" and similar expressions
are intended to identify forward-looking statements.

Such forward-looking information is based on management's
expectations and assumptions, including that the Company will achieve
a comparable level of hedging going forward in respect of its
existing production, that the Company will achieve the results
anticipated by management from its cost reduction measures, that the
Company's geologic models will be validated, that indications of
early results are reasonably accurate predictors of the
prospectiveness of the shale intervals, that previous exploration
results are indicative of future results and success, that expected
production from future wells can be achieved as modeled, declines
will match the modeling, future well production rates will be
improved over existing wells, that rates of return as modeled can be
achieved, that recoveries are consistent with management's
expectations, that additional wells are actually drilled and
completed, that design and performance improvements will reduce
development time and expense and improve productivity, that
discoveries will prove to be economic, that anticipated results and
estimated costs will be consistent with managements' expectations,
that all required permits and approvals and the necessary labor and
equipment will be obtained, provided or available, as applicable, on
terms that are acceptable to the Company, when required, that no
unforeseen delays, unexpected geological or other effects, equipment
failures, permitting delays or labor or contract disputes are
encountered, that the development plans of the Company and its
co-venturers will not change, that the demand for oil and gas will be
sustained, that the Company will continue to be able to access
sufficient capital through financings, credit facilities, farm-ins or
other participation arrangements to maintain its projects, that funds
will be available from the Company's reserves based loan facility
when required to fund planned operations, that the Company will not
be adversely affected by changing government policies and
regulations, social instability or other political, economic or
diplomatic developments in the countries in which it operates and
that global economic conditions will not deteriorate in a manner that
has an adverse impact on the Company's business and its ability to
advance its business strategy.

Forward looking information involves significant known and unknown
risks and uncertainties, which could cause actual results to differ
materially from those anticipated. These risks include, but are not
limited to: any of the assumptions on which such forward looking
information is based vary or prove to be invalid, including that
anticipated results and estimated costs will not be consistent with
managements' expectations, that the Company will not achieve a
comparable level of hedging going forward in respect of its existing
production, that the Company's geologic and reservoir models or
analysis are not validated, that the Company will not achieve the
results anticipated by management from the Company's cost reduction
measures, the risks associated with the oil and gas industry (e.g.
operational risks in development, exploration and production; delays
or changes in plans with respect to exploration and development
projects or capital expenditures; the uncertainty of reserve and
resource estimates and projections relating to production, costs and
expenses, and health, safety and environmental risks, including
flooding and extended interruptions due to inclement or hazardous
weather conditions), the risk of commodity price and foreign exchange
rate fluctuations, risks and uncertainties associated with securing
the necessary regulatory approvals and financing to proceed with
continued development of the Tishomingo Field and other shale basins
in the United States and Europe, the Company or its subsidiaries is
not able for any reason to obtain and provide the information
necessary to secure required approvals or that required regulatory
approvals are otherwise not available when required, that unexpected
geological results are encountered, that completion techniques
require further optimization, that production rates do not match the
Company's assumptions, that very low or no production rates are
achieved, that the Company is unable to access required capital, that
funds will not be available from the Company's reserves based loan
facility when required to fund planned operations, that occurrences
such as those that are assumed will not occur, do in fact occur, and
those conditions that are assumed will continue or improve, do not
continue or improve and the other risks identified in the Company's
most recent Annual Information Form under the "Risk Factors" section,
the Company's most recent management's discussion and analysis and
the Company's other public disclosure, available under the Company's
profile on SEDAR at http://www.sedar.com.

Although the Company has attempted to take into account important
factors that could cause actual costs or results to differ
materially, there may be other factors that cause actual results not
to be as anticipated, estimated or intended. There can be no
assurance that such statements will prove to be accurate as actual
results and future events could differ materially from those
anticipated in such statements. The forward-looking information
included in this release is expressly qualified in its entirety by
this cautionary statement. Accordingly, readers should not place
undue reliance on forward-looking information. The Company undertakes
no obligation to update these forward-looking statements, other than
as required by applicable law.

About BNK Petroleum Inc.

BNK Petroleum Inc. is an international oil and gas exploration and
production company focused on finding and exploiting large,
predominately unconventional oil and gas resource plays. Through
various affiliates and subsidiaries, the Company owns and operates
shale gas properties and concessions in the United States and Spain.
Additionally the Company is utilizing its technical and operational
expertise to identify and acquire additional unconventional projects.
The Company's shares are traded on the Toronto Stock Exchange under
the stock symbol BKX.

Wolf E. Regener, President and Chief Executive Officer,
+1(805)484-3613, Email: investorrelations@bnkpetroleum.com, Website:
http://www.bnkpetroleum.com

ots Originaltext: BNK Petroleum Inc.
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