BNK Petroleum Inc. Announces First Quarter 2017 Results

CAMARILLO, CA, May 9, 2017

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

FIRST QUARTER HIGHLIGHTS

• In the first quarter of 2017, the Company drilled and fracture stimulated the Chandler 8-6H well, the first well in its 2017 drilling program, in which it holds a 99.9% working interest. 
• The Company also drilled the Hartgraves 1-6H well and the Brock 9-2H, in each of which it holds a 100% working interest.  The Company expects to begin fracture stimulation on the Hartgraves 1-6H well in the second quarter, with the Brock 9-2H well to be fracture stimulated after the Hartgraves 1-6H well is completed.
• Average production for the first quarter of 2017 was 753 BOEPD, a decrease of 44% compared to first quarter 2016 average production of 1,352 BOEPD due to three wells that were still shut-in during the first quarter, as a result of 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.  The shut-in wells decreased first quarter 2017 production by over 300 BOEPD.  Production improved throughout the quarter with the addition of the Chandler 8-6H well and March 2017 production was over 1,000 BOE per day even without the three wells returning to full production.
• In the quarter, the Company continued to reduce its costs.  G&A expenses decreased by another 15% in the first quarter of 2017 compared to the first quarter of 2016 due to continuing cost cutting efforts.
• Funds from continuing operations was approximately $0.9 million in the first quarter 2017 compared to $1.5 million in the first quarter of 2016.  The decrease in funds from continuing operations was mainly due to the shut-in wells as well as lower realized gains from commodity contracts in the first quarter of 2017 compared to 2016, partially offset by the pricing increase.
• Net income for the first quarter of 2017 was approximately $1.0 million compared to a net loss of $1.3 million for the first quarter of 2016 due to the unrealized gain of $1.5 million from hedged commodity contracts in the first quarter of 2017.
• Revenue, net of royalties was $2.2 million in the first quarter of 2017 compared to $2.1 million for first quarter of 2016, an increase of 5%, as average prices increased by 91% between the quarters, which offset the production decrease.
• Average netback per barrel for the first quarter of 2017 was $25.81, an increase of 110% from the prior year first quarter due to the higher prices in 2017.  Over 80% of first quarter 2017 oil production was hedged which resulted in substantially higher netbacks when the impact of commodity hedges are included.  If the commodity contract hedges are included in the computation, the average netback per barrel increases 27% to $32.92 in 2017 compared to $25.89 in the first quarter of 2016.
• Cash totaled $7.0 million and working capital totaled $1.1 million at March 31, 2017.

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

"During the first quarter, we used the proceeds from our 2016 equity offering to begin our 2017 drilling program. We drilled and completed the Chandler 8-6H well (99.9% working interest) and drilled the Hartgraves 1-6H well (100% working interest) and the Brock 9-2H well (100% working interest).  We expect to perform the fracture stimulation of the Hartgraves 1-6H well in the second quarter, with the Brock 9-2H well to follow.  We are looking forward to the completion of these wells which we believe will outperform all of our previous wells due to both wells having full length laterals available for stimulation, improved placement of the laterals in the Caney based on previous learnings and both being located in areas where we have excellent calculated original oil in place numbers.

Our net revenue increased by 5% in the first quarter 2017 as average prices increased by 91% compared to the prior year quarter.  The price increase offset the impact of our decline in production due to the three shut-in wells during the first quarter, which reduced production by over 300 BOEPD during the quarter.  However, our production increased throughout the quarter as the Chandler 8-6H well started production in late February and the shut-in wells were brought back online.  Our March 2017 production was over 1,000 BOEPD.  All the shut-in wells are still pumping off the offset operator's frack water and, at the end of the quarter, were still about 230 BOEPD below expected production levels.  We don't expect any impact to the long-term production of the wells even though they are recovering slower than we originally expected them too.

The Company continues to succeed in its cost-cutting efforts.  In the first quarter of 2017, a reduction of general and administrative expense of 15% was achieved over the first quarter of 2016.  These continued cost savings coupled with a 91% increase in average prices compared to the prior year quarter contributed to the Company generating funds from operations of $0.9 million despite the loss of production from the shut-in wells.