BNK Petroleum Inc. Announces Third Quarter 2019 Results with Positive Net Income

Source Company Press Release
Company Kolibri Global Energy Inc.
Tags Corporate: Corporate Results, Guidance, Overview/Strategy, Country: Canada, Financial - Costs & Metrics: Capital Expenditures
Date November 07, 2019

THIRD QUARTER HIGHLIGHTS

  • Average production for the third quarter of 2019 was 1,341 BOEPD, compared to third quarter 2018 average production of 1,534 BOEPD, which was a decrease of 13%. Average production for the third quarter of 2019 was only 1% lower than the second quarter 2019 production. The decrease compared to the prior year quarter was primarily due to normal production decline for existing wells
  • Net income for the third quarter of 2019 was $1.4 million compared to net income of $1.2 million in 2018. The Company had an unrealized gain on financial commodity contracts of $1.3 million in the third quarter of 2019, compared to an unrealized loss of $0.2 million in the third quarter of 2018
  • General & administrative expenses decreased by 8% for the third quarter of 2019 compared to the third quarter of 2018. The decrease relates to management's continued efforts to reduce costs throughout the Company and the adoption of IFRS 16 which lowered rent expense
  • Adjusted funds flow was $2.2 million in the third quarter 2019 compared to $3.9 million in the third quarter of 2018, which was a decrease of 42%. The decrease was mainly due to lower revenue caused by lower production and lower average prices
  • Revenue, net of royalties was $4.1 million in the third quarter of 2019 compared to $6.8 million for third quarter of 2018, which was a decrease of 40%, as production decreased by 13% and average prices decreased 26% between the quarters
  • Average netback from operations was $25.69 per barrel for the third quarter of 2019, which was a decrease of 33% from the prior year third quarter due to lower prices in 2019
  • During the third quarter of 2019, the Company paid down $2.5 million of the outstanding amount on its BOK Financial credit facility to reduce the outstanding balance to $27.5 million
  • At September 30, 2019, cash totaled $2.1 million

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

"We are pleased with the performance of our field in the third quarter of 2019 as production has only declined by 13% from the prior year third quarter and only 1% from the second quarter of 2019 as the WLC 14-1H well that was shut-in came back on production in August and we were able to recover about 70% of the lost production.  The Company generated net income of $1.4 million and adjusted funds flow of over $2.2 million during the quarter even though our capital expenditures for the first nine months of 2019 totaled only $1.3 million.  Also, the Company continued to reduce its G&A overhead by over 8% in the third quarter.  The Company is expected to continue to generate positive cash flow for the remainder of the year and into 2020.

In the third quarter of 2019, the Company generated net income of $1.4 million compared to net income of $1.2 million in the third quarter of 2018.  This included an unrealized gain on financial commodity contracts of $1.3 million in the third quarter of 2019, compared to unrealized loss of $0.2 million in the third quarter of 2018.

The Company's G&A expenses decreased by 8% due to continued cost cutting at the Company and the implementation of the new lease accounting standard which lowered the Company's rental expense in 2019. 

Average production for the third quarter of 2019 decreased by 13% to 1,341 BOEPD, compared to third quarter 2018 average production of 1,534 BOEPD. Average production for the third quarter of 2019 was only 1% lower than the second quarter 2019 production as the WLC 14-1H well came back on production in August and the Company was able to recover approximately 70% of the lost production.  The decrease compared to the prior year quarter was primarily due to normal production decline for existing wells.

Net revenue decreased by 40% in the third quarter of 2019 and adjusted funds flow decreased by 42% to $2.2 million in the third quarter 2019 compared to $3.9 million in the third quarter of 2018 due to production and price decreases.

Average netbacks from operations for the third quarter of 2019 were $25.69 per boe, a decrease of 33% compared to the prior year due to lower prices and decreased production."

    Third Quarter    First Nine Months   
    2019  2018  2019  2018 
               
Net Income (Loss):             
$ Thousands  $1,420  $1,184  20%  $1,474  $(111) 
$ per common share  $0.01  $0.01  $0.01  $(0.00) 
assuming dilution             
               
Capital Expenditures  $195  $2,188  (91%)  $1,310  $13,771  (90%) 
               
Average Production (Boepd)  1,341  1,534  (13%)  1,397  1,700  (18%) 
Average Price per Barrel  $41.87  $56.91  (26%)  $43.89  $53.78  (18%) 
Average Netback from operations per Barrel  $25.69  $38.33  (33%)  $27.47  $35.39  (22%) 
Average Netback after adjustments per Barrel  $24.63  $33.73  (27%)  $25.87  $28.16  (8%) 
               
    September 2019    June 2019    December
2018 
 
               
Cash and Cash Equivalents  $2,064    $2,855    $1,456   
Working Capital  $(376)    $(598)    $(2,393)   

Third Quarter 2019 versus Third Quarter 2018

Oil and gas gross revenues totaled $5,166,000 in the third quarter of 2019 versus $8,378,000 in the third quarter of 2018.  Oil revenues decreased $2,740,000 or 36% as oil production decreased by 19% to 955 boepd and average oil prices decreased by $14.77 per barrel or 21% to $54.41.  Natural gas revenues increased $27,000 or 18% to $178,000 as natural gas production increased 25% to 990 mcfpd, which was offset by an average natural gas price decrease of $0.12/mcf or 6% to $1.96/mcf.  Natural gas production for the third quarter of 2018 included prior period adjustments which decreased production by 565 mcfpd.  Natural gas liquids (NGLs) revenues decreased $499,000 or 71% as NGL production was the same in both periods while average NGL prices decreased 71% to $10.18.  NGL production for the third quarter of 2018 included prior period adjustments which increased production by 17 boepd.

Average third quarter 2019 production per day decreased 13% from the third quarter of 2018.  Production in the third quarter of 2018 included prior period adjustments which decreased production by 77 boepd.  The decrease was primarily due to the normal production decline of existing wells. 

Production and operating expenses decreased to $934,000 mainly due to lower production.  Production and operating costs on a boe basis decreased by 5% to $7.57/boe due to operating cost reductions.

Depletion and depreciation expense decreased $348,000 or 19% due to a decrease in production in the third quarter of 2019 and an increase in reserves from the prior year.

General and administrative expenses decreased $74,000 or 8% in the quarter due to continued cost cutting efforts and  lower rent expense from the adoption of IFRS 16.

Stock based compensation decreased by $30,000 or 53% due to the timing of stock awards granted to employees.

Finance income increased $1.3 million in the third quarter of 2019 compared to the third quarter of 2018 due to unrealized gains on commodity contracts in the third quarter of 2019.

Finance expense decreased by $0.9 million in the third quarter of 2019 compared to the prior year quarter primarily due to higher realized losses on commodity contracts in the third quarter of 2018.

During the third quarter of 2019, the Company paid down $2.5 million of the commitment amount on its BOK Financial credit facility to reduce the outstanding balance to $27.5 million.  BOK Financial is in the process of modifying the credit facility to amortize the amount outstanding down to $26.0 million by April of 2020.

FIRST NINE MONTHS 2019 HIGHLIGHTS

  • Average production for the first nine months of 2019 was 1,397 BOEPD, a decrease of 18% compared to prior year first nine months average production of 1,700 BOEPD. Production for first nine months of 2018 included prior period adjustments which increased production by 122 boepd. The decrease was primarily due to the normal production decline of existing wells.
  • Net income for the first nine months of 2019 was $1.5 million compared to net loss of $0.1 million for the first nine months of 2018. The 2019 amount included an unrealized gain on financial commodity contracts of $0.6 million and the 2018 amount included an unrealized losses on commodity contracts of $2.5 million
  • General & administrative expenses decreased by 10% for the first nine months of 2019 compared to the first nine months of 2018. The decrease relates to management's continued efforts to reduce costs throughout the Company, the adoption of IFRS 16 which lowered rent expense and adviser fees incurred in 2018
  • Adjusted funds flow was $7.3 million in the first nine months of 2019 compared to $10.3 million in the first nine months of 2018, a decrease of 28%. The decrease was mainly due to a 18% decrease in production combined with a 18% decrease in average prices
  • Revenue, net of royalties was $13.3 million for the first nine months of 2019 compared to $18.6 million for the first nine months of 2018, a decrease of 29%, due to lower prices and decreased production
  • Average netback from operations for the first nine months of 2019 was $27.47 per boe, a decrease of 22% from the prior year period due to lower production and prices in 2019
  • Cash totaled $2.1 million at September 30, 2019

First Nine Months of 2019 versus First Nine Months of 2018

Gross oil and gas revenues totaled $16,739,000 in the first nine months of 2019 versus $23,724,000 in the first nine months of 2018, a decrease of 29%.  Oil revenues were $15,293,000 in the first nine months of 2019 versus $20,743,000 in the same period of 2018, a decrease of 26% as average oil prices decreased 17% or $10.91 a barrel and oil production decreased by 12%.  Natural gas revenues decreased $473,000 or 39%, due to an average natural gas production decrease of 46% in the first nine months of 2019 partially offset by an increase in natural gas prices of 13%.  Natural gas production for the first nine months of 2018 included an increase of 654 mcfpd related to prior period adjustments.  NGL revenue decreased $1,062,000, or 60%, due to a decrease in NGL production of 10% and an average NGL price decrease of 56% in the first nine months of 2019.  NGL production for the first nine months of 2018 included an increase of 16 boepd related to prior period adjustments.

Average production per day for the first nine months of 2019 decreased 18% from the prior year comparable period due to two additional wells added to production in 2018.  The production for the first nine months of 2018 also included an increase of 122 boepd related to prior period adjustments. The decrease was primarily due to the normal production decline of existing wells.

Production and operating expenses decreased 22% for the first nine months of 2019 mainly due to a decrease in production.  Operating expenses averaged $7.36 per BOE for the first nine months of 2019 compared to $6.79 per BOE for the same period in 2018.  The operating expense per BOE amounts for the first nine months of 2019 include the impact of a production tax increase in July 2018 which increased the first nine months of 2019 amount by $0.41 per boe compared to the prior year period.

Depletion and depreciation expense decreased $1,443,000 due to decreased production and an increase in reserves compared to the prior year.

General and administrative expenses decreased $274,000, or 10%, due to cost cutting efforts, lower rent expense from the adoption of IFRS 16 and advisor fees incurred in the first nine months of 2018.

Finance income increased $0.6 million due to unrealized gains on financial commodity contracts in 2019. 

Finance expense decreased $3.7 million due to realized losses of $0.6 million in 2019 compared to realized and unrealized losses of $4.4 million on commodity contracts in 2018.

BNK PETROLEUM INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited, Expressed in Thousands of United States Dollars) 
($000 except as noted) 
 
  September 30    December 31 
  2019    2018 
       
Current Assets   Cash  $2,064    $1,456 
  Trade and other receivables  1,903    2,965 
  Other current assets  679    609 
  Fair value of commodity contracts  636    407 
  5,282    5,437 
       
Non-current assets   Property, plant and equipment  155,828    159,122 
  Fair value of commodity contracts  351   
  Right of use assets  137   
  156,316    159,122 
       
Total Assets  $161,598    $164,559 
       
Current Liabilities   Trade and other payables  $5,515    $7,830 
  Lease payable  143   
  5,658    7,830 
       
Non-current liabilities       
  Loans and borrowings  27,134    29,551 
  Asset retirement obligations  1,152    1,127 
  Fair value of commodity contracts   
  28,286    30,687 
       
Equity       
  Share capital  289,622    289,622 
  Contributed surplus  22,893    22,755 
  Deficit  (184,861)    (186,335) 
Total Equity  127,654    126,042 
       
Total Equity and Liabilities  $161,598    $164,559 

BNK PETROLEUM INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) 
(Unaudited, expressed in Thousands of  United States dollars, except per share amounts) 
($000 except as noted) 
 
         
    Third Quarter    First Nine Months 
    2019    2018    2019    2018 
                 
Oil and natural gas revenue, net  4,104    6,834    13,282    18,632 
Other income          19 
    4,104    6,834    13,284    18,651 
                 
Production and operating expenses    934    1,268    2,808    3,611 
Depletion and depreciation expense    1,531    1,879    4,731    6,174 
General and administrative expenses    811    885    2,548    2,822 
Stock based compensation    27    57    121    279 
    3,303    4,089    10,208    12,886 
                 
Finance income    1,263      597   
Finance expense    (644)    (1,561)    (2,199)    (5,876) 
                 
Net income (loss)    1,420    1,184    1,474    (111) 
Net income (loss) per share  0.01    0.01    0.01    (0.00) 
                   

BNK PETROLEUM INC. 
THIRD QUARTER 2019 
(Unaudited, expressed in Thousands of  United States dollars, except as noted) 
 
    Third Quarter     First Nine Months 
    2019    2018    2019    2018 
Oil revenue before royalties  4,781    7,521    15,293    20,743 
Gas revenue before royalties    178    151    739    1,212 
NGL revenue before royalties    207    706    707    1,769 
Oil and Gas revenue    5,166    8,378    16,739    23,724 
                 
Adjusted funds flow    2,233    3,875    7,332    10,253 
Additions to property, plant & equipment    195    2,188    1,310    13,771 
                 
                 
Statistics:    3rd Quarter    First Nine Months 
    2019    2018    2019    2018 
Average oil production (Bopd)    955    1,182    1,019    1,154 
Average natural gas production (mcf/d)    990    789    1,024    1,901 
Average NGL  production (Boepd)    221    220    207    229 
Average production (Boepd)    1,341    1,534    1,397    1,700 
Average oil price ($/bbl)    $54.41    $69.18    $54.96    $65.87 
Average natural gas price ($/mcf)    $1.96    $2.08    $2.64    $2.33 
Average NGL price ($/bbl)    $10.18    $34.89    $12.50    $28.35 
                 
Average price (Boe)    $41.87    $56.91    $43.89    $53.78 
Royalties (Boe)    8.61    10.62    9.06    11.60 
Operating expenses (Boe)    7.57    7.96    7.36    6.79 
Netback from operations (Boe)    $25.69    $38.33    $27.47    $35.39 
Price adjustment from commodity contracts (Boe)    (1.06)    (5.71)    (1.60)    (4.22) 
Netback including commodity contracts (Boe)    24.63    32.62    25.87    31.17 
Prior period adjustments (Boe)      1.11      (3.01) 
Netback after adjustments (Boe)    $24.63    $33.73    $25.87    $28.16 

The information outlined above is extracted from and should be read in conjunction with the Company's unaudited financial statements for the three and nine months ended September 30, 2019 and the related management's discussion and analysis thereof, copies of which are available under the Company's profile at sedar.com.

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