BNK Petroleum Announces Third Quarter 2020 Results

Source: www.gulfoilandgas.com 11/5/2020, Location: North America

THIRD QUARTER HIGHLIGHTS
- Average production for the third quarter of 2020 was 1,134 BOEPD, compared to third quarter 2019 average production of 1,357 BOEPD, which was a decrease of 16%. Average production for the third quarter of 2020 was only 2% lower than the second quarter 2020 production. The decrease compared to the prior year quarter was primarily due to normal production decline for existing wells
- The Company has commodity contracts in place for almost 80% of its existing fourth quarter 2020 production at an average price of $58.32/barrel
- General & administrative ("G&A") expense decreased by 13% in the third quarter of 2020 compared to the prior year quarter due to lower payroll and related costs due to management's continued efforts to reduce G&A costs throughout the Company including employee terminations
- Operating expense per barrel averaged $6.46 per BOE for the third quarter of 2020 compared to $7.48 per BOE for the same period in 2019, a decrease of 14%. The decrease was due to cost cutting measures taken in the field during the current year
- Interest expense decreased by 40% in the third quarter of 2020 compared to the same period in the prior year due to principal payments on the credit facility which reduced the outstanding loan balance
- Average netback including commodity contracts for the third quarter of 2020 was $24.90 per barrel, an increase of 2% from the prior year second quarter due to the hedges the Company has in place
- Adjusted funds flow was $1.9 million in the third quarter of 2020 compared to $2.2 million in the third quarter of 2019. The decrease was mainly due to a 28% decrease in average oil prices and a decrease of 16% in production partially offset by realized gains from commodity contracts of $0.8 million
- Net loss for the third quarter of 2020 was $0.6 million compared to net income of $1.4 million for the third quarter of 2019 due to unrealized losses of $1.0 million from hedged commodity contracts in the third quarter of 2020 compared to an unrealized gain of $1.2 million in the third quarter of 2019. Without the unrealized hedging losses for the third quarter of 2020, the Company would have recognized positive net income
- Revenue, net of royalties was $2.5 million in the third quarter of 2020 compared to $4.1 million for third quarter of 2019, which was a decrease of 40%, as production decreased by 16% and average prices decreased 28% between the quarters The Company has an outstanding balance of $21.5 million on its credit facility at September 30, 2020 after paying down $6.0 million during the first nine months of 2020
- At September 30, 2020, cash totaled $1.4 million

BNK's President and Chief Executive Officer, Wolf Regener commented:
"Due to the Company's strong hedge position, the Company was able to generate positive adjusted funds flow of $1.9 million during the third quarter of 2020 which was only a 15% decrease from the prior year quarter. For the fourth quarter of 2020, the Company has commodity contracts in place for almost 80% of its existing oil production at an average price of $58.32/barrel. In addition, the Company has almost 40% of its 2021 existing oil production hedged at $52.66/barrel. We are also experiencing low decline rates in our field, with a quarterly year over year decline rate on existing wells of only 16% and only a 2% decrease from the second quarter of 2020. The Company expects to continue to generate positive adjusted funds flow into 2021 due to its hedges and low decline rates.

The Company has continued to achieve additional cost reductions during 2020. Our G&A expense for the third quarter of 2020 decreased by 18% from the prior year quarter due to continued cost cutting including employee terminations. We also significantly reduced field operating costs which lowered our operating expense per barrel for the third quarter of 2020 to $6.46/barrel which was a 14% decrease from the prior year quarter. The Company has also made $6.0 million of principal debt repayments during 2020, which has lowered our interest expense by 40% in the third quarter of 2020 compared to the prior year quarter.

The Company's adjusted funds flow was $1.9 million for the third quarter of 2020 compared to $2.2 million in the prior year quarter. The decrease was mainly due to lower average prices and lower production partially offset by realized gains from commodity contracts.

Average production for the third quarter of 2020 was 1,134 BOEPD, compared to third quarter 2019 average production of 1,357 BOEPD, which was a decrease of 16%. The decrease compared to the prior year quarter was primarily due to normal production decline for existing wells.

Net revenue was $2.5 million in the third quarter of 2020 compared to $4.1 million for third quarter of 2019, a decrease of 40%, due to production declines of 16% and average prices declines of 28%.

Average netback including commodity contracts for the third quarter of 2020 were $24.90 per boe, an increase of 2% compared to the prior year quarter due to the impact of our commodity contracts which added $7.73 per boe to the netback.

The Company incurred a net loss for the third quarter of 2020 of $0.6 million compared to net income of $1.4 million for the third quarter of 2019. This was due to unrealized losses of $1.0 million from commodity contracts in the third quarter of 2020 compared to an unrealized gain of $1.3 million in the third quarter of 2019."

Third Quarter 2020 versus Third Quarter 2019
Oil and gas gross revenues totaled $3.1 million in the third quarter of 2020 versus $5.0 million in the third quarter of 2019. Oil revenues decreased $2.1 million or 44% as oil production decreased by 21% to 761 boepd and average oil prices decreased by $15.68 per barrel or 29% to $38.70. Natural gas revenues decreased by $11 thousand or 6% to $169,000 as natural gas prices decreased $0.18/mcf or 9% which was partially offset by an average natural gas production increase of 32 mcfpd or 3%. Natural gas liquids (NGLs) revenues increased $61 thousand or 29% as NGL prices increased 42% to $14.50/boe which was partially offset by NGL production decreases of 21 boepd or 9%.

Average third quarter 2020 production per day decreased 16% from the third quarter of 2019. The decrease was primarily due to the normal production decline of existing wells.

Production and operating expenses decreased to $0.6 million mainly due to lower production and cost cutting. Production and operating costs on a boe basis decreased by 14% to $6.46/boe due to operating cost reductions in the field.

Depletion and depreciation expense decreased $0.4 million or 27% due to a decrease in production in the third quarter of 2020 and a lower PP&E balance due to the impairment.

General and administrative expenses decreased $0.1 million or 13% in the third quarter of 2020 due to lower payroll and related costs due to employee terminations and management's continued efforts to reduce G&A costs throughout the Company.

Finance income decreased $0.5 million in the third quarter of 2020 compared to the third quarter of 2019 due to unrealized gains on commodity contracts in the third quarter of 2019 which were offset by higher realized gains in the third quarter of 2020.

Finance expense increased by $0.7 million in the third quarter of 2020 compared to the prior year quarter primarily due to unrealized losses on commodity contracts in the third quarter of 2020 partially offset by lower interest expense.

FIRST NINE MONTHS 2020 HIGHLIGHTS
- Average production for the first nine months of 2020 was 1,174 BOEPD, a decrease of 17% compared to prior year first nine months average production of 1,412 BOEPD. The decrease was primarily due to the normal production decline of existing wells.
- The Company has commodity contracts in place for almost 80% of its existing fourth quarter 2020 production at an average price of $58.32/barrel
- General & administrative ("G&A") expense decreased by 18% in the first nine months of 2020 compared to the first nine months of 2019 due to lower payroll and related costs due to management's continued efforts to reduce G&A costs throughout the Company including employee terminations
- Operating expense per barrel averaged $6.45 per BOE for the first nine months of 2020 compared to $7.28 per BOE for the same period in 2019, a decrease of 11%. The decrease was due to cost cutting measures taken in the field during the current year
- Interest expense decreased by 31% in the first nine months of 2020 compared to the same period in the prior year due to principal payments on the credit facility which reduced the outstanding loan balance
- Average netback including commodity contracts for the first nine months of 2020 was $23.38 per barrel, a decrease of 9% from the comparable prior year period due to lower prices in 2020
- Adjusted funds flow was $5.4 million in the first nine months of 2020 compared to $7.3 million in the first nine months of 2019. The decrease was mainly due to a 36% decrease in average oil prices and a decrease of 17% in production partially offset by realized gains from commodity contracts of $2.5 million
- Due to the significant decline in commodity prices and the global impact on demand from the COVID-19 pandemic, the Company performed a PP&E impairment test in the first quarter of 2020. The impairment test resulted in an impairment of PP&E which totaled $71.9 million. In accordance with IFRS, an impairment loss can be reversed in future periods if there is an indication that a previously recognized impairment loss has reversed because of a change in the estimates used to determine the impairment loss and the recoverable amount of the impaired asset subsequently increases.
- Net loss for the first nine months of 2020 was $69.3 million compared to net income of $1.5 million for the first nine months of 2019 due to the PP&E impairment
- Revenue, net of royalties was $7.1 million in the first nine months of 2020 compared to $13.3 million for first nine months of 2019 due to a decrease in average prices of 36% and a decrease in production of 17%

First Nine Months of 2020 versus First Nine Months of 2019
Gross oil and gas revenues totaled $9.1 million in the first nine months of 2020 versus $16.7 million in the first nine months of 2019, a decrease of 46%. Oil revenues were $7.9 million in the first nine months of 2020 versus $15.5 million in the same period of 2019, a decrease of 49% as average oil prices decreased 35% or $19.20 a barrel and oil production decreased by 22%. Natural gas revenues decreased $0.2 million or 30%, due to an average natural gas price decrease of $0.83/mcf or 32% partially offset by a 1% increase in natural gas production. NGL revenue decreased $38 thousand, or 5%, due to a decrease in NGL production of 5% and an average NGL price decrease of 1% in the first nine months of 2020.

Average production per day for the first nine months of 2020 decreased 17% from the prior year comparable period. The decrease was due to the normal production decline of existing wells.

Production and operating expenses decreased to $2.1 million or 26% mainly due to lower production and cost cutting. Production and operating costs on a boe basis decreased by 11% to $6.45/boe due to operating cost reductions in the field.

Depletion and depreciation expense decreased $1.1 million due to decreased production and a lower PP&E balance due to the impairment.

G&A expenses decreased $0.5 million, or 18%, due to lower payroll and related costs due to employee terminations and management's continued efforts to reduce G&A costs throughout the Company.

Finance income increased by $3.8 million due to realized and unrealized gains on financial commodity contracts in 2020.

Finance expense decreased $1.1 million due to lower interest expense in the first nine months of 2020 compared to the prior year period and a realized loss on commodity contracts of $0.6 million in the first nine months of 2019.


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