Fully Funded US$218
Million Capital Program
and Accelerated Enhanced
Oil Recovery Program
CALGARY, Dec. 12, 2014 /PRNewswire/ - Bankers Petroleum
Ltd. ("Bankers" or the "Company") (TSX: BNK, AIM: BNK) is pleased
to announce its 2015 capital program of US$218 million (all amounts referenced below are
in US dollars). The capital program will be fully supported by
funds generated from operations and cash resources. The
budget has been approved by the Company's Board of Directors and
submitted to the Albanian authorities for their approval.
The 2015 capital program will continue to focus on three main
strategic goals: execution of the primary horizontal drilling
program, acceleration of the secondary recovery program, and
targeted capital for operational improvements to reduce costs and
provide infrastructure and facilities necessary to support the
future growth of the Company.
David French, President and CEO,
commented, "We have put together a strategic fully funded capital
program that maintains a solid level of drilling activity while
investing in the future growth of Bankers through enhanced oil
recovery (EOR).
"Over the past several years Bankers has built a business with a
clean balance sheet and operational flexibility to withstand softer
commodity prices. When combining our 2015 sales program and hedge
position, the Company anticipates a cash margin of around
$30/bbl at $70 Brent with capability to deliver over
$25/bbl stress tested at $60/bbl Dated Brent. This budget builds upon our
low-cost development of horizontal wells, and continues our
commitment to reserves growth and future volumes through expansion
of polymer flooding. We believe our financial discipline, reservoir
management, and operational capability will serve us well in this
volatile market."
CAPITAL PROGRAM FUNDING
The 2015 capital program utilizes a $70 per barrel average annual Brent oil price
forecast. The Company expects to fully fund the 2015 capital
program with funds generated from operations and cash
resources.
2015 Sales Contracts
Bankers is pleased to announce that it expects to receive
average cash realization equivalent of 82% of Dated Brent price
realization; inclusive of both the export and domestic agreements
as well as the existing hedge at current average Brent forecast of
$70/bbl.
The Company has committed 55% of next year's crude oil volumes
to export counterparties in the Mediterranean and the United States. An average realized price
of 79 – 80% of Dated Brent is projected for all export volumes on
term contracts.
Bankers has also reached an agreement to sell 45% of its 2015
volumes to the domestic market at 74% of Dated Brent (FOB Vlora
equivalent), plus a fixed $28/metric-ton or approximately $4.45/bbl
recovery against the overdue accounts receivable balance from prior
years. Over the course of the year, the Company will receive full
payment of the remaining $15.4
million accounts receivable in addition to sales and
transportation savings of approximately $2.90/bbl. The fixed $4.45/bbl payment has the advantage of providing
structural protection against further softening in Brent
pricing.
PATOS-MARINZA FIELD
Primary Development
The majority of the 2015 capital program at $118 million is for primary drilling with three
rigs and between 85 – 90 new horizontal wells. These wells
are a continuation of development in the Patos-Marinza
oilfield.
Enhanced Oil Recovery: Polymer Flood Expansion
Next year will mark a shift from an early-stage pilot project to
commercial development of our EOR program. We are encouraged by the
strong performance to date and will be allocating $36 million to EOR expansion in 2015, with plans
to convert 25 – 30 existing production wells to polymer injection
throughout the year. Approximately 70% of EOR capital will be spent
on associated infrastructure and facilities, and the remaining 30%
on well conversions and injection.
This program represents an increase of 41% compared to the 2014
EOR budget of $22 million and more
than double the number of wells converted to injection.
Facilities, Infrastructure, and Associated
Capital
A total of $64 million of the 2015
capital program will be allocated to facilities and infrastructure
activities which include improvements aimed at lowering operating
costs. Projects include:
- well servicing and work overs;
- flow lining within the field;
- electrification of well pads;
- expansion of water disposal capabilities with two (2) water
disposal wells; and
- continuation of environmental remediation and social
initiatives.
OPERATIONAL FLEXIBILITY
Over the past several years, Bankers has constructed its capital
program to allow for flexibility in changing market
conditions. In this lower commodity price environment,
Bankers has initiated a drilling rig phase-down from six to three
rigs to conserve cash-flow and balance capital spending. By
the end of the fourth quarter 2014, two rigs will be suspended with
the third rig following in January 2015. In addition, the
Company has been in conversation with all material service
providers to source near term price reductions.
Our efforts will continue on expanding margins through further
operational efficiencies in the field including the installation of
flow lines to reduce trucking costs, electrification of well pads,
well servicing improvements and diluent reduction. Over the past
two years that margin expansion has been a strategic focus of the
Company, we have reduced our cost structure by over $6/bbl excluding excise and carbon and
circulation tax changes introduced in 2014. Bankers projects an
additional costs savings of $2 –
3/bbl over the next two years.
Bankers is positioned to respond quickly when oil prices show
signs of recovery and will prioritize its primary drilling program
by reinstating drilling rigs, infrastructure and facilities
spending.
FINANCIAL RESILIENCE
Bankers maintains a strong balance sheet with a cash position of
$88 million at September 30, 2014. Management will continue to
protect the financial position of the Company with the strategic
view to maintain capital expenditures within 2015 cash flow,
supplemented with cash resources. At September 30, 2014, Bankers had drawn
$104 million from its $224 million credit facilities; no additional
draws are anticipated in 2015.
Financial Hedge
To protect against the downside of oil prices, in Q2 2014,
Bankers purchased two Puts, which combined represent 6,000 bopd at
$80/bbl Brent for 2015. Cash
proceeds from the Puts are received monthly, based on the
difference between the average monthly Brent price and $80/bbl. The financial stability provided
by this hedge supports the operation of three drilling rigs in
2015.
PRODUCTION GUIDANCE
In recognition of recent pullback in Brent oil price, reduced
2015 capital expenditure and the acceleration of the
polymer flood program, Bankers anticipates 2015 average production
levels will be in line with the 2014 average production level.
UPDATED CORPORATE PRESENTATION
For additional information on this operational update, please
see the December 2014 version of the
Company's corporate presentation at www.bankerspetroleum.com.
CONFERENCE CALL
Management of Bankers will host a conference call on
December 12, 2014 at 6:30 am MST to discuss the 2015 Capital Budget.
Following Management's presentation, there will be a question and
answer session for analysts and investors.
To participate in the conference call, please contact the
conference operator ten minutes prior to the call at 1-888-231-8191
or 1-647-427-7450. A live audio web cast of the conference call
will also be available on Bankers website
at www.bankerspetroleum.com or by entering the following
URL into your web
browser, http://www.newswire.ca/en/webcast/detail/1457825/1621957.
The web cast will be archived two hours after the presentation
on the website, and posted on the website for 90 days. A
replay of the call will be available until December 25,
2014 by dialing 1-855-859-2056 or 1-416-849-0833 and entering
access code 47056493.
Q4 2014 OPERATIONAL UPDATE
Bankers intends to announce its Operational Update for the
Fourth Quarter 2014 and host a conference call on Tuesday,
January 6, 2015.
About Bankers Petroleum Ltd.
Bankers Petroleum Ltd. is a Canadian-based oil and gas
exploration and production company focused on developing large oil
and gas reserves. In Albania, Bankers operates and has the full
rights to develop the Patos-Marinza heavy oilfield, has a 100%
interest in the Kuçova oilfield, and a 100% interest in Exploration
Block "F". Bankers' shares are traded on the Toronto Stock
Exchange and the AIM Market in London,
England under the stock symbol BNK.
SOURCE Bankers Petroleum Ltd.