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Attention Business Editors
Bankers Petroleum To Split Albanian And U.S. Operations
/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED STATES/
Transaction Designed to Enhance Shareholder Value by Creating Two
Separate Companies having Exposure to Significant Potential Upside
CALGARY, May 14 /CNW/ - The Board of Directors of Bankers Petroleum Ltd.
(TSX: BNK, AIM: BNK) has unanimously approved a proposal to split Bankers into
two separate public companies. One company will have a continued focus on
heavy oil in Albania and the other company will be a North American shale gas
resource company.
With the recent success in Oklahoma, the Company has determined that the
timing is right for Bankers' U.S. assets to be restructured into a separate
newly-formed public entity, BNK Petroleum Inc. ("BNK-US"). This transaction is
designed to enhance shareholder value by creating two separate companies,
which have exposure to significant upside potential. The proposed corporate
reorganization will be completed by way of a plan of arrangement pursuant to
the Business Corporations Act (British Columbia) (the "Plan") and will require
the approval of Bankers' shareholders.
"The two asset bases have different risk profiles and typically appeal to
different types of investors, both geographically and sectorally," said Bob
Cross, Chairman. "Overall value will be enhanced by allowing each company to
develop its own shareholder base through the execution of distinct business
plans. We now have experienced stand-alone management teams that are
delivering on their business objectives."
Pursuant to the Plan, Bankers' shareholders will receive shares of BNK-US
on a basis that is proportional to their interest in Bankers. Every Bankers
shareholder will receive one share in BNK-US for every 10 common shares held
in Bankers, as at the record date to be set for early July. With respect to
outstanding Bankers' common share purchase warrants, their respective exercise
price will be reduced in accordance with the terms of the applicable common
share purchase warrant indenture by an amount on a per share basis to reflect
the fair market value of the U.S. assets that are being split into BNK-US. All
such warrants, as adjusted, will remain exercisable only into common shares of
Bankers. In the event a warrant holder wishes to participate in the Plan and
receive common shares of BNK-US, a warrant holder will need to exercise their
warrants prior to the effective date of the Plan to acquire Bankers common
shares. Such acquired Bankers common shares will participate in the Plan on
the same basis as all other Bankers common shares.
Strategic Rationale
Through the execution of the Plan, Bankers' shareholders will realize the
value of the Company's existing assets through continued ownership in a
growing and successful oil and gas company with significant heavy oil
properties in Albania, while retaining the upside potential associated with
Bankers' U.S. shale gas assets through ownership in the new public company,
BNK-US. The new company will be run by Bankers' existing U.S. management team.
The transaction is expected to offer shareholders a number of significant
benefits which include:
<<
- A clear mandate to allow each company to pursue its own business plan
and to achieve its own strategic goals;
- Appropriate public market ratings for these two distinct asset bases;
- Greater corporate clarity and transparency;
- Continued exposure to each companies' potential upside and additional
growth opportunities; and
- Experienced management teams with expertise in each company's asset
base.
>>
"The restructuring will allow Bankers' management team to focus its
efforts and financial resources on developing the 2.5 billion barrels of
original-oil-in-place in the Patos Marinza and Kucova oil fields, as well as
exploring additional oil and gas investment opportunities in Albania," said
Abby Badwi, Chief Executive Officer. "Bankers is in a strong financial
position to fund its three-year $370.0 million capital program from existing
working capital, cash flow and available credit facilities."
BNK-US Highlights
BNK-US's principal asset is its interest in the Tishomingo gas field in
the Ardmore Basin in Oklahoma. The following table summarizes the key
attributes of BNK-US's interest in the Tishomingo field:
<<
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Tishomingo Gas Field
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Operations
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Currently producing wells(1) 5
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Current net production, post optimization (mcfe/d)(2),(3) ~3,100
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Natural gas % of current production ~64%
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Undeveloped land position (net acres) 12,000
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Average working interest 47%
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Gross Working Interest Reserves(2),(4)
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PDP reserves, 5 wells (Bcfe) 6.4
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Proven reserves (Bcfe) 19.2
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Proven plus probable reserves (Bcfe) 57.2
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Proven, probable and possible reserves (Bcfe) 76.5
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Reserve Value (Before Tax @ 10%)(2),(4),(5)
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PDP reserves, 5 wells (US$ million) $13.4
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Proven reserves (US$ million) $30.4
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Proven plus probable reserves (US$ million) $91.0
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Proven, probable and possible reserves (US$ million) $127.6
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Key Assumptions of MHA Reserve Report
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Effective date of reserve report December 31, 2007
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Original gas in place per section (Bcfe)(6) 47.3
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Assumed well spacing (acres) 640
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Additional wells drilled in 2008 30
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Total capital required in 2008 (US$ million) $45.8
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Notes:
1. In addition to the five producing wells, there is one well waiting
for pipeline connection in June 2008 and another commercial discovery
which is currently recovering fracture fluids.
2. Production and reserve estimates are based on a mcf to boe conversion
factor of 6:1.
3. Net production as of today is 1,200 mcfe/d; total in table include
Dunn 2-1H well.
4. BNK-US's reserves were evaluated by MHA Petroleum Consultants and
have been prepared in accordance with the Canadian Oil and Gas
Evaluation Handbook (COGEH) reserve definitions and National
Instrument 51-101 with an effective date of December 31, 2007.
5. Reserve values are before tax numbers based on a discount rate of 10%
and on the following Henry Hub natural gas price assumptions
(US $/mmbtu) for the years 2008 to 2017: $7.56, $8.27, $8.74, $8.75,
$8.66, $8.83, $9.01, $9.19, $9.37 and $9.56.
6. Based on the Median Monte Carlo realizations, OGIP volumes ranged
from 40 to 120 bcf/section from SCAL data and 200 to 300 bcf from
Schlumberger data.
>>
"Our team is doing an incredible job in carrying out the 2008 drilling
program on the Tishomingo field, which I believe will create great value for
all BNK-US shareholders," said Wolf Regener, President of BNK-US. "Our 2008
program consists of drilling one well for every 640 acres of land and we are
optimistic that it will ultimately be proven that additional wells can be
drilled in each section, recovering more of this large resource and leading to
a further increase in the value of this property. The separation also allows
our experienced team to pursue other projects that we feel certain will lead
to further shareholder value in the future."
BNK-US also holds a 100% interest in 85,000 acres in the Black Warrior
basin and 52% to 73% working interests in 260,000 gross acres in the Palo Duro
basin in Texas as well as a 100% working interest in 19,000 gross acres in the
Appalachian basin in upstate New York. Management estimates the value of the
BNK-US's undeveloped lands at US$10 million.
BNK-US's management and Board of Directors will consist of the following:
<<
- Robert Cross, Director
- Ford Nicholson, Director
- Victor Redekop, Director
- Eric Brown, Director
- Wolf Regener, President & Chief Executive Officer
- C. S. (Juneyt) Tirmandi, Chief Financial Officer
- Rick Pawluk, Corporate Secretary
>>
It is anticipated that Bankers will initially provide credit support
through a bank guarantee of up to $23.0 million to allow BNK-US to fund its
remaining drilling program of US$30.0 million for 2008. Bankers' credit
support is anticipated to cease once BNK-US replaces this bank guarantee
through future debt, equity or a possible rights offering, or internally
generated cash flow.
US Operational Update
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The development of the Tishomingo gas field in Oklahoma is progressing
rapidly. In addition to successfully completing four horizontal Woodford shale
wells, which had average initial gross production rates of around 2.0 MMcfe/d
each. The Company spud six new horizontal wells since the beginning of 2008
and currently has five rigs drilling. The Dunn 2-1H well was drilled and
cased, and was fracture stimulated in the second quarter. It is still flowing
back fracture fluid and has an initial production rate of about 2.7 MMcf/d
along with about 90 bopd on a three-day test. The Barnes 6-1H well was drilled
to depth in April and is now undergoing some shallow casing repair work when a
casing failure occurred after the first fracture stage was stimulated. The
fracture stimulation of the rest of the well is anticipated late in the second
quarter. The pilot hole of the Barnes 7-1H well was drilled to gather more
reservoir data; currently, the horizontal leg of the well is being drilled. In
the second quarter, Bankers has also spud three additional wells: the Sapp
11-1H, the Sapp 3-1H and the Bice 20-1H.
BNK-US is implementing its development plan for the field, which entails
drilling 30 gross wells in 2008 at a capital cost of approximately
US$45.0 million.
A gathering system was installed to connect the Brock wells to the
processing facility, which was completed in late March. Bankers is waiting on
larger three-stage compressors to optimize production, which are expected to
be operational in late May. The first compressor is now onsite and being
installed.
Completion of the Plan is subject to various conditions, including the
receipt of all regulatory, shareholder and Court approvals. The shareholders
of Bankers will be asked to approve the Plan at its Annual General and Special
Meeting to be held on June 27, 2008, with closing to occur shortly thereafter.
Further details will be contained in an information circular that is
expected to be mailed to Bankers' shareholders in early June.
<<
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Financial Advisor:
Canaccord Capital Corporation has been engaged as financial advisor to
the Board of Directors of Bankers to determine, among other things, the
fairness of the transaction from a financial point of view, to the
shareholders of Bankers.
Conference Call:
A conference call to discuss the separation of the U.S. assets will be
held Wednesday, May 14 at 9:00 a.m. MDT, 11:00 a.m. EDT, 4:00 p.m. BDT. To
participate in the conference call, please dial 1-800-814-3911 or
1-416-915-5762 approximately 10 minutes prior to the call. A live and archived
audio webcast of the conference call will also be available on Bankers'
website at www.bankerspetroleum.com. Shortly after the call, an audio archive
will be posted on the website for 90 days.
An archived recording of the call with be available shortly after the
completion of the call by dialling 1-416-640-1917 or 1-877-289-8525 and
entering pass code 21272150.
Caution Regarding Forward-looking Information
Information in this news release respecting the expected future
production levels, future prices and netback, work plans, anticipated total
oil recovery of the Patos Marinza oil field and the Tishomingo gas field in
Oklahoma, U.S., the proposed plan of arrangement for the U.S. assets, and
potential opportunities constitutes forward-looking information. Statements
containing forward-looking information express, as at the date of this news
release, the Company's plans, estimates, forecasts, projections, expectations,
or beliefs as to future events or results and are believed to be reasonable
based on information currently available to the Company.
Exploration for oil and natural gas is a speculative business that
involves a high degree of risk. Few shale natural gas wells that are drilled
are ultimately developed commercially. There is no assurance that expenditures
made by the Company on its US properties will result in discovery of
commercial qualities of natural gas. The Company's expectations for its
Albanian operations and plans are subject to a number of risks in addition to
those inherent in oil production operations, including: that Brent oil prices
could fall resulting in reduced returns and a change in the economics of the
project; delays associated with equipment procurement, equipment failure and
the lack of suitably qualified personnel; the inherent uncertainty in
estimation of reserves; exports from Albania being disrupted due to unplanned
disruptions; and changes in the political or economic environment.
Production and netback forecasts are based on a number of assumptions
including that the rate and cost of well takeovers and well recompletions of
the past will continue and success rates will be similar to those rates
experienced for previous well recompletions/development; that further wells
taken over and recompleted will produce at rates similar to the average rate
of production achieved from wells recompleted/redeveloped in the past;
continued availability of the necessary equipment, personnel and financial
resources to sustain the Company's planned work program; continued political
and economic stability in Albania; approval of the Addendum to the Plan of
Development; the existence of reserves as expected; the continued release by
Albpetrol of areas and wells pursuant to the Plan of Development and Addendum;
the absence of unplanned disruptions; the ability of the Company to
successfully drill new wells and bring production to market; and general risks
inherent in oil and gas operations.
Forward-looking statements and information are based on assumptions that
financing, equipment and personnel will be available when required and on
reasonable terms, none of which are assured and are subject to a number of
other risks and uncertainties described under "Risk Factors" in the Company's
Annual Information Form and Management's Discussion and Analysis, which are
available on SEDAR under the Company's profile at www.sedar.com.
There can be no assurance that forward-looking statements will prove to
be accurate. Actual results and future events could differ materially from
those anticipated in such statements. Readers should not place undue reliance
on forward-looking information.
Oil equivalent amounts have been calculated using a conversion rate of
six thousand cubic feet of natural gas to one barrel of oil. 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.
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 oil field and has a 50% interest in the Kucova oil field. It also holds
an average 50% interest in the Tishomingo gas field in Oklahoma and varied
interests in three other areas in the Northern and Central regions of the
United States, where it is currently pursuing the exploration, development and
production of shale and tight sand gas plays. Bankers shares are traded on the
Toronto Stock Exchange and the AIM Market in London, England under the ticker
symbol BNK.
The Toronto Stock Exchange has not reviewed, nor does it accept
responsibility for the adequacy or accuracy of this release.
The BNK-US Shares to be issued pursuant to the Plan have not been
registered under the United States Securities Act of 1933, as amended, and may
not be offered or sold in the United States or to, for the account or benefit
of, U.S. Persons absent U.S. registration or an applicable exemption from the
U.S. registration requirements. This press release does not constitute an
offer to sell or the solicitation of an offer to purchase securities in the
United States.
This news release is not for dissemination in the United States or to any
United States news services. Any failure to comply with this restriction may
constitute a violation of U.S. securities laws.
-30-
/For further information: Abby Badwi, Chief Executive Officer, (403)
513-2694; Doug Urch, VP, Finance and Chief Financial Officer, (403) 513-2691;
Susan J. Soprovich, VP, Investor Relations and Corporate Governance, (403)
513-2681; Email: investorrelations@bankerspetroleum.com, Website:
www.bankerspetroleum.com; AIM NOMAD: Canaccord Adams Limited, Ryan Gaffney,
Henry Fitzgerald-O'Connor, +44 20 7050 6500; Tristone Capital Ltd., Nick
Morgan, +44 20 7355 5800/
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