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Bankers Announces Strong Operational and Financial Results in the First Quarter of 2008

Posted on: Monday, 12 May 2008, 09:01 CDT

CALGARY, May 12 /PRNewswire-FirstCall/ -- Bankers Petroleum Ltd. (TSX: BNK, AIM: BNK) today announced strong operational and financial results as continued growth was achieved over the first quarter of 2008.

Three months ended March 31 ----------------------------- ($000s, except as noted) 2008 2007 % ------------------------------------------------------------------------- Oil and gas revenue 26,244 10,739 144 Net operating income 13,932 4,510 209 Net income (loss) 306 (1,050) 129 Funds from operations 10,115 2,852 255 First Quarter Highlights: - In Albania, average production was 5,218 bopd compared to 4,388 bopd for the same period in 2007 and 5,429 bopd for the fourth quarter of 2007. - Crude oil inventory in Albania at March 31, 2008, increased to 98,000 barrels to meet required export delivery schedules. - Exit production for March 2008 was approximately 5,420 bopd in Albania. - In the U.S., average gas production was 762 mcf/d compared to 462 mcf/d for the fourth quarter of 2007; average condensate and NGL production was 107 bopd compared to 37 bopd for the previous quarter. - On a combined basis, this represented 5,452 boed for the first quarter of 2008, as compared to 4,388 boed for the first quarter of 2007 and 5,543 boed for the fourth quarter of 2007. - The Company completed a non-brokered private placement, issuing an aggregate of 66,666,666 common shares at CAD$0.90 per share, resulting in net proceeds of $58.3 million. Albania - Effective January 1, 2008, the Company renegotiated its domestic crude oil sales agreement with the Albanian Refining and Marketing Organization, ARMO Sh.a (ARMO), renewed its export agreement with one of the Italian refineries and finalized a new agreement with a second Italian refinery. The new domestic price compares favourably to the previous contract, becoming competitive with export pricing. - The average oil price was $51.96 per barrel (54% of Brent); total export volume represented 42% of production. - Bankers acquired a 50% working interest in the Kucova oil field in Albania along with an option to acquire the remaining 50% working interest by June 30, 2008. The Kucova field has in excess of 490 million barrels of original-oil-in-place. United States - In Oklahoma, Bankers finished fracture stimulating its third and fourth horizontal shale gas wells in the Tishomingo field, the Brock 4-1H and Brock 9-1H. - The wells continue to flow back fracture fluid and are now producing. Initial gross production rates were approximately 2.1 mmcfe/d and 1.8 mmcfe/d respectively. - A gathering system was installed to connect the Brock wells to the processing facility, which was completed in late March. Bankers is waiting on a larger compressor to optimize production in May. - Three new horizontal wells were spud in the Tishomingo gas field in the quarter and are at various stages of completion.

The Company anticipates that restructuring details of Bankers Petroleum (US) Inc. will be announced this week.

--------- 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.

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following is management's discussion and analysis (MD&A) of Bankers Petroleum Ltd's (Bankers or the Company) operating and financial results for the three months ended March 31, 2008, compared to the preceding quarter and the corresponding period in the prior year, as well as information and expectations concerning the Company's outlook based on currently available information. The MD&A should be read in conjunction with the unaudited interim financial statements for the three months ended March 31, 2008 and the audited financial statements and MD&A for the year ended December 31, 2007. Additional information relating to Bankers, including its Annual Information Form, is on SEDAR at http://www.sedar.com/ and on the Company's website at http://www.bankerspetroleum.com/. All dollar values are expressed in U.S. dollars, unless otherwise indicated.

The majority of the Company's production is heavy oil (reported in barrels), however, the company also uses the "barrels of oil equivalent" (boe) reference in this report to reflect U.S. natural gas sales. All boe conversions are derived by converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil, representing the approximate energy equivalency.

This report is prepared as of May 9, 2008. NON-GAAP MEASURES

Netback per barrel and its components are calculated by dividing revenue, royalties, operating, sales and transportation expenses by the gross production volume during the period. Netback per barrel is a non-GAAP measure but it is commonly used by oil and gas companies to illustrate the unit contribution of each barrel produced.

Net operating income is similarly a non-GAAP measure that represents revenue net of royalties and operating and sales and transportation expenses. The Company believes that net operating income is a useful supplemental measure to analyze operating performance and provides an indication of the results generated by the Company's principal business activities prior to the consideration of other income and expenses.

Funds from operations is a non-GAAP measure that represents cash provided by (used in) operating activities, as per the consolidated statements of cash flows, before changes in non-cash working capital. The Company considers this a key measure as it demonstrates its ability to generate the funds necessary for future growth. Reconciliation to the GAAP measure is as follows:

Three Months Ended March 31 ---------------------------- ($000s) 2008 2007 % ------------------------------------------------------------------------- Cash provided by (used in) operating activities 9,799 (229) 4,379 Change in non-cash working capital (316) (3,081) 90 ---------------------------- Funds from operations 10,115 2,852 255 ---------------------------- ----------------------------

The non-GAAP measures referred to above do not have any standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures used by other companies.

CAUTION REGARDING FORWARD-LOOKING INFORMATION

Certain information contained in this news release and MD&A respecting the Company and the Company's properties constitute forward-looking statements. The use of any of the words "target", "plans", "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. Such forward-looking information, including but not limited to statements as to production targets, timing of the Company's planned work program and management's belief as to the potential of certain properties, involve known and unknown risks, uncertainties and other factors which may cause the actual results of the Company and its operations to be materially different from estimated costs or results expressed or implied by such forward-looking statements.

Such factors include, among others general risks and uncertainties associated with exploration, development, petroleum operations and risks associated with equipment procurement and equipment failure as well as those described under "Risk Factors" in the Company's Annual Information Form and in each MD&A. Although the Company has attempted to take into account important factors that could cause actual costs or results to differ materially, there may be other factors that cause costs of the Company's program or results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information.

OVERVIEW & SELECTED QUARTERLY INFORMATION Three months ended March 31 ---------------------------- Results at a Glance 2008 2007 % ------------------------------------------------------------------------- Financial ($000s, except as noted) Oil and gas revenue 26,244 10,739 144 Net operating income 13,932 4,510 209 Net income (loss) 306 (1,050) 129 Funds from operations 10,115 2,852 255 Additions to property, plant and equipment 19,567 14,014 40 Total assets 272,469 166,175 64 Bank loans 30,218 15,987 89 Other long-term liabilities 21,467 6,076 253 Shareholders' equity 199,944 135,382 48 Operating Albania - crude oil Average production (bopd) 5,218 4,388 19 Average price ($/barrel) 51.96 27.19 91 Netback ($/barrel) 27.39 11.42 140 U.S. - natural gas, natural gas liquids (NGL) and condensate(1) Average natural gas production (mcf/d) 762 - - Average condensate & NGL production (bopd) 107 - - Average natural gas price ($/mcf) 6.64 - - Average condensate & NGL price ($/barrel) 85.34 - - Netback ($/boe) 32.56 - - (1) U.S. production commenced in September 2007

Bankers continued to increase production, revenues and funds from operations during the three month period ended March 31, 2008 as compared to the same period in 2007:

- In Albania, average production was 5,218 bopd compared to 4,388 bopd for the same period in 2007 and 5,429 bopd for the fourth quarter of 2007, an increase of 19% and decrease of 4%, respectively. - Crude oil inventory in Albania at March 31, 2008, increased to 98,000 barrels from 93,000 barrels at December 31, 2007, to meet required export delivery schedules. - Exit production for March 2008 was approximately 5,420 bopd in Albania; current production is approximately 5,500 bopd. - In the U.S., average gas production was 762 mcf/d compared to 462 mcf/d for the fourth quarter of 2007, an increase of 65%; average condensate and NGL production was 107 bopd compared to 37 bopd for the previous quarter, an increase of 189%. - On a combined basis, this represented 5,452 boed for the first quarter of 2008, down slightly from 5,543 boed for the fourth quarter of 2007. - Bankers received the results of its 2008 reserve evaluation, increasing 2007 gross proved plus probable reserves (2P) by 54% to 156.6 MMboe from 101.9 MMboe in 2006. - In March 2008, the Company completed a non-brokered private placement, issuing an aggregate of 66,666,666 common shares at CAD$0.90 per share, resulting in net proceeds of $58.3 million. - Higher production and commodity prices resulted in increased revenue to $26.2 million for the quarter compared to $22.1 million in the preceding quarter and $10.7 million for the same period in 2007. - Net operating income improved to $13.9 million ($27.39 per barrel) from $12.6 million ($24.82 per barrel) in the preceding quarter and $4.5 million ($11.42 per barrel) for the same period in 2007, increases of 10% and 209% respectively. - Funds from operations increased to $10.12 million from $2.85 million for the three months ended March 31, 2007 and from $10.07 million for the fourth quarter in 2007. Albania

Effective January 1, 2008, the Company renegotiated its domestic crude oil sales agreement with the Albanian Refining and Marketing Organization, ARMO Sh.a (ARMO), renewed its export agreement with one of the Italian refineries and finalized a new agreement with a second Italian refinery. The new domestic price compares favourably to the previous contract, becoming competitive with export pricing. Bankers expects that its overall average price will approximate 56% of the Brent oil price for 2008, dependent upon total domestic versus export volumes. The average price for the first quarter of 2008 was approximately 54% of the Brent oil price.

In addition, the Company exported 42% of its crude oil production during the first quarter of 2008 at an average price of $54.49 per barrel. In comparison, exports made up 58% of the sales during the previous quarter at an average price of $52.70 per barrel.

The increased domestic and export sale prices helped Bankers receive higher overall oil prices. As a result, the Company averaged $51.96 per barrel during the first quarter of 2008 as compared to $42.84 per barrel for the previous quarter and $27.19 per barrel for the same period in 2007.

Other significant events during the quarter included: - In March, Bankers submitted an Addendum to the Plan of Development that outlined the technical, capital and production profiles for the Patos Marinza field. Under this Addendum, the Company plans to access additional reserves through the application of primary, secondary and tertiary techniques. - With this Addendum, Bankers announced a three-year plan that entails increased capital expenditures for vertical and horizontal infill drilling, as well as the initiation of waterflood development and thermal programs, to substantially increase production and reserves in 2008 and beyond. The plans' total capital investment is estimated to be $370.0 million over the next three years with an objective to achieve a target field production of 20,000 bopd by the end of 2010. - Bankers acquired a 50% working interest in the Kucova oil field in Albania along with an option to acquire the remaining 50% working interest by June 30, 2008. The Kucova field has in excess of 490 million barrels of original-oil-in-place. United States - In Oklahoma, Bankers finished fracture stimulating its third and fourth horizontal shale wells in the Tishomingo field, the Brock 4-1H and Brock 9-1H. - The wells continue to flow back fracture fluid and are now producing. Initial gross production rates were approximately 2.1 mmcfe/d and 1.8 mmcfe/d respectively. - A gathering system was installed to connect the Brock wells to the processing facility, which was completed in late March. Bankers is waiting on a larger compressor to optimize production in May. - Three new horizontal wells were spud in the Tishomingo gas field in the quarter and are at various stages of completion. - Bankers received a pre-stack time migration of the entire 115 square mile 3D seismic survey that was acquired last year. - In Texas, two of the three horizontal stages were fracture stimulated in the Atoka A zone of the horizontal Cogdell # 64-1H well. Testing resulted in virtually no hydrocarbon recovery, likely due to the fracture having connected into a water interval. - The well recovered all of the injected water and was still producing significant water rates at the time it was shut-in. RESULTS OF OPERATIONS Production and Revenue Three months ended March 31 ---------------------------- Albania - crude oil 2008 2007 % ------------------------------------------------------------------------- Average production (bopd) 5,218 4,388 19 Average price ($/barrel) 51.96 27.19 91 U.S. - natural gas, condensate & NGL ------------------------------------------------------------------------- Average natural gas production (mcf/d) 762 - - Average condensate & NGL production (bopd) 107 - - Average natural gas price ($/mcf) 6.64 - - Average condensate & NGL price ($/barrel) 85.34 - - Oil and gas revenue ($000) ------------------------------------------------------------------------- Albania 24,676 10,739 130 U.S. 1,568 - -

During the quarter, production continued to increase as more wells were re-activated in Albania, bringing the active well count to 172 from 164 in the preceding quarter. As at March 31, 2008, the Company also had 114 wells waiting for servicing and reactivation. Average production decreased slightly by 4% to 5,218 bopd during the quarter from 5,429 bopd for the preceding quarter and increased 19% from 4,388 bopd from the same period a year ago. The production decrease over the quarter is due to changes in inventory not reflected in sales and a delay in the last export of over 40,000 bbls being pushed into April. Production gains from activations were offset by production declines and well failures. Production was approximately 5,500 bopd as at the last week in April.

During the quarter, the Company exported approximately 42% of its crude oil to refineries in Italy at an average price of $54.49 per barrel. Exports made up 58% of sales in the preceding quarter at an average price of $52.70 per barrel. The reduction in export volumes was due to more favourable domestic sales contract compared to prior period, encouraging higher domestic sales volumes, as well as one export shipment being pushed into early April. As a result, the average price for domestic sales amounted to $50.18 per barrel, compared to $29.40 per barrel during the previous quarter and $26.26 for the same period in 2007.

The Company's average oil price for the quarter was $51.96 per barrel, up from $42.84 per barrel for the preceding quarter and $27.19 per barrel for the same period in 2007.

Oil revenues from the Albanian operations for the quarter were $24.7 million up from $21.4 million for the quarter ended December 31, 2007, and $10.7 million for the corresponding quarter a year ago, increases of 15% and 130% respectively.

Natural gas, condensate and natural gas liquids revenues from the U.S. operations were $1.6 million for the quarter compared to $816,000 for the preceding period, an increase of 92%.

Royalties, Direct Expenses and Netbacks

Royalties in Albania are calculated pursuant to the Petroleum Agreement with Albpetrol, and consist of Albpetrol's pre-existing production and a 1% gross overriding royalty on new production. Royalties increased to $9.05 per barrel from $4.42 per barrel compared to the preceding quarter while the overall royalty on a total dollar basis increased to 17%, compared with 12% for 2007. The increase in royalties was related to higher commodity prices and an increase in Albpetrol's share of production, which increased to 18.5% of total production in 2008 compared to 14.7% in the first quarter of 2007. The lead time for reactivation of wells taken over resulted in a higher proportionate share of production for Albpetrol in advance of generating a proportionate increase in Bankers' share of production volume.

Operating expenses increased to $12.02 per barrel from $10.93 per barrel in the preceding quarter and $10.16 per barrel for the same period in 2007. This increase was primarily due to significantly increased energy costs. Sales and transportation expenses increased to $3.50 per barrel from $2.67 per barrel in the preceding quarter as a direct result of increased diluent costs, higher fuel costs and trucking expense.

The Company's netback per barrel improved to $27.39 per barrel from $24.82 per barrel in the preceding quarter and $11.42 per barrel for the same period in 2007. The improvement in netback resulted mainly from higher oil prices.

Three months ended March 31 ---------------------------- Netback ($/barrel) 2008 2007 % ------------------------------------------------------------------------- Average price ($/barrel) 51.96 27.19 91 Royalties 9.05 3.65 148 Sales and transportation 3.50 1.96 79 Operating 12.02 10.16 18 ---------------------------- Netback ($/barrel) 27.39 11.42 140 ---------------------------- ---------------------------- General and Administrative Expenses

General and administrative expenses (G&A) for the quarter were $2.4 million compared to $2.9 million for the preceding quarter and $1.7 million for the same period in 2007. The modest reduction in G&A when compared to the previous quarter reflects mainly the softening of the Canadian dollar against the U.S. dollar. The increase in general and administrative expenses compared to the same period in 2007 reflected higher personnel costs with the addition of new employees, higher consulting fees and travel expenses related to the Company's operating and financing activities.

During the quarter, the Company capitalized general and administrative expenses of $1.0 million compared to $822,000 for the preceding quarter and $799,000 for the same period in 2007, for activities in Albania and the United States. These expenses were directly related to acquisition, exploration and development activities.

Non-cash stock-based compensation expense pertaining to options vested and/or granted to officers, directors, employees and service providers were $1.7 million compared to $1.0 million for the preceding quarter and $1.1 million for the same period in 2007. Of this amount $1.4 million was charged to earnings during this quarter, compared to $900,000 and $960,000 that was charged to earnings for the preceding period and the period ending March 31, 2007. The remaining was capitalized.

Depletion, Depreciation and Accretion

Depletion, depreciation and accretion expense for the quarter ended March 31, 2008 were $3.6 million compared to $3.3 million for the preceding quarter and $1.9 million for the same period in 2007. The increase in depletion, depreciation and accretion expense reflects an overall increase in the depletable base, commensurate with production level for the period. Depletion expense on a per barrel basis was $5.65 for the quarter compared to $5.87 and $4.36, respectively for the preceding quarter and the same period in 2007.

Future Income Tax Expense Three months ended March 31 ---------------------------- ($000) 2008 2007 ------------------------------------------------------------------------- Net book value of property, plant and equipment (Albania) 100,676 62,688 Cost recovery pool (64,196) (54,354) ---------------------------- Timing difference 36,480 8,334 ---------------------------- ---------------------------- Future income tax liability (50%) 18,240 4,167 ---------------------------- ---------------------------- Earnings (loss) before income taxes 5,146 (9) Statutory tax rate 29.50% 32.12% ---------------------------- 1,518 (3) Difference in tax rates between Albania and Canada 1,760 732 Non-deductible expenses 412 308 Valuation allowance and other 1,150 4 ---------------------------- 4,840 1,041 ---------------------------- ----------------------------

Future income tax liabilities result from the temporary differences between the carrying value and tax values of its Albanian assets and liabilities.

The cost recovery pool represents deductions for income taxes in Albania. Bankers is presently not paying cash taxes in any jurisdiction.

Net income (loss) and Funds from Operations

The Company recorded a net income of $306,000 ($0.001 per share) during the quarter compared to a loss of $2.2 million ($0.005 per share) for the preceding period and $1.0 million ($0.002 per share) for the same period in 2007.

Bankers generated funds from operations of $10.12 million during the quarter compared to $10.07 million for the preceding quarter and $2.85 million for the same period in 2007. The slight increase in funds generated from operations compared to the preceding quarter was mainly due to higher oil prices. The increase in funds from operation compared to the same period in 2007 was attributed to higher production from Albanian operations and higher oil prices.

OPERATIONS UPDATE Albania Patos Marinza Field -------------------

In March, the Company announced an Addendum to the Plan of Development that outlined the technical, capital and production profiles for the Patos Marinza field. Under this Addendum, Bankers plans to access additional reserves through the application of infill vertical and horizontal drilling, and waterflood and thermal recovery techniques. The Addendum was submitted to Albpetrol Sh. A. and the Albanian Government and is currently awaiting final approval.

The original plan of development was mainly comprised of recompleting active wells and re-activation of suspended wells through primary cold heavy oil production (CHOP) of previously operated wells by Albpetrol. The new Addendum to the plan of development moves beyond primary recovery techniques, identifying methods to further access the substantial oil reserves of the field by applying the appropriate extraction method to each individual formation. It includes reactivations, new vertical and horizontal infill wells, a waterflood program and cyclic steam stimulation. The various technologies will be focused to maximize the recoveries from each formation through disciplined and staged exposure of capital and an overall 'field to formation' development plan.

The Plan's total capital investment is estimated to be $370.0 million over the next three years and will be primarily funded from existing working capital and future cash flow. The Plan's objective is to achieve production target of 20,000 bopd by December 2010 and access additional reserves. In preparation for implementation of the Plan, Bankers has contracted a drilling rig to begin in the second quarter of 2008, and is seeking a second drilling rig for the third quarter of the year.

Bankers believes that newly planned thermal wells will be designed to overcome the casing integrity issues experienced during steam injection testing with existing wells. The Company expects to drill eight new wells for the thermal steam project in the fourth quarter of 2008.

Kucova Field ------------

In February, Bankers acquired a 50% working interest in the Kucova oil field in Albania through the acquisition of 50% of the issued and outstanding securities of an independent private company, which holds the exclusive right to evaluate and redevelop the field. The terms of the Petroleum Agreement are substantially the same as those governing Bankers' Petroleum Agreement for the Patos Marinza oil field. The consideration paid included cash and warrants.

The Kucova field has in excess of 490 million barrels of original-oil-in-place that averages 17o API gravity, based on previous reservoir reports. Geologically, it is similar to Bankers' Patos Marinza oil field, consisting of multiple stacked sandstone reservoirs of various oil gravities. Recovery to date is approximately six percent.

Bankers has undertaken an evaluation of the oilfield to further define its remaining reserves and production potential. The terms of the transaction include an option to acquire the remaining 50% interest for an aggregate 100%. The Company expects to complete the evaluation and will disclose details of its capital program and reserves assessment by the end of the second quarter.

United States Oklahoma, Ardmore Basin - Tishomingo Gas Field ----------------------------------------------

The Company finished fracture stimulating its third and fourth horizontal shale wells in the Tishomingo field, the Brock 4-1H and Brock 9-1H. The wells continue to flow back fracture fluid and are now producing. Initial gross production rates were approximately 2.1 mmcfe/d and 1.8 mmcfe/d respectively. This compares favourably to Bankers first two horizontal wells, one of which is on production and the other, the WLC 17-1H (initial gross production rate: 2.1 mmcfe/d), is currently shut-in awaiting pipeline hook-up. 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 compressors to optimize production, which are expected to be operational in early May.

Three new horizontal wells were spud in the Tishomingo gas field in the quarter. The Dunn 2-1H well was drilled and cased, and was fracture stimulated in the second quarter. It is currently flowing back fracture fluid. The Barnes 6-1H well completed drilling in April and is now waiting fracture stimulation, which is anticipated during 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.

Bankers has received a pre-stack time migration for the entire 115 square mile 3D seismic survey that was acquired last year, and is using this data to select its drill sites for 2008.

CAPITAL EXPENDITURES Three months ended March 31 ---------------------------- ($000) 2008 2007 ------------------------------------------------------------------------- Albania 13,720 9,684 United States 5,803 3,954 Canada 44 376 ---------------------------- 19,567 14,014 ---------------------------- ----------------------------

The Company incurred $7.1 million of capital expenditures in Albania during the quarter for well re-activations, $500,000 related to the thermal project and $700,000 on water disposal and pipeline-flowlines systems. The balance of the expenditures was related to miscellaneous asset acquisitions and capitalized general and administrative expenses. The capital expenditures also include an increase in prepayments to suppliers of $1.0 million for equipment in transit to Albania. The Company spent $9.7 million in capital expenditures in Albania for the same period in 2007, which were mainly incurred on well re-activation and central treatment facilities.

In the U.S., the Company spent $2.0 million on drilling and evaluation costs of three news wells in Oklahoma. The balance of the capitalized expenditures was related to seismic reprocessing costs and capitalized general and administrative expenses. The Company spent $4.0 million in capital expenditures in the United States for the same period in 2007 which included $1.9 million on drilling and $1.4 million on lease acquisition costs.

LIQUIDITY AND CAPITAL RESOURCES

As at March 31, 2008, Bankers had working capital of $38.2 million, including cash of $51.6 million, and a long-term bank loan of $9.7 million. The Company's $30.4 million credit facility with a European financial institution was nearly fully utilized at March 31, 2008, with the revolving operating loan at $15.8 million, the bridge loan at $1.0 million and the four-year term loan at $13.4 million. Repayments of $1.6 million were made during the first quarter of 2008 in accordance with the term loan repayment schedule.

In March 2008, Bankers received approval for a $20.0 million increase to this credit facility. Subsequent to year-end, the Company issued 66.7 million common shares, pursuant to a private placement, for net proceeds of $58.3 million.

Capital expenditures for Albania and the U.S. are estimated to be approximately $77.0 million and $50.0 million, respectively, for 2008. Bankers anticipates that it has sufficient capital resources to fund Albania's 2008 capital expenditure program and to meet working capital requirements through funds from operations, available credit facilities and working capital. Significant changes in expected commodity prices could impact funds from operations.

Working capital and revenue from production in the U.S. operation are expected to be sufficient to fund planned U.S. capital expenditures over the first half of 2008. Bankers will consider various options to obtain required capital for the remainder of the program in coordination with the restructuring of the U.S. assets.

As of March 31, 2007, the Company had working capital of $16.9 million and long-term debt of $10.7 million. Bankers had a working capital deficiency of $9.6 million and long-term debt of $11.2 million at December 31, 2007.

Plan of Development

Bankers has no capital expenditure commitment for the Patos Marinza oilfield under the Petroleum Agreement. Bankers annually submits a work program to AKBN which includes the nature and the amount of capital expenditures to be incurred during that year. Significant deviations in this annual program from the Plan of Development will be subject to AKBN approval. The Petroleum Agreement provides that disagreements between the parties will be referred to an independent expert whose decision will be binding. The Company has the right to relinquish a portion or all of the contract area. If only a portion of the contract area is relinquished then the Company will continue to conduct petroleum operations on the portion it retains and the future capital expenditures will be adjusted accordingly.

Commitments

The Company has long-term lease commitments in Canada, Albania and the U.S. The minimum lease payments for the next five years are $967,000 and outlined as follows:

($000) Canada Albania U.S. Total ------------------------------------------------ 2008 126 132 56 314 2009 168 49 56 273 2010 168 37 - 205 2011 168 - - 168 2012 7 - - 7 ------------------------------------- 637 218 112 967 ------------------------------------- -------------------------------------

The $13.4 million term loan is repayable in equal monthly instalments over a 48-month period commencing January 1, 2008. During the quarter, $1.6 million was paid down. Of the amount outstanding, $3.8 million was classified as a current liability and $9.6 million as long-term debt. Principal repayments of the term loan over the next four years are as follows:

($000) ------------------------ 2008 2,813 2009 3,750 2010 3,750 2011 3,125 -------- 13,438 -------- -------- RELATED PARTY TRANSACTIONS

Bankers contracts with a Canadian drilling company for the provision of rigs and other oil well services at industry competitive rates. Victor Redekop, a Director of Bankers, is a principal shareholder and officer of this company. During the quarter ended March 31, 2008, the Company transacted $2.9 million of services compared to $2.6 million for the preceding quarter and $2.0 million for the corresponding period in 2007. The services can be terminated upon 60 days' notice at the election of the Company.

QUARTERLY SUMMARY Below is a summary of Bankers' performance over the last eight quarters. 2007 2008 ---------------------------------------------- ------------- ($000s, except as noted) Second Quarter Third Quarter Fourth Quarter First Quarter ----------------------------------------------------------- ------------- $/boe $/boe $/boe $/boe ----------------------------------------------------------- ------------- Albania - crude oil ----------------------------------------------------------- ------------- Average production (bopd) 4,314 4,753 5,429 5,218 ----------------------------------------------------------- ------------- Oil revenue 12,913 32.89 16,239 37.14 21,398 42.84 24,676 51.96 Royalties 1,682 4.28 1,922 4.40 2,207 4.42 4,298 9.05 Sales and transportation 1,007 2.56 1,068 2.44 1,332 2.67 1,664 3.50 Operating expenses 4,048 9.91 4,535 10.37 5,303 10.93 5,706 12.02 -------------------------------------------- ------------- Net operating income 6,176 16.14 8,714 19.93 12,556 24.82 13,008 27.39 -------------------------------------------- ------------- -------------------------------------------- ------------- 2006 2007 ---------------------------------------------- ------------- ($000s, except as noted) Second Quarter Third Quarter Fourth Quarter First Quarter ----------------------------------------------------------- ------------- $/boe $/boe $/boe ----------------------------------------------------------- ------------- Albania - crude oil ----------------------------------------------------------- ------------- Average production (bopd) 3,175 3,776 4,113 4,388 ----------------------------------------------------------- ------------- Oil revenue 7,407 25.64 9,240 26.63 9,250 24.44 10,739 27.19 Royalties 860 2.98 1,055 3.04 1,149 3.04 1,440 3.65 Sales and transportation 480 1.66 728 2.10 670 1.77 775 1.96 Operating expenses 2,862 9.91 3,141 9.05 3,737 9.88 4,014 10.16 -------------------------------------------- ------------- Net operating income 3,205 11.09 4,316 12.44 3,694 9.75 4,510 11.42 -------------------------------------------- ------------- -------------------------------------------- ------------- 2007 2008 ----------------------------------------------------------- ------------- Second Quarter Third Quarter Fourth Quarter First Quarter ----------------------------------------------------------- ------------- U.S. - natural gas, condensate & NGL ----------------------------------------------------------- ------------- Average natural gas production (mcf/d) - 127 492 762 Average condensate & NGL production (bopd) - 15 37 107 ----------------------------------------------------------- ------------- Average natural gas price ($/mcf) - 5.18 5.91 6.64 Average condensate & NGL price ($/barrel) - 59.08 73.35 85.34 -------------------------------------------- ------------- Net operating income - 120 407 924 -------------------------------------------- ------------- -------------------------------------------- ------------- (x) Due to the low production volumes in the U.S. operations, 2007 U.S. netback is not representative of future operations. (x) Production from the U.S. operations commenced September, 2007. 2007 2008 ---------------------------- --------- ($000s, except as noted) Second Third Fourth First Quarter Quarter Quarter Quarter ---------------------------- --------- Financial Oil and gas revenue 12,913 16,392 22,061 26,244 General and administrative 1,824 1,975 2,853 2,422 Funds from operations 4,792 6,420 10,072 10,115 Net income (loss) 600 264 (2,156) 306 Basic and diluted earnings (loss) per share 0.001 0.001 (0.005) 0.001 Total assets 175,550 185,652 204,295 272,469 Bank loans 19,471 25,967 30,850 30,218 2006 2007 ---------------------------- --------- Second Third Fourth First Quarter Quarter Quarter Quarter ---------------------------- --------- Financial Oil and gas revenue 7,407 9,240 9,250 10,739 General and administrative 1,450 1,422 1,820 1,659 Funds from operations 3,251 2,950 1,588 2,852 Net income (loss) (253) (208) (107) (1,050) Basic and diluted earnings (loss) per share (0.001) (0.001) (0.000) (0.002) Total assets 124,321 127,106 138,030 168,005 Bank loans - - 6,772 15,987 OUTSTANDING SHARE DATA

There were approximately 519 million and 520 million shares outstanding as at March 31, 2008 and May 9, 2008, respectively. In addition, the Company had approximately 81 and 85 million stock options and warrants outstanding as of the same dates, respectively.

PRINCIPAL BUSINESS RISKS

Bankers' business and results of operations are subject to a number of risks and uncertainties, including but not limited to the following:

Exploration, development, production and marketing of oil and natural gas involves a wide variety of risks which include but are not limited to the uncertainty of finding oil and gas in commercial quantities, securing markets for existing reserves, commodity price fluctuations, exchange and interest rate exposure and changes to government regulations, including regulations relating to prices, taxes, royalties and environmental protection. The oil and gas industry is intensely competitive and the Company competes with a large number of companies with greater resources.

Bankers' ability to increase its reserves in the future will depend not only on its ability to develop its current properties but also on its ability to acquire new prospects and producing properties. The acquisition, exploration and development of new properties also require that sufficient capital from outside sources will be available to the Company in a timely manner. The availability of equity or debt financing is affected by many factors many of which are beyond the control of the Company.

Bankers has a significant investment in Albania. There are a number of risks associated with conducting foreign operations over which the Company has no control, including political instability, potential and actual civil disturbances, ability to repatriate funds, changes in laws affecting foreign ownership and existing contracts, environmental regulations, oil and gas prices, production regulations, royalty rates, income tax law changes, potential expropriation of property without fair compensation and restriction on exports. Additional risks that may affect the Company and its operations are set out in its AIF filed under the Company's profile on http://www.sedar.com/.

SUBSEQUENT EVENTS

Subsequent to March 31, 2008, the Company received documentation pertaining to the approval of a $20,000 increase to its existing credit facility with a European financial institution based in Albania. The details were as follows:

- A new $20,000 operating loan facility was provided with an interest rate of one year LIBOR plus 3.5%. The term of the operating loan may be extended for further twelve month periods up to four times upon request by the Company and acceptance by the lender. - The existing $16,000 operating loan was converted to a five-year term facility bearing an interest rate of LIBOR plus 4.65%. The facility has no scheduled repayments during the first twelve months after which it is repayable in equal monthly instalments over a 48- month period.

Bankers granted 5,725,000 stock options with a weighted average exercise price of CAD$1.66 per share to directors, officers, employees and consultants.

NEW ACCOUNTING STANDARDS

The Canadian Institute of Chartered Accountants ("CICA") has released new accounting standards for implementation effective January 1, 2008, as follows:

- Section 3031 - Inventories: the new standard replaces the previous inventories standard and prescribes certain methods for valuing inventories. The adoption of this standard has had no material impact on the Company's consolidated financial statements. - Section 3862 - Financial Instruments - Disclosures and Section 3863 - Financial Instruments - Presentation: the new disclosure standard requires increased disclosure regarding the Company's financial instruments, the risks associated with these instruments and how the risks are managed. The new presentation standard carries forward the former presentation requirements. The required disclosures are contained in Note 1 to the Company's interim unaudited consolidated financial statements. - Section 1535 - Capital Disclosures: the new standard requires the Company to disclose its definition of capital and its objectives, policies and processes for managing its capital structure. The required disclosures are contained in Note 1 to the Company's interim unaudited consolidated financial statements. INTERNAL CONTROLS

Disclosure controls and procedures have been designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the Company's management, as appropriate, to allow timely decisions regarding required disclosure. The Company's Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of March 31, 2008, that the Company's disclosure controls and procedures are effective to provide reasonable assurance that material information related to the Company, including its consolidated subsidiaries, is made known to them by others within those entities. During the three months ended March 31, 2008, there have been no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

OUTLOOK

Going forward, Bankers' strategic objective is to remain focused on exploration and production activities in Albania. The three-year strategic plan for the Patos Marinza oil field provides significant potential for growth in production and reserves through primary, secondary and tertiary extraction techniques. In addition, the Company will complete its evaluation of the Kucova oil field by the end of the second quarter to further define its remaining reserves and production potential, providing the opportunity to acquire the remaining 50% interest for an aggregate 100%.

In the United States, Bankers is progressing with a 30 well development program for its Oklahoma Woodford shale gas play. Additionally, the Company expects to finalize the most optimal arrangement for restructuring of the U.S. assets to maximize shareholder value during the second quarter of 2008.

BANKERS PETROLEUM LTD. CONSOLIDATED BALANCE SHEETS (Unaudited, Expressed in Thousands of United States dollars) ------------------------------------------------------------------------- ASSETS March December 31 2008 31 2007 ----------------------- Current assets Cash and cash equivalents $ 51,622 $ 3,560 Investments (Note 2) 1,428 1,120 Accounts receivable 24,177 21,128 Crude oil inventory 1,265 985 Deposits and prepaid expenses 1,116 1,601 ----------------------- 79,608 28,394 Property, plant and equipment (Note 3) 192,861 175,901 ----------------------- $ 272,469 $ 204,295 ----------------------- ----------------------- LIABILITIES Current liabilities Operating loans (Note 4) $ 16,780 $ 15,805 Accounts payable and accrued liabilities 20,840 18,444 Current portion of term loan (Note 4) 3,750 3,750 ----------------------- 41,370 37,999 Term loan (Note 4) 9,688 11,250 Asset retirement obligations (Note 5) 3,227 2,610 Future income tax liability (Note 6) 18,240 13,400 SHAREHOLDERS' EQUITY Share capital (Note 7) 194,807 136,513 Warrants (Note 7) 2,794 2,539 Contributed surplus (Note 7) 10,053 8,308 Deficit (8,018) (8,324) Accumulated other comprehensive income 308 - ----------------------- 199,944 139,036 ----------------------- $ 272,469 $ 204,295 ----------------------- ----------------------- Commitments (Note 10) Subsequent events (Note 12) See accompanying notes to consolidated financial statements. BANKERS PETROLEUM LTD. CONSOLIDATED STATEMENT OF CHANGES IN DEFICIT, COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE INCOME (Unaudited, Expressed in Thousands of United States dollars) ------------------------------------------------------------------------- Three months ended March 31 2008 2007 ----------------------- Deficit Balance, beginning of period $ (8,324) $ (5,982) Net income (loss) for the period 306 (1,050) ----------------------- Balance, end of period $ (8,018) $ (7,032) ----------------------- ----------------------- Comprehensive income (loss) Net income (loss) for the period $ 306 $ (1,050) Unrealized gain on investments (Note 2) 308 - ----------------------- Comprehensive income (loss) $ 614 $ (1,050) ----------------------- ----------------------- Accumulated other comprehensive income Balance, beginning of period $ - $ - Unrealized gain on investments 308 - ----------------------- Balance, end of period $ 308 $ - ----------------------- ----------------------- See accompanying notes to consolidated financial statements. BANKERS PETROLEUM LTD. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31 (Unaudited, Expressed in Thousands of United States dollars, except per share amounts) ------------------------------------------------------------------------- 2008 2007 ----------------------- Revenue Oil and gas revenue $ 26,244 $ 10,739 Royalties (4,592) (1,440) Interest 268 150 ----------------------- 21,920 9,449 ----------------------- Expenses Operating 6,056 4,014 Sales and transportation 1,664 775 General and administrative 2,422 1,659 Interest and bank charges 280 162 Interest on term loan 335 168 Foreign exchange loss (gain) 1,048 (181) Stock-based compensation (Note 7) 1,397 960 Depletion, depreciation and accretion 3,572 1,901 ----------------------- 16,774 9,458 ----------------------- Earnings (loss) before income taxes 5,146 (9) Future income tax expense (Note 6) (4,840) (1,041) ----------------------- Net income (loss) for the period $ 306 $ (1,050) ----------------------- ----------------------- Basic and diluted earnings (loss) per share $ 0.001 $ (0.002) ----------------------- ----------------------- See accompanying notes to consolidated financial statements. BANKERS PETROLEUM LTD. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31 (Unaudited, Expressed in Thousands of United States dollars) ------------------------------------------------------------------------- Cash provided by (used in) 2008 2007 ----------------------- Operating activities Net income (loss) for the period $ 306 $ (1,050) Items not involving cash: Depletion, depreciation and accretion 3,572 1,901 Future income tax expense 4,840 1,041 Stock-based compensation 1,397 960 ----------------------- 10,115 2,852 Change in non-cash working capital (Note 11) (316) (3,081) ----------------------- 9,799 (229) ----------------------- Investing activities Additions to property, plant and equipment (19,567) (14,014) Change in non-cash working capital (Note 11) (132) (1,554) ----------------------- (19,699) (15,568) ----------------------- Financing activities Issue of common shares and warrants, net of share issue costs (Note 7) 58,549 20,119 Operating loans 975 (1,053) Term loan (1,562) 10,268 ----------------------- 57,962 29,334 ----------------------- Increase in cash and cash equivalents 48,062 13,537 Cash and cash equivalents, beginning of period 3,560 6,329 ----------------------- Cash and cash equivalents, end of period (Note 11) $ 51,622 $ 19,866 ----------------------- ----------------------- See accompanying notes to consolidated financial statements. Notes to the Consolidated Financial Statements (Unaudited, Expressed in Thousands of U.S. dollars) ------------------------------------------------------------------------- 1. BASIS OF PRESENTATION The interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (GAAP). Certain information and note disclosures normally included in financial statements prepared in accordance with Canadian GAAP have been condensed or omitted. These interim consolidated financial statements should be read together with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2007. In the opinion of the Company, its unaudited interim consolidated financial statements contain all adjustments necessary in order to present a fair statement of the results of the interim periods presented. The preparation of interim financial statements is based on accounting principles and practices consistent with those used in the preparation of annual financial statements, except for the following changes in accounting policies: On January 1, 2008, the Company adopted a new Canadian accounting standard on inventories which establishes standards for the measurement and disclosure of inventories including guidance on the determination of cost. The adoption of this standard did not have any impact on the Company's interim consolidated financial statements. Effective January 1, 2008, the Company adopted the new Canadian accounting standards relating to financial instruments and capital disclosures. Financial risk management Overview The Company has exposure to the credit, liquidity and market risk. This note presents information about the Company's exposure to each risk, the Company's objectives, policies and processes for measuring and managing risk, and management of capital. - The Board of Directors of the Company has overall responsibility for the establishment and oversight of the Company's risk management framework. The Board has implemented and monitors compliance with risk management policies. The Company's risk management policies are established to identify and analyze the risks faced, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company's activities. Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from petroleum and n

Source: PRNewswire-FirstCall

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