BNK Provides Update on US Caney Shale Oil Operations and Polish Gapowo Shale Gas Project

BNK Petroleum Inc. is providing an update on its Tishomingo Field, Caney shale oil operations in Oklahoma as well as its Polish shale gas project.

Tishomingo Field, Oklahoma

The Company has fracture stimulated 30 percent of the Emery 17-1H well (98.7% interest). The Company has decided to flowback the well at this time and fracture stimulate the rest of the lateral at a later date. The well began flowback today.

The Company has just finished drilling the Nickel Hill 36-3H well (99.4% interest) and has cemented the casing in place. The Company employed revised drilling practices on the Nickel Hill 36-3H that were successful in avoiding some issues encountered in the Emery 17-1H well. The Emery 17-1H issues impacted drilling time and cost and necessitates remedial work prior to fracture stimulation of the rest of the lateral. The Company expects to utilize these new drilling practices in future Caney wells and believes they will enable significant future savings. After drilling the Nickel Hill 36-3H well the Company's net acreage in the Tishomingo Field has increased to about 16,200 acres.

The Company's existing Caney production is declining at a slower rate than forecast in the reserves report for the year ended December 31, 2013 and in management's opinion is performing very well. However, given the oil price drop over the last few months, the Company is taking a conservative approach to capital expenditures. Accordingly, the Company has released the drilling rig and will postpone the completion of the Nickel Hill 36-3H well and the fracture stimulation of the rest of the Emery 17-1H well. The Company is also evaluating cost saving measures.

Gapowo B-1H Well, Poland

The previously announced reservoir model analysis for the Gapowo B-1H shale gas well in Poland has been completed. The model was prepared for the Company by a third party consulting firm that is a world leader in this field.

The model simulated flow rates and recoveries that would be achieved if another well is drilled near the Gapowo B-1H well, in various sub intervals of the Ordovician shale, and is successfully fracture stimulated along a full-length lateral with the modeled fracture design. It also assumes that the learnings from the Gapowo B-1H well and the modeling are incorporated in the new well design. As announced on June 5 and July 30, 2014, the fracture stimulation of the Gapowo B-1H well encountered challenges resulting in placement of proppant that was sub-optimal and did not achieve designed volumes. Flow back rates, data from pressure gauges and data analysis indicate that only 8 of the 20 stages were contributing to the flow.

The forecasted flow rates and estimated recoveries predicted by the numerical model for a full stimulated length lateral, in addition to the overpressure that was confirmed by the data collected from the Gapowo B-1H well, are encouraging and the Company believes further wells are warranted.

The detailed study report prepared by the third party consulting firm will be included in the information made available to potential joint venture partners. The Company has begun the process of providing potential partners with access to project data. The Company believes that the encouraging modeling results, strong natural gas prices in Europe, and the Company's large Polish acreage position will be attractive to joint venture partners with the capacity to advance this project.


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