To investors of Bankers Petroleum Ltd. , the company has burned through all its chances.
The Calgary oil company, which has assets in Albania, has struggled in recent years to meet targets set by management and the market lost patience Monday after Bankers disappointed investors with poor production results. The stock closed at $2.29 a share, down $1.16 or nearly 34 per cent, on the Toronto Stock Exchange, despite respectable financial results.
Bankers' woes are tied to operational failures and broken production promises. Energy investors are no longer satisfied with large reserves. Instead, they insist on drilling success, a standard that threatens oil and gas companies across the board as investors search for safe places to put their money during global financial turmoil.
Bankers hoped to expand its production by 30 per cent in 2012, aiming to churn out about 15,500 barrels of oil a day. The company produced 13,279 barrels a day in the first quarter, down from 13,399 in the previous quarter. Bankers is now "likely" to slash its production goals, said Abby Badwi, the company's chief executive officer.
"It has been embarrassing," he said. "Talking is not going to be sufficient now because we've talked before and we have not delivered on what we've said we would do."
Bankers suffered from execution problems in the Patos-Marinza oil field. It has drilled about 150 horizontal wells since taking over the zone, and about 15 to 20 of those have had water problems, while liners in 15 more have failed, Mr. Badwi said. Some of the liners, for example, are unable to withstand the tectonic conditions, or are failing because of pumping and pressure problems. These troubles, he said, can be fixed. The company can repair the liners with higher-quality steel, for example. He estimates it will cost between $200,000 and $300,000 per well to solve the problems.
In addition to its new wells, Bankers has revived about 300 vertical wells in the oil field.
The company will provide more precise cost estimates and further explain what went wrong at an investor meeting June 4.
The high volume of shares that traded hands Monday indicates institutional investors were the ones bailing on the company. This came despite Bankers handing in first-quarter results that came with bright spots. Its so-called netbacks per barrel reached $44.24 (U.S.) a barrel, up from $37.22 in the same quarter last year. Netbacks is a metric used in the oil and gas industry to reflect the amount of money companies receive for their products after royalties, production expenses and transportation. The improved netbacks, however, were not enough to pacify frustrated investors.
"This is a [management]team that was already in the penalty box and they delivered a result that was below expectations again and for sure ... a few people are capitulating on this stock and saying 'there's really no reason to own it,' " said David Popowich, a Calgary-based analyst at Macquarie Group. "They are going to get out of it at any price."
Bankers' profit rang in at $7.76-million or 31 cents a share in the quarter, down 31 per cent from $11.21-million or 46 cents in the same frame in 2011. Its operating profit, however, totalled $53.47-million, up 34 per cent from $39.83-million.