Petrobank Reports Q2 2011 Funds Flow from Operations of $148.4 Million

Petrobank Energy and Resources Ltd. (TSX:PBG) is pleased to announce 2011 second
quarter financial and operating results highlighted by funds flow from
operations of $1.38 per diluted share. 


Petrobank's results include the financial and operating results of PetroBakken
Energy Ltd. (TSX:PBN), 59% owned by Petrobank at June 30, 2011. PetroBakken
announced second quarter financial and operating results on August 8, 2011. 


All financial figures are unaudited and in Canadian dollars ($) unless noted
otherwise. All financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") including comparative
figures pertaining to Petrobank's 2010 results. A reconciliation of comparative
figures is provided in the notes to the Unaudited Interim Consolidated Financial
Statements for the period ended June 30, 2011. 


This news release includes forward-looking statements and information within the
meaning of applicable securities laws. Readers are advised to review
"Forward-Looking Information and Statements" at the conclusion of this news
release. Readers are also referred to "Resources and Contingent Resources" and
"Non-GAAP Measures" at the end of this news release for information regarding
the presentation of the financial and contingent resources information in this
news release. A full copy of our 2011 Second Quarter Financial Statements and
MD&A have been filed on our website at www.petrobank.com and will be available
under our profile on SEDAR at www.sedar.com.


HIGHLIGHTS 

In this report, quarterly comparisons are second quarter 2011 compared to second
quarter 2010 unless otherwise noted. The results of Petrominerales Ltd.
("Petrominerales") (TSX:PMG), previously majority owned by Petrobank, have been
separately disclosed as discontinued operations up until December 31, 2010, the
date this business unit was spun off to Petrobank shareholders.




Q2 2011 Financial Highlights

--  Net income from continuing operations, adjusted for gains on derivative
    financial liabilities, for the three months ended June 30, 2011 of $25.5
    million increased $71.3 million compared to the same period in the prior
    year. The increase is primarily due to higher revenue as a result of
    higher pricing, a non-cash gain arising from the disposition of
    PetroBakken non-core assets, and certain costs related to convertible
    debentures in the second quarter of 2010 which did not exist in the
    current period. 
--  PetroBakken's production averaged 35,300 barrels of oil equivalent
    ("boe") per day in the second quarter of 2011, representing a 15%
    decrease compared to the first quarter of 2011, and a 16% decrease from
    the prior year period. Light oil production increases, primarily from
    PetroBakken's Cardium play, were more than offset by shut-in production
    of approximately 6,200 boe per day for the quarter due to an extended
    spring break-up that prevented access to leases. 
--  PetroBakken's operating netback (excluding hedging activity) of $56.63
    per boe in the second quarter increased 8% compared to the first quarter
    of 2011, and 23% over the prior year period, primarily as a result of
    higher pricing that more than offset increased royalty and production
    expenses. 
--  Capital expenditures were $168.7 million in the second quarter, up 26%
    from a year ago. The increases are attributable to our Heavy Oil
    Business Unit's ten well-pair expansion project at Kerrobert, which has
    experienced cumulative cost overruns of approximately $30 million, long
    lead equipment purchases for our May River project and increased
    activity at our Dawson project.

Heavy Oil Business Unit 2011 Operational Highlights

--  May River best estimate contingent resources increased 11% to 624.1
    million barrels at June 1, 2011 (see "Resources and Contingent
    Resources") as a result of 2011 oil sands evaluation well drilling.  
--  Eight of the Kerrobert expansion well-pairs have completed the Pre-
    Ignition Heating Cycle ("PIHC") and are now on air injection. 
--  Our Dawson demonstration project is proceeding and we anticipate that
    drilling will start in the fourth quarter of 2011. 
--  The Energy Resources Conservation Board ("ERCB") has determined that two
    parties who filed Statements of Concerns are entitled to participate in
    the ERCB's consideration of the May River application. We anticipate
    that the ERCB will schedule a hearing for the application shortly, with
    the hearing likely to take place in late 2011 or the first quarter of
    2012.



OPERATIONAL UPDATE

Kerrobert Project 

Our Kerrobert project operations are underway with eight of the ten new
well-pairs on air injection and in the initial production phase. The first
expansion well-pair was placed on air injection and production in the middle of
May, with an additional four well-pairs placed on air injection by the end of
the second quarter. The PIHC for the remaining five well-pairs began at the end
of the second quarter and currently three of these well-pairs are on air
injection, with the remainder expected to be on air injection by September. 


Our operating procedures continue to evolve. We have been able to reduce the
duration of the PIHC from a planned eight weeks to approximately four weeks.
Following the PIHC, the vertical wells commence air injection at low rates and
the horizontal production wells are brought on production with a progressive
cavity pump. The initial clean-up fluids consist of water, including condensed
water from the PIHC steam injection, and some native oil. As these fluids are
produced, the combustion gas volume increases, the temperature in the horizontal
well begins to rise and the well begins to produce an oil and water emulsion at
low rates. Well bore temperatures will increase and combustion gas, along with
some native oil and occasional upgraded THAI(R) oil, will be produced. As we
measure the combustion gas communication and rising well bore temperatures, we
will increase the air injection in stages to facilitate the combustion zone
development. 


The second quarter was a period of transition for the Kerrobert project. We
completed the drilling of the expansion wells, began operations on the new wells
and started dismantling the temporary facilities in anticipation of the new
wells being tied into the new central processing facility ("CPF"). Very wet
weather delayed our access to the CPF and well-site until mid-July. We
experienced significant down time on the original Kerrobert wells due to pump
changes, decommissioning of the original Kerrobert facilities and delayed tie-in
to the new CPF. These activities resulted in second quarter Kerrobert production
of approximately 40 bopd.


Dawson Project 

We received final ERCB and Alberta Environment ("AENV") approval for our Dawson
demonstration project during the fourth quarter of 2010. This project will
consist of two THAI(R) well-pairs plus associated surface facilities. We expect
that one well-pair will be drilled during 2011 and the second will be drilled in
2012. 


In the second quarter of 2011, we drilled two stratigraphic evaluation wells. We
are currently decommissioning the surface facilities from our first two wells at
the Kerrobert project and will begin moving the facilities to our Dawson project
in the third quarter of 2011. Civil work has begun and it is expected that
drilling will commence in mid-September. Drilling activities for the remainder
of 2011 will include completing an observation well as an air injector, as well
as drilling a water disposal well, an observation well and one horizontal
production well. 


PIHC is planned to start in the fourth quarter of 2011, and air injection is
expected to commence before year-end. 


The environmental assessment and regulatory application associated with the
Dawson 10,000 bopd expansion project are underway with the application to the
ERCB and AENV scheduled to be submitted during the fourth quarter of 2011. We
expect that the regulatory review cycle could take up to 18 months.


Conklin Demonstration Project 

With our Kerrobert and Dawson projects both moving forward, we are now
evaluating options for the Conklin demonstration project to become predominantly
a field scale testing site for future technology enhancements to the THAI(R)
process. We have received approval from the ERCB to conduct a wet combustion
process on P1B and have submitted an application to the ERCB to drill another
air injector further along the P1B well bore to evaluate our new multi-THAI(R)
configuration.


May River Project 

The May River application was previously submitted to the Board of the ERCB (the
"Board") for review. The Board recently determined that two of the parties who
filed Statements of Concern are entitled to participate in the Board's
consideration of the May River application. We anticipate that the Board will
schedule a hearing in respect of the May River application shortly, with the
hearing likely to take place in late 2011 or the first quarter of 2012. 


Now that we have received clarity from the Board with respect to the Statements
of Concern we plan to continue our consultation with these parties to clarify
and resolve their issues prior to the hearing. 


As previously disclosed, we drilled 11 oil sands evaluation wells to further
evaluate resource potential and further delineate the resource for future
expansion phases of the May River property. Our external reserves evaluator,
McDaniel & Associates Consultants Ltd., updated our 2010 reserve report to
reflect these drilling results. May River best estimate contingent resources
increased 11% to 624.1 million barrels at June 1, 2011 (see "Resources and
Contingent Resources"). May River proved plus probable reserves remains
relatively unchanged at 90.6 million barrels. These reserves are not included in
our contingent resource estimates. Our June 28, 2011 press release provides more
information about our updated May River reserve and resource estimates.


Land Acquisition 

On May 27, 2011, Petrobank acquired 566 acres of petroleum and natural gas
rights on the Kerrobert trend in Saskatchewan situated adjacent to the 4,092
acres of land that we purchased on March 31, 2011. This is the third acquisition
of land that we have made in six months on the same trend as Kerrobert and we
currently control 13,533 gross and 11,517 net acres of land on the trend. To
define the resource potential of our new lands, we purchased three third party
3-D seismic surveys and plan to drill two stratigraphic delineation wells.


Archon Technologies Ltd. ("Archon") 

Archon, our wholly-owned technology subsidiary, continues to expand research and
development efforts and review and assess several other enhanced oil recovery
techniques. Archon currently has eight patents granted, or pending, and is
preparing applications for eight new patents. 


Now that we have signed a collaboration agreement with Pemex Exploracion y
Produccion, we are actively engaged with them to evaluate potential reservoirs
for the use of THAI(R). 


During the second quarter, Archon entered into a new Technology License and
Royalty Agreement ("License Agreement") with Petrominerales. The License
Agreement gives Petrominerales the right to use Archon's patented THAI(R)
in-situ combustion technology and related technologies (the "Technologies") for
the development of heavy oil resources in Colombia. In addition, Petrominerales
has an exclusive right to sublicense the Technologies to third parties in
Colombia for up to 10 years, provided certain contractual commitments are met,
including commencing a pilot project within three years. 


In exchange for the right to use and sublicense the Technologies in Colombia,
Petrominerales has agreed to pay Archon a specified royalty based upon
production, and has granted Archon the right to acquire a working interest in
third party THAI(R) heavy oil joint ventures with Petrominerales. Archon, or an
Archon affiliate, can elect to participate in a third party heavy oil joint
venture for up to 25% of Petrominerales' share in the joint venture. For heavy
oil projects that are 100% Petrominerales working interest, Archon does not have
a right to acquire a working interest and Petrominerales is solely obligated to
pay a specified royalty rate to Archon.


PETROBANK'S LIQUIDITY AND CAPITAL RESOURCES 

Petrobank and PetroBakken manage their capital structure independently, generate
their own cash flows and have the ability to fund their operations through the
issuance of secured and unsecured debt as well as equity financing. Petrobank's
capital resources are focused on funding corporate and Heavy Oil Business Unit
expenditures. At June 30, 2011, on a standalone basis independent of
PetroBakken, Petrobank had bank debt of $45.5 million, a working capital deficit
of $21.4 million and available credit capacity of $154.5 million. 


Based on Petrobank's current ownership and PetroBakken's intentions of paying an
annual dividend of $0.96 per PetroBakken share, Petrobank expects to receive
$105 million of dividends annually from PetroBakken, paid monthly. Petrobank can
also raise funds by selling a portion of its ownership in PetroBakken. 


Petrobank expects to fund our HBU capital expenditure program with available
credit, cash from operations and dividends received from PetroBakken.


SUMMARY OF FINANCIAL AND OPERATING RESULTS 

The following table provides a summary of Petrobank's financial and operating
results for the three and six month periods ended June 30, 2011 and 2010.
Unaudited condensed interim consolidated financial statements with Management's
Discussion and Analysis ("MD&A") will be available on the Company's website at
www.petrobank.com and on the SEDAR website at www.sedar.com.




Summary of Results (1)

                  Three months ended June 30,      Six months ended June 30,
                                           %                              % 
                     2011      2010   Change        2011      2010   Change 
----------------------------------------------------------------------------
Financial                                                                   
($000s, except                                                              
 where noted)                                                               
Oil and                                                                     
 natural gas                                                                
 sales from                                                                 
 continuing                                                                 
 operations       274,952   245,954       12     556,249   521,660        7 
Funds flow                                                                  
 from                                                                       
 continuing                                                                 
 operations                                                                 
 (2)              148,440   153,715       (3)    316,824   342,086       (7)
 Per share -                                                                
  basic ($)          1.40      1.46       (4)       2.98      3.33      (11)
  - diluted                                                                 
   ($)               1.38      1.43       (3)       2.93      3.20       (8)
Adjusted net                                                                
 income (loss)                                                              
 from                                                                       
 continuing                                                                 
 operations(2)(3)  25,513   (45,815)       -      17,828   (61,116)       - 
 Per share -                                                                
  basic ($)          0.24     (0.44)       -        0.17     (0.59)       - 
  - diluted                                                                 
   ($)               0.23     (0.44)       -        0.16     (0.59)       - 
Adjusted net                                                                
 income                                                                     
 attributable                                                               
 to Petrobank                                                               
 shareholders                                                               
 (2) (3) (4)       25,513    19,576       30      17,828    69,011      (74)
 Per share -                                                                
  basic ($)          0.24      0.19       26        0.17      0.67      (75)
  - diluted                                                                 
   ($)               0.23      0.15       53        0.16      0.58      (72)
Capital                                                                     
 expenditures                                                               
 (5)                                                                        
 PetroBakken      113,010   122,688       (8)    420,491   307,804       37 
 Heavy Oil                                                                  
  Business                                                                  
  Unit ("HBU")     55,641    10,652      422     109,896    34,586      218 
----------------------------------------------------------------------------
Total capital                                                               
 expenditures                                                               
 from                                                                       
 continuing                                                                 
 operations       168,651   133,340       26     530,387   342,390       55 
Total assets    6,571,119 7,003,720       (6)  6,571,119 7,003,720       (6)
Common shares                                                               
 outstanding,                                                               
 end of period                                                              
 (000s)                                                                     
 Basic            106,303   105,993        -     106,303   105,993        - 
 Diluted (6)      110,155   110,167        -     110,155   110,167        - 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operations                                                                  
PetroBakken                                                                 
 operating                                                                  
 netback                                                                    
 ($/boe) (2)                                                                
 (7)                                                                        
 Crude oil and                                                              
  NGL sales                                                                 
  price                                                                     
  ($/bbl) (8)       96.37     70.98       36       88.55     73.61       20 
 Natural gas                                                                
  sales price                                                               
  ($/Mcf) (8)        4.19      4.11        2        4.16      4.57       (9)
 Oil                                                                        
  equivalent                                                                
  sales price                                                               
  (8)               85.02     62.86       35       79.34     66.65       19 
 Royalties          13.15      9.17       43       12.45      9.43       32 
 Production                                                                 
  expenses          15.24      7.59      101       12.52      7.69       63 
----------------------------------------------------------------------------
 Operating                                                                  
  netback (2)                                                               
  (7) (9)           56.63     46.10       23       54.37     49.53       10 
Average daily                                                               
 production                                                                 
 (7)                                                                        
 PetroBakken -                                                              
  oil and NGL                                                               
  (bbls)           29,676    34,852      (15)     32,890    36,245       (9)
 PetroBakken -                                                              
  natural gas                                                               
  (Mcf)            33,746    44,469      (24)     33,143    38,598      (14)
----------------------------------------------------------------------------
 Total                                                                      
  conventional                                                              
  (boe)                                                                     
  (7)(10)          35,300    42,263      (16)     38,414    42,678      (10)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1)  Petrominerales Ltd. ("Petrominerales") has been presented as
     discontinued operations in the comparative period as this business unit
     was spun off to Petrobank shareholders at December 31, 2010.
(2)  Non-GAAP measure. See "Non-GAAP Measures" section within Management's
     Discussion and Analysis ("MD&A").
(3)  Net income has been adjusted for the IFRS accounting effects of
     changes in the gain on derivative financial liability. For the three
     and six months ended June 30, 2011, adjusted net income includes a
     $32.8 million and $61.0 million reduction (2010 - $60.8 million and
     $76.4 million) for this gain. Management considers adjusted net income
     a better measure of the Company's economic performance period over
     period.
(4)  Net income attributable to Petrobank shareholders for the three and
     six months ended June 30, 2010 includes the operating results of
     Petrominerales.
(5)  Includes expenditures on property, plant and equipment, exploration and
     evaluation and other intangible assets.
(6)  Consists of common shares, stock options, directors deferred common
     shares, deferred common shares, and incentive shares as at the period
     end date.
(7)  Six Mcf of natural gas is equivalent to one barrel of oil equivalent
     ("boe"). 
(8)  Net of transportation expenses. 
(9)  Excludes hedging activities. 
(10) HBU bitumen and heavy oil volumes are excluded from average daily
     production as Conklin and Kerrobert operations are considered to be in
     the exploration and evaluation phase and accordingly are capitalized.



INVESTOR CONFERENCE CALL 

Management of Petrobank will be holding a conference call for investors,
financial analysts, media and any interested persons on Tuesday, August 16, 2011
at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) to discuss Petrobank's
second quarter financial and operating results. The investor conference call
details are as follows: 


Live call dial-in number(s): 416-695-6616 / 800-355-4959 

Replay dial-in numbers: 905-694-9451 / 800-408-3053 

Replay pass code: 6674103 

The live audio webcast link is:
http://events.digitalmedia.telus.com/petrobank/081611/index.php and is also
available on our website at: http://www.petrobank.com/investors/.


Petrobank Energy and Resources Ltd. is a Calgary-based oil and natural gas
exploration and production company with operations in western Canada. The
Company operates high-impact projects through two business units and a
technology subsidiary. Petrobank's 59% owned TSX-listed subsidiary, PetroBakken
Energy Ltd. (TSX:PBN), is an oil and gas exploration and production company
combining light oil Bakken and Cardium resource plays with conventional light
oil assets, delivering industry leading operating netbacks, strong cash flows
and production growth. PetroBakken is applying leading edge technology to a
multi-year inventory of Bakken and Cardium light oil development locations,
along with a significant inventory of opportunities in the Horn River and
Montney gas resource plays in northeast BC. PetroBakken's strategy is to deliver
accretive production and reserves growth, along with an attractive dividend
yield. Whitesands Insitu Partnership, a partnership between Petrobank and its
wholly-owned subsidiary Whitesands Insitu Inc., owns 104 net sections of oil
sands leases in Alberta, 36 sections of oil sands licenses in Saskatchewan and
15 sections of petroleum and natural gas rights along the Kerrobert channel
trend near Kerrobert, Saskatchewan, and operates the Kerrobert and Conklin
projects which are field-demonstrating Petrobank's patented THAI(R) heavy oil
recovery process. THAI(R) is an evolutionary in-situ combustion technology for
the recovery of bitumen and heavy oil that integrates existing proven
technologies and provides the opportunity to create a step change in the
development of heavy oil resources globally. THAI(R) and CAPRI(R) are registered
trademarks of Archon Technologies Ltd., a wholly-owned subsidiary of Petrobank
Energy and Resources Ltd., for specialized methods for recovery of oil from
subterranean formations through in-situ combustion techniques and methodologies
with or without upgrading catalysts. Used under license by Petrobank Energy and
Resources Ltd.


Non-GAAP Measures: This press release contains financial terms that are not
considered measures under International Financial Report Standards, which are
considered to be generally accepted accounting principles ("GAAP"), such as
funds flow from continuing operations, funds flow per share, adjusted net
income, adjusted net income per share and operating netback. These measures are
commonly utilized in the oil and gas industry and are considered informative for
management and shareholders. Specifically, funds flow from continuing operations
and funds flow per share reflect cash generated from operating activities before
changes in non-cash working capital. Adjusted net income is determined by adding
back any losses or deducting any gains on the derivative financial liabilities.
Management considers funds flow from continuing operations, funds flow per
share, adjusted net income and adjusted net income per share important as they
help evaluate performance and demonstrate the Company's ability to generate
sufficient cash to fund future growth opportunities and repay debt.
Profitability relative to commodity prices per unit of production is
demonstrated by an operating netback. Funds flow from continuing operations,
funds flow per share, adjusted net income, adjusted net income per share and
operating netbacks may not be comparable to those reported by other companies
nor should they be viewed as an alternative to net income or other measures of
financial performance calculated in accordance with GAAP.


The following table shows the reconciliation of funds flow from continuing
operations to cash flow from operating activities from continuing operations for
the periods noted (in $000s): 




                                   Three months ended      Six months ended 
                                              June 30,              June 30,
----------------------------------------------------------------------------
                                       2011      2010       2011       2010 
----------------------------------------------------------------------------
Funds flow from continuing                                                  
 operations: Non-GAAP               148,440   153,715    316,824    342,086 
  Changes in non-cash working                                               
   capital                           36,533    (5,998)    (1,190)   (19,613)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net cash provided by operating                                              
 activities from continuing
 operations: GAAP                   184,973   147,717    315,634    322,473 
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Resources and Contingent Resources:  In this press release, Petrobank has
disclosed estimated volumes of "contingent resources" associated with our May
River property. "Resources" are oil and gas volumes that are estimated to have
originally existed in the earth's crust as naturally occurring accumulations but
are not capable of being classified as "reserves". "Contingent resources" are
those quantities of petroleum estimated, as of a given date, to be potentially
recoverable from known accumulations using established technology or technology
under development, but which are not currently considered to be commercially
recoverable due to one or more contingencies. In respect of the May River
property, contingencies include current uncertainties around the specific scope
and timing of the development of the project; lack of regulatory approvals;
uncertainty regarding marketing plans for production from the subject area; and
need for improved estimation of project costs. Contingent resources do not
constitute, and should not be confused with, reserves. There is no certainty
that it will be commercially viable to produce any portion of the contingent
resources on the May River property.


Forward-Looking Statements: Certain information provided in this press release
constitutes forward-looking statements. Specifically, this press release
contains forward-looking statements relating to financial results, results from
operations, the timing of certain projects, timing for obtaining regulatory
approvals, future resource potential, potential technology enhancements and
anticipated sources of available financing. Forward-looking statements are
necessarily based on a number of assumptions and judgments, including but not
limited to, assumptions relating to the outlook for commodity and capital
markets, the success of future resource evaluation and development activities,
he successful application of our technology, the performance of producing wells
and reservoirs, well development and operating performance, general economic
conditions, weather and the regulatory and legal environment. The reader is
cautioned that assumptions used in the preparation of such information, although
considered reasonable at the time of preparation, may prove to be incorrect.
Actual results achieved during the forecast period will vary from the
information provided herein as a result of numerous known and unknown risks and
uncertainties and other factors. You can find a discussion of those risks and
uncertainties in our Canadian securities filings. Such factors include, but are
not limited to: general economic, market and business conditions; weather
conditions and access to our properties; fluctuations in oil prices; the results
of exploration and development drilling, recompletions and related activities;
timing and rig availability; outcome of exploration contract negotiations;
fluctuation in foreign currency exchange rates; the uncertainty of reserve
estimates; changes in environmental and other regulations; uncertainties
associated with the regulatory review and approval process in respect to our
projects; risks associated with the application of early stage technology; risks
associated with oil and gas operations; and other factors, many of which are
beyond the control of the Company. There is no representation by Petrobank that
actual results achieved during the forecast period will be the same in whole or
in part as those forecasted. Except as may be required by applicable securities
laws, Petrobank assumes no obligation to publicly update or revise any
forward-looking statements made herein or otherwise, whether as a result of new
information, future events or otherwise. 


Natural gas volumes have been converted to barrels of oil equivalent ("boe").
Six thousand cubic feet ("Mcf") of natural gas is equal to one barrel of oil
equivalent based on an energy equivalency conversion method primarily
attributable at the burner tip and does not represent a value equivalency at the
wellhead. Boes may be misleading, especially if used in isolation.