Petrobank Reports Q2 2012 Financial Results and Operational Update

Petrobank Energy and Resources Ltd. (TSX:PBG) announces our 2012 second quarter
financial and operating results highlighted by funds flow from operations of
$1.13 per diluted share and increasing production from Kerrobert. 


Petrobank's results include the financial and operating results of PetroBakken
Energy Ltd. (TSX:PBN), 58% owned by Petrobank at June 30, 2012. PetroBakken
announced second quarter financial and operating results on August 8, 2012. 


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 "Non-GAAP Measures" at the end of this
news release for information regarding the presentation of the financial
information in this news release. A full copy of our 2012 Second Quarter
Financial Statements and MD&A have been filed on our website at
www.petrobank.com and under our profile on SEDAR at www.sedar.com. 


In this report, quarterly comparisons are second quarter 2012 compared to second
quarter 2011 unless otherwise noted. All financial figures are unaudited and in
Canadian dollars ($) unless otherwise noted.


HIGHLIGHTS

Q2 2012 Financial and Operating Highlights



--  Funds flow from operations decreased 20 percent from the second quarter
    of 2011 to $118.9 million, or $1.13 per diluted share, primarily as a
    result of lower commodity prices and increased differentials to WTI
    leading to lower gross operating netbacks at PetroBakken, partially
    offset by higher production.  
--  PetroBakken's second quarter production, after dispositions, averaged
    38,715 barrels of oil equivalent per day ("boepd") (83% light oil and
    liquids weighted), a 10% increase over the second quarter of 2011. 
--  Capital expenditures before dispositions totalled $114.3 million in the
    second quarter with PetroBakken drilling 9 net wells. 
--  Production from Petrobank's Kerrobert project averaged 236 barrels of
    upgraded THAI(R) oil per day ("bopd") in Q2 2012, an increase from 193
    bopd in Q1 2012. Production in July 2012 averaged 280 bopd and field
    estimates for August production to date averaged approximately 400 bopd.
--  In mid-July, we completed our Normal Course Issuer Bid ("NCIB") and have
    repurchased and cancelled our approved limit of 7,273,401 Petrobank
    shares at a cost of approximately $88 million. 
--  Through our Automatic Share Repurchase and PetroBakken Share Sale Plan,
    we sold 5.5 million PetroBakken shares for proceeds of $67 million to
    fund a portion of the Petrobank share repurchases. The sale of one
    PetroBakken share for each Petrobank share repurchased under this plan
    resulted in net cash proceeds to Petrobank of $4.6 million. 
--  We increased the number of PetroBakken shares owned per Petrobank share
    outstanding to approximately 1.08 from 1.03 at December 31, 2011 through
    our participation in PetroBakken's dividend reinvestment plan, the
    repurchase of our shares under our NCIB and the sale of PetroBakken
    shares. 



OPERATIONAL UPDATE

Kerrobert THAI(R) Project 

THAI(R) production continues to increase. Full field production in the second
quarter of 2012 averaged 236 bopd compared to 193 bopd in the first quarter of
2012. These production volumes represent actual sale volumes for each period
reported. Production in July 2012 averaged 280 bopd and field estimates for
August production to date averaged approximately 400 bopd. Our operating
philosophy remains unchanged with a focus on increasing the air injection into
the wells across the field and gradually increasing production and reducing
operating costs. We are currently injecting air at approximately eight percent
of full field design capacity and intend to continue to increase air injection
to build out the THAI(R) combustion front.


Dawson THAI(R) Project 

We received regulatory approval in early August to start the cold production
phase on the two-well demonstration project. We expect to cold produce the wells
for a period of time in order to condition the reservoir prior to initiating
THAI(R) operations. With this approval we expect to commence cold production in
Q3 2012.


Saskatchewan Conventional Cold Heavy Oil Production 

As previously reported, we identified multiple opportunities to re-enter certain
wells on our Saskatchewan lands for conventional cold heavy oil production. We
have recently re-completed and placed on production five wells, which are
expected to stabilize and produce oil in the fourth quarter. 


LIQUIDITY AND CAPITAL RESOURCES 

In mid-July, we completed our NCIB and have repurchased and cancelled our
approved limit of 7,273,401 Petrobank shares at a cost of approximately $88
million. Through our Automatic Share Repurchase and PetroBakken Share Sale Plan,
we sold 5.5 million PetroBakken shares for proceeds of $67 million to fund a
portion of the Petrobank share repurchases. The sale of one PetroBakken share
for each Petrobank share repurchased under this plan resulted in net cash
proceeds to Petrobank of $4.6 million. We expect to renew our NCIB and
PetroBakken share sale plan as soon as permitted under securities regulations,
which is anticipated to be in mid-September. 


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, 2012, on a standalone basis independent of
PetroBakken, Petrobank's HBU and Corporate operating segment had cash and cash
equivalents of $103.6 million and a net working capital surplus (including cash)
of $95.1 million. 


Based on Petrobank's current ownership and PetroBakken's current annual dividend
of $0.96 per PetroBakken share, Petrobank expects to receive approximately $103
million of dividends annually from PetroBakken, paid monthly. PetroBakken
instituted a DRIP in early 2012, which allows shareholders to reinvest monthly
cash dividends in new shares at a five percent discount to the then current
market price. Due to Petrobank's significant positive working capital balance,
we elected to participate at a 100% level in PetroBakken's DRIP starting with
the March dividend. We believe that receiving additional shares in PetroBakken
is an attractive investment at this time. Petrobank may change our participation
level in the future. 


Petrobank currently expects to fund our future working capital requirements and
HBU capital expenditure program with available cash and cash from operations.


SUMMARY OF FINANCIAL AND OPERATING RESULTS 

The following table provides a summary of Petrobank's financial and operating
results for the three and six months ending June 30, 2012 and 2011. 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



                             Three months ended            Six months ended 
                                       June 30,                    June 30, 
                                              %                           % 
                          2012      2011 Change       2012      2011 Change 
----------------------------------------------------------------------------
Financial                                                                   
($000s, except where                                                        
 noted)                                                                     
Oil and natural gas                                                         
 sales                 240,205   274,952    (13)   570,566   556,249      3 
Funds flow from                                                             
 operations (1)        118,890   148,440    (20)   300,180   316,824     (5)
 Per share - basic                                                          
  ($)                     1.14      1.40    (19)      2.85      2.98     (4)
 - diluted ($)            1.13      1.38    (18)      2.82      2.93     (4)
Adjusted net income                                                         
 attributable to                                                            
 Petrobank                                                                  
 shareholders (1)       31,999    30,659      4    114,306    30,638    273 
 Per share - basic                                                          
  ($)                     0.31      0.29      7       1.09      0.29    276 
 - diluted ($)            0.31      0.28     11       1.07      0.28    282 
Capital expenditures                                                        
 (1)                                                                        
 PetroBakken           109,756   113,010     (3)   316,177   420,491    (25)
 Heavy Oil Business                                                         
  Unit ("HBU")           4,525    55,641    (92)    22,403   109,896    (80)
----------------------------------------------------------------------------
Total capital                                                               
 expenditures          114,281   168,651    (32)   338,580   530,387    (36)
Total assets         6,290,114 6,571,119     (4) 6,290,114 6,571,119     (4)
Common shares                                                               
 outstanding, end of                                                        
 period (000s)                                                              
 Basic                 100,875   106,303     (5)   100,875   106,303     (5)
 Diluted (2)           104,867   110,155     (5)   104,867   110,155     (5)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operations                                                                  
PetroBakken                                                                 
 operating netback                                                          
 ($/boe) (1) (3)                                                            
 Oil, NGL and                                                               
  natural gas                                                               
  revenue (4)            67.89     85.02    (20)     73.07     79.34     (8)
 Royalties                9.44     13.15    (28)     10.80     12.45    (13)
 Production expenses     13.37     15.24    (12)     12.95     12.52      3 
----------------------------------------------------------------------------
 Operating netback                                                          
  (1) (3) (5)            45.08     56.63    (20)     49.32     54.37     (9)
Average daily                                                               
 production (3)                                                             
 PetroBakken - oil                                                          
  and NGL (bbls)        32,236    29,676      9     36,286    32,890     10 
 PetroBakken -                                                              
  natural gas (Mcf)     38,874    33,746     15     38,597    33,143     16 
----------------------------------------------------------------------------
 Total conventional                                                         
  (boe) (3)(6)          38,715    35,300     10     42,719    38,414     11 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Non-GAAP measure. See "Non-GAAP Measures" section.                      
(2) Consists of common shares, stock options, directors deferred common     
    shares, deferred common shares, and incentive shares as at the period   
    end date.                                                               
(3) Six Mcf of natural gas is equivalent to one barrel of oil equivalent    
    ("boe").                                                                
(4) Net of transportation expenses.                                         
(5) Excludes hedging activities.                                            
(6) HBU heavy oil volumes are excluded from average daily production as HBU 
    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 14, 2012
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): 416-340-2217 / 866-696-5910 

Live pass code: 5264057  

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

Replay pass code: 8414187  

The live audio webcast link is:
http://events.digitalmedia.telus.com/petrobank/081412/index.php and is also
available on our website at:
http://www.petrobank.com/investors/presentations-webcasts.


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 57% 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. Whitesands Insitu Partnership, a partnership between Petrobank and
its wholly-owned subsidiary Whitesands Insitu Inc., applies Petrobank's patented
THAI(R) heavy oil recovery process in the field. THAI(R) is an evolutionary
in-situ combustion technology for the recovery of bitumen and heavy oil. 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 IFRS, such as funds flow from operations, adjusted net
income, funds flow per share, adjusted net income per share, operating netback
and capital expenditures. These measures are commonly utilized in the oil and
gas industry and are considered informative for management and stakeholders.
Specifically, funds flow from operations reflects 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
liabilities, adding back any losses or deducting any gains on settlement of
convertible debentures, and adding back impairments. Management considers funds
flow from operations, funds flow per share, adjusted net income, and adjusted
net income per share important as it helps evaluate performance and demonstrate
the ability to generate sufficient cash to fund future growth opportunities.
Profitability relative to commodity prices per unit of production is
demonstrated by an operating netback. Operating netback reflects revenues less
royalties, transportation costs, and production expenses divided by production
for the period. Capital expenditures represent expenditures on property, plant
and equipment, exploration and evaluation expenditures and other expenditures.
Funds flow from operations, funds flow per share, adjusted net income, adjusted
net income per share, operating netbacks, and net capital expenditures may not
be comparable to those reported by other companies nor should they be viewed as
an alternative to cash flow from operations or other measures of financial
performance calculated in accordance with IFRS. Further information in respect
of these non-GAAP measures is set forth in our MD&A.


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 regulatory filings for
future normal course issuer bids 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, the 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.