During the retrenchment in commodity prices that persisted during the first quarter of 2009, Bankers Petroleum carried on with its initiative of capital reduction by suspending its drilling program and reducing the number of operating service rigs from seven to four. The active pumping well count was also decreased from 213 at the end of 2008 to 184 on March 31, 2009 by closing low productivity wells. Therefore, average production was 5,864 bopd during the quarter as compared with 6,561 during the previous quarter and 5,218 bopd for the same period in 2008. Current production surpasses 6,200 bopd.

The decrease in capital expenditures and the cost cutting measures implemented during the last quarter of 2008 and the first quarter of 2009 succeeded in providing Bankers Petroleum with positive netbacks and the ability to tolerate during a difficult economic period with minimal balance sheet risk.

With the recent recovery of commodity prices (resulting in higher netbacks), cash, equity proceeds and credit facilities available to the company, the 2009 capital expenditure program has been set at $55 million and will comprise of 12 horizontal and vertical wells, reactivation and work overs of 50 wells and other facilities construction projects. The exit pumping rate for 2009 is projected to be about 8,000 bopd. The company will continue to monitor oil prices and is prepared to make adjustments to its capital program if deemed necessary.

For the three months ended March 31, 2009 the company continued its initiative of capital reduction started during the fourth quarter of 2008. Total well counts remained consistent at the end of December 2008, however active well counts were decreased from 213 at the end of 2008 to 184 on March 31, 2009. Therefore, average production was decreased to 5,864 bopd during the quarter from 6,561 during the preceding quarter. Compared with the same period in 2008 average production increased 12% from 5,218 bopd as a result of the successful 2008 drilling, work over and reactivation program,

The retrenchment in commodity prices that commenced in the third quarter of 2008, persisted during the first quarter of 2009. Therefore, the company received an average of $24.73/bbl as compared to $29.63/bbl for the fourth quarter of 2008 and $51.96 for the same period one year ago. The average Brent price for the first quarter in 2009 was $44.40, compared with $54.91 during the previous quarter and $96.90 for the same period in 2008. For the first quarter of 2009, the company’s average sales price represented 56% of the Brent oil price, up 54%, for the other two referenced quarters.

Oil revenue for the first quarter of 2009 was $13.1 million, $17.9 during the preceding quarter and $24.7 million for the same period in 2008. In spite of the lower commodity prices, the company’s netback (revenue less royalties, operating costs and sales/transportation expenses) rest of positive at $4.98/bbl compared to $5.77/bbl during the preceding quarter and $27.39/bbl for the same period in 2008.

Royalties

Royalties in Albania are calculated pursuant to the petroleum agreement with Albpetrol and consist of Albpetrol’s pre-existing production and a gross overriding royalty on new production. For the first quarter of 2009 royalties represented $6.61/bbl (27% of oil revenue), a slight reduction from $6.69/bbl (23%) for the fourth quarter of 2008 and $9.05/bbl (17%) during the corresponding period in 2008. The overall decreasing in royalty is reflective of lower oil prices. As a result of the decreased capital activity level for the first quarter of 2009, abandoned production from lower productivity wells and period end oil inventory fluctuations, a higher proportionate amount of royalties were expensed during the quarter.

Operating Expenses

Operating expenses for the first quarter of 209 were decreased by 23% to $10.44/bbl from $13.54/bbl for the previous quarter and $12.02/bbl for the same period in 2008, mainly due to lower commodity prices for fuel and diluent costs along with a reduction in well servicing activity to focus on higher impact wells. Likewise, the sales and transportation costs for the quarter were 26% lower, to $2.70/bbl from $3.63/bbl for the fourth quarter in 2008 and $3.50/bbl for the same period one year ago.

General and Administrative Expenses

General and administrative expenses (G&A) for the quarter were $1.2 million, relatively consistent with $1.1 million for the previous quarter. In comparison with the $2.1 million recorded for the first quarter of 2008, G&A expenses were 43% lower primarily as a result of personnel and restructuring costs initiatives undertaken in 2008 and favorable impact off the softening Canadian dollar against the US dollar.

During first quarter of 2009, the company capitalized $0.4 million of G&A expenses compared with $0.4 million for the preceding quarter and $0.5 million for the same period in 2008. These expenses were directly related to acquisition, exploration and development activities in Albania.

Non-cash stock-based compensation expense pertaining to options vested and/or granted to officers, directors, employees and service providers were $0.7 million compared with $1.8 million for the previous quarter and $1.5 million for the same period in 2008. Of this amount $0.6 million was charged to earnings during this quarter, compared with $1.4 million and $1.2 million that were charged to earnings for the preceding quarter and the quarter ended March 31, 2008, respectively. The balance was capitalized.

Depletion, Depreciation and Accretion

Depletion, depreciation and accretion expense for the quarter ended March 31, 2009 were $4.0 million ($6.80/bbl) compared with $4.3 million ($6.67/bbl) for the preceding quarter and $2.9 ($5.65/bbl) million for the same period in 2008. The reduction in overall depletion, depreciation and accretion expenses from the fourth quarter of 2008 is reflective of the lower average production level. The rise from the first quarter of 2008 was mainly because of the increased depletable base and higher production level.

Income Taxes

The net loss recorded by the company for the first quarter of 2009, resulted in a future income tax recovery of $1.1 million for the quarter as compared with future tax expense of $80,000 for the previous quarter and $4.8 million for the same period in 2008. The decrease in future income taxes was mainly due to the net loss incurred in the quarter in Albania.

Future income tax liabilities result from the temporary differences between the carrying value and tax values of Albanian assets and liabilities after giving effect to all cost recovery pool costs. Bankers Petroleum is currently not paying cash taxes in any jurisdiction.