Pan Orient Energy earns $2.87-million in Q3 2021

Mr. Jeff Chisholm reports

PAN ORIENT ENERGY CORP. -2021 THIRD QUARTER FINANCIAL & OPERATING RESULTS

Pan Orient Energy Corp. has released 2021 third quarter consolidated financial and operating results. Please note that all amounts are in Canadian dollars unless otherwise stated and bopd refers to barrels of oil per day.

The company is today filing its unaudited consolidated financial statements as at and for the nine months ended Sept. 30, 2021, and related management's discussion and analysis with Canadian securities regulatory authorities. Copies of these documents may be obtained on-line on SEDAR or the company's website.

Commenting today on Pan Orient's 2021 third quarter results, president and chief executive officer Jeff Chisholm stated: "The third quarter of 2021 saw the highest quarterly oil sales revenue since production first began in Thailand concession L53. This was despite severe flooding conditions that resulted in some production shut-ins, from approximately Oct. 13, that are now mainly back on-stream. This was a testament to a job well done by Pan Orient's operations staff. We are now focused on a series of workovers that, with success, will define new reserves in the AA2 sand, which had no reserves attributed to it at year-end 2020, and the asset sales process announced on Oct. 28, 2021."

Highlights

Thailand (net to Pan Orient's 50.01-per-cent equity interest in the Thailand joint venture):

Net to Pan Orient's 50.01-per-cent equity interest in the Thailand joint venture, oil sales from concession L53 in the first nine months of 2021 were 1,385 bopd, with 1,179 bopd from the L53-DD field; Adjusted Thailand funds flow from operations after tax of $5.3-million ($41.45 per barrel) in the third quarter of 2021 increased 6 per cent compared with $5-million ($39.60 per barrel) in the second quarter of 2021. Per barrel amounts during the third quarter of 2021 were a realized price for oil sales of $87.55, transportation expenses $2.36, operating expenses $5.21, general and administrative expenses $1.68, foreign exchange loss and other 18 cents, a 5-per-cent royalty to the Thailand government $4.67 and income tax $32. Oil sales revenue during this period was allocated 11 per cent to expenses for transportation, operating, and general and administrative, 42 per cent to the government of Thailand for royalties and income tax, and 47 per cent to the Thailand joint venture;Thailand adjusted funds flow from operations of $14.7-million in the first nine months of 2021 financed $5-million of Thailand exploration and development activities and dividends paid to Pan Orient from the Thailand joint venture of $8.6-million. Pan Orient's share of working capital and long-term deposits in Thailand at Sept. 30, 2021, was $5.3-million.

Indonesia East Jabungproduction sharing contract (Pan Orient is non-operator with a 49-per-cent ownership interest):

The East Jabung production sharing contract (PSC) expired in January, 2020, and the operator is determining final steps to be taken for formal approval of the expiry from the government of Indonesia. The estimated cost by the operator for abandonment and reclamation of the East Jabung PSC is $700,000 (U.S.) ($900,000) net to Pan Orient's 49-per-cent interest;Activities of the company in Indonesia are reported in 2020 and 2021 as discontinued operations. Discontinued operations in Indonesia for 2021 were $168,000 of expenses and $7,000 of unrealized foreign exchange gains on currency exchange rates since the end of 2020. In addition, during the third quarter of 2021 the company recorded $600,000 in the current decommissioning expense for discontinued operations related to the East Jabung PSC. The total provision recorded for abandonment and reclamation for East Jabung PSC at Sept. 30, 2021, is $900,000.

Sawn Lake (operated by Andora Energy Corp., in which Pan Orient has a 71.8-per-cent ownership):

For the first nine months of 2021, Pan Orient reports total operating expenses of $220,000 associated with the Sawn Lake suspended SAGD (steam-assisted gravity drainage) facility and wellpair. In addition, the estimated decommissioning provision for Sawn Lake was reduced by $900,000 during the third quarter of 2021 based on an assessment of Sawn Lake by a specialized third party reclamation company.

Corporate:

Corporate adjusted funds flow from operations (including Pan Orient's 50.01-per-cent equity interest in the Thailand joint venture) was $5-million (10 cents per share) in the third quarter and a total of $12.3-million (24 cents per share) for the first nine months of 2021. The increase in the third quarter from $3.9-million (eight cents per share) in the second quarter of 2021 was primarily due to a $300,000 increase in Pan Orient's equity interest in Thailand joint venture adjusted funds flow from operations and unrealized foreign exchange gain on Canadian cash holdings denominated in U.S. dollars;Net income attributable to common shareholders for the first nine months of 2021 was $5.5-million (11 cents income per share). This compares with a net loss attributable to common shareholders for the first nine months of 2020 of $59.2-million ($1.12 loss per share), with a net $57.6-million impairment charge for the Sawn Lake, Alberta exploration and evaluation assets at March 31, 2020;Pan Orient repurchased 1,950,100 common shares in the first nine months of 2021, at an average price of 87 cents per share, for $1.7-million. The company repurchased 87,100 shares in the third quarter at an average price of $1.09 per share. Common shares outstanding at Sept. 30, 2021, and currently, are 49.8 million; Pan Orient is in a strong financial position with working capital and non-current deposits of $28.4-million, mainly comprising cash and cash equivalents held in Canada, and no long-term debt at Sept. 30, 2021. In addition, the Thailand joint venture has $5.3-million in working capital and long-term deposits, net to Pan Orient's 50.01-per-cent equity interest, and Thailand funds flow from operations are expected to increase the company's cash balance during the remainder of 2021.

Outlook

Thailand

Concession L53 onshore (Pan Orient Energy (Siam) Ltd., in which Pan Orient has 50.01-per-cent ownership)

Pan Orient is now focused on a series of workovers, that with success will define new reserves in the AA2 sand, which had no reserves attributed to it at year-end 2020. In addition, an updated reservoir simulation is under way that will incorporate: 1) updated production data, 2) some AA sand model changes made in response to observed production performance and 3) the addition of the AA1 and AA2 sands into the model. No further drilling is anticipated in 2021.

Corporate

The company has started a process to accelerate shareholder value given the mid- to late-stage development of Thailand, the desire to allocate no further funds to the Sawn Lake asset, and strength in current oil prices. It is expected this process will involve both the Thailand assets and the Sawn Lake, Canada, assets, and be completed by mid-2022. Discussions for both assets are currently under way with interested parties. It seems most likely that no individual potential purchaser is interested in both assets due to their contrasting nature, and that distinct transactions are the more likely outcome.It is intended that the proceeds from any potential sale of any of the assets will be returned to Pan Orient shareholders through a return of capital.

Based on this new direction, the company announced on Oct. 28that it plans to pay a 40-cent-per-share special distribution to shareholders, subject to shareholder and regulatory approval. The distribution is intended to be a return of capital, which would require shareholder approval of a reorganization of the company's share capital. Pan Orient anticipates that the required annual and special meeting of shareholders will be held in mid-January, 2022. If approved by shareholders, the record date for the determination of shareholders entitled to receive the distribution would be set and the distribution paid in early February, 2022.

It is currently proposed that in the period after the sale of the company's oil and gas interests, and the distribution of the vast majority of cash to shareholders, the company will continue to pursue international oil and gas opportunities with a substantially scaled-down cost structure.

COVID-19

The operations in Thailand of Pan Orient Energy (Siam) Ltd. (POS) continue to be somewhat affected by the worldwide COVID-19 pandemic.The Thailand government imposed a state of emergency in late March, 2020, giving it wide-ranging powers to address the crisis. Domestic travel restrictions have now been eased and restrictions on fully vaccinated foreigners entering Thailand are being reduced.

Prudent measures have been taken by POS to help protect the health and safety of staff, which are of paramount importance. Fortunately, POS in Thailand was able to complete its initial three-well 2021 appraisal drilling program. POS and Pan Orient are well positioned to withstand these unprecedented events.The company is optimistic about a return to normal operations and continued strength in world oil prices.

Pan Orient is a Calgary, Alta.-based oil and gas exploration and production company with operations currently located onshore Thailand and Western Canada.

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