Mr.Jeff Chisholm reports
PAN ORIENT ENERGY CORP.: 2018 SECOND QUARTER FINANCIAL & OPERATING RESULTS
Pan Orient Energy Corp. has released its 2018 second quarter consolidated financial and operating results.
The Company is today filing its unaudited consolidated financial statements as at and for the six months ended June 30, 2018 and related management's discussion and analysis with Canadian securities regulatory authorities. Copies of these documents may be obtained online at www.sedar.com or the Company's website, www.panorient.ca.
Commenting today on Pan Orient's 2018 second quarter results, President and CEO Jeff Chisholm stated: "Oil prices continued strong throughout the quarter and construction has commenced on the DD exploration well location in onshore Thailand Concession L53 targeting drilling in late Q3 to early Q4 2018. In addition, we received the environmental impact assessment approval on July 17th for the L53-B production license with production anticipated to commence in late August to early September upon completion of a planned four well workover program that includes the existing L53-B well. As part of the drilling program for the DD exploration well referenced above, an L53-B appraisal well will also be drilled from the existing L53-B well pad. In Indonesia, based on information provided by the operator on August 7, 2018, progress has been frustratingly slow towards the approval required for the land fill quarry that is required prior to commencing construction of the Anggun-1X access road and wellsite. While this approval is expected at any time, we are currently delayed approximately five months from the originally laid out timeline which will likely see drilling now pushed into Q1 2019. Various options that would reduce the originally planned construction timeline and hasten the drilling of the well are being reviewed and considered by the joint venture. A more specific timeline will be provided by the operator upon receipt of the land fill quarry approval and this will be communicated to Pan Orient shareholders. The operator remains firmly committed to the drilling of the Anggun-1X well in the most timely and expedient manner possible, this delay is not unlike those experienced by Pan Orient in the past, specifically regarding these sorts of permit issues. We continue to support the operator in whatever manner required. Rest assured we share the same frustrations with our many long term shareholders, with this delay."
HIGHLIGHTS FOR THE FIRST HALF OF 2018
For the Anggun-1X exploration well at the East Jabung Production Sharing Contract ("PSC") in Indonesia, where Pan Orient is non-operator with a 49% ownership interest, the operator is working to obtain the final permit required to start construction of the 7.6 kilometer road. Upon receipt of the final permit, road construction will commence immediately and the timeline for drilling will be finalized.
Oil sales, net to Pan Orient's 50.01% equity interest in the Thailand Joint Venture, were 209 BOPD in the first half of 2018, with Thailand funds flow from operations of $1.9 million ($51.24 per barrel). Oil sales increased 29% in the second quarter to 235 BOPD compared with 182 BOPD in the first quarter of 2018 as a result of the first phase of a multi-well workover program. The second phase of the multi-well workover program is starting in late-August.
At the Thailand Joint Venture (where Pan Orient's has a 50.01% equity interest) the L53-B Environmental Impact Assessment ("EIA") was approved on July 17, 2018 for the 1.96 square kilometers production license and the existing L53-B well will be placed back on production in late August to early September upon completion of workover operations. The drilling of an L53B appraisal well and the L53 DD exploration well is expected to commence late in the third quarter or early in the fourth quarter.
Total corporate funds flow from operations in the first half of 2018 was $2.1 million, including Pan Orient's 50.01% equity interest in the Thailand Joint Venture, and the net loss attributable to common shareholders was $0.5 million ($0.01 loss per share).
Pan Orient maintains a strong financial position for planned exploration activities at the East Jabung PSC in Indonesia with working capital and non-current deposits at June 30, 2018 of $35.0 million and no long-term debt. For Concession L53 in Thailand there is $6.3 million of working capital and non-current deposits related to Pan Orient's 50.01% equity interest in the Thailand Joint Venture to fund exploration and development activities.
2018 SECOND QUARTER OPERATING RESULTS
Net loss attributable to common shareholders for the second quarter of 2018 of $0.2 million ($0.00 loss per share) compared with $0.3 million ($0.01 loss per share) in the first quarter of 2018 and $1.2 million ($0.02 loss per share) in the second quarter of 2017.
For the second quarter of 2018, the Company recorded total corporate funds flow from operations, which includes the economic results of the 50.01% interest in the Thailand joint venture, of $1.3 million ($0.02 per share) compared with $0.8 million ($0.01 per share) first quarter of 2018.
Pan Orient had capital expenditures of $1.8 million in the second quarter of 2018, with $1.5 million in Indonesia primarily associated with the Anggun-1X exploration well and $0.3 million in Canada at the Sawn Lake SAGD property of Pan Orient's 71.8% subsidiary Andora Energy Corporation ("Andora"). In addition, Pan Orient's share of Thailand joint venture capital expenditures was $0.2 million for workover activity, which was recorded in Investment in Thailand Joint Venture.
At June 30, 2018 Pan Orient had $35.0 million of working capital and non-current deposits. Working capital and non-current deposits were comprised of $32.3 million cash, $4.1 million of Indonesian and Canadian accounts and taxes receivable, $0.7 million of non-current deposits, and less accounts payable of $2.1 million. In addition to this, Pan Orient's Investment in Thailand Joint Venture has $6.3 million of working capital and non-current deposits and $2.0 million of equipment inventory to be utilized for future Thailand Joint Venture operations.
Results net to Pan Orient's 50.01% interest in the Thailand Joint Venture for Concession L53
{A—} Average oil sales of 235 BOPD during the second quarter of 2018 and generated $1.2 million in funds flow from operations, or $57.97 per barrel. This compares with 182 BOPD in the first quarter of 2018 and $54.24 per barrel in funds flow from operations. The average realized sales price per barrel increased 15% from $75.50 in the first quarter of 2018 to $86.74 in the second quarter of 2018.
{A—} Per barrel amounts during the second quarter of 2018 were a realized price for oil sales of $86.74, transportation expenses of $1.87, operating expenses of $13.47, general and administrative expenses of $9.92 and a 5% royalty to the Thailand government of $4.30. Oil sales revenue during this period was allocated 28% to expenses for transportation, operating, general & administrative and other, 5% to the government of Thailand for royalties, and 67% to the Thailand Joint Venture. No Thailand petroleum income taxes or Special Remuneratory Benefit tax were recorded during the quarter.
OUTLOOK
INDONESIA
East Jabung PSC, Onshore Sumatra (Pan Orient 49% ownership & Non Operator)
The Anggun-1X exploration well is primarily targeting the Gumai sandstone level at a location 4.6 kilometers northwest and 80 meters structurally up-dip of the AYU-1X exploration well which was drilled in 2017. The estimated dry hole cost is US$15.4 million (with Pan Orient's 49% share US$7.55 million). On August 7, 2018, Pan Orient was informed by the operator that progress has been frustratingly slow towards the approval required for the land fill quarry that is required prior to commencing construction of the Anggun-1X access road and wellsite. While this approval is expected at any time, we are currently delayed approximately five months from the originally laid out timeline which will likely see drilling now pushed into Q1 2019. Various options that would reduce the originally planned construction timeline and hasten the drilling of the well are being reviewed and considered by the joint venture. A more specific timeline will be provided by the operator upon receipt of the land fill quarry approval.
THAILAND
Concession L53 Onshore (Pan Orient Energy (Siam) Ltd., in which Pan Orient has 50.01% ownership)
Concession L53 continues to benefit from strong world crude oil prices and the effectiveness of earlier workover programs. In addition, a four well workover program will commence in late August 2018. The existing L53-B well is being placed back on production as part of the planned workover program now that the production EIA has been approved. Drilling of an L53B appraisal well and the L53 DD exploration well is expected to commence late in the third quarter or early in the fourth quarter. Concession L53 continues to generate funds flow from operations as a low cost operation and limited capital expenditures
CANADA
Sawn Lake (Operated by Andora, in which Pan Orient has a 71.8% ownership)
Pan Orient continues to work with joint venture partners to move forward towards potential commercial expansion to 3200 BOPD at the Sawn Lake, Alberta steam assisted gravity drainage ("SAGD") project (in which Andora has a 50% working interest and is the operator) using Andora's proprietary Produced Water Boiler. It is recognized that stable heavy oil prices will have a significant impact on any decision by the Sawn Lake partners regarding the timing and extent of future development, and the ability to finance the project.
Corporate
Pan Orient maintains a strong cash balance, denominated mainly in United States dollar deposits, to conduct key exploration and development activities and ensure financial flexibility. Pan Orient continually reviews its exploration and development asset portfolio in Indonesia, Thailand and Canada with the aim of maximizing corporate value and achieving the best allocation of resources.
Financial and Operating Summary Three Months Ended June 30,Six Months Ended June 30, (thousands of Canadian dollars except where indicated)2018201720182017 FINANCIALFinancial Statement Results -- Excluding 50.01%Interest in Thailand Joint VentureNet income (loss) attributed to common shareholders (151 ) (1,224)(489 ) (2,738)Per share -- basic and diluted$(0.00 )$ (0.02)$(0.01 )$ (0.05)Cash flow from (used in) operating activities2,547 (1,586)(2,123 ) (3,316)Per share -- basic and diluted $0.05$ (0.03)$(0.04 )$ (0.06)Cash flow from (used in) investing activities (2,635 ) (636)(4,208 ) (1,443)Per share -- basic and diluted$(0.05 )$ (0.01)$(0.08 )$ (0.03)Working capital 34,30541,25834,30541,258Working capital & non-current deposits34,99245,90834,99245,908Long-term debt - - - -Shares outstanding (thousands)54,90054,90054,90054,900Capital Commitments (Note 3)68 3,72268 3,722Working Capital and Non-current Deposits --Excluding Thailand Joint Venture Beginning of period36,86747,34436,89749,818Fund flow from (used in) operations (excl.Thailand joint venture) 47 (1,268) 163 (2,353)Issue of common shares -22 -22Consolidated capital expenditures (1,819 ) (347)(2,122 ) (1,284)Disposal of petroleum and natural gas assets - 133 133 133Amounts advanced to Thailand joint venture48567380Settlement of decommissioning liabilities-(27) - (457)Effect of foreign exchange(151 ) (5)(152 )(51)End of period - Excluding Thailand Joint Venture34,99245,90834,99245,908Economic Results -- Including 50.01% Interestin Thailand Joint VentureTotal corporate funds flow from (used in)operations by regionCanada68 (1,187) 312 (1,776)Thailand(2 ) (7) (15 )(22)Indonesia(19 )(74)(134 ) (555)Funds flow from (used in) operations(excl. Thailand Joint Venture)47 (1,268) 163 (2,353)Share of Thailand Joint Venture1,247 1,019 1,949 1,932Total corporate funds flow from (used in) operations 1,294 (249) 2,112 (421)Per share -- basic and diluted $0.02$ (0.00) $0.04$ (0.01)Capital Expenditures -- Petroleum andnatural gas propertiesCanada 278 239 496 474Indonesia1,541 108 1,626 810Consolidated capital expenditures (excluding Thailand joint venture) 1,8193472,122 1,284Share of Thailand Joint Venture capital expenditures 151 456 617 550Total capital expenditures (includingThailand joint venture)1,970 803 2,739 1,834Disposition -- Petroleum and natural gas properties- (133)(133 ) (133)Investment in Thailand Joint VentureBeginning of period 33,87533,31632,18532,795Net loss from Joint Venture(97 ) (288)(288 ) (466)Other comprehensive gain (loss) from Joint Venture(926 ) (353) 980 370Amounts received from Joint Venture(48 )(56) (73 )(80)End of period 32,80432,61932,80432,619
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