Mr. Jeff Chisholm reports
PAN ORIENT ENERGY CORP. 2018 THIRD QUARTER FINANCIAL & OPERATING RESULTS
Pan Orient Energy Corp. has released its third quarter 2018 consolidated financial and operating results.
The company is today filing its unaudited consolidated financial statements as at and for the nine months ended Sept. 30, 2018 and related management's discussion and analysis with Canadian securities regulatory authorities.Copies of these documents may be obtained online atwww.sedar.com or the company's website,www.panorient.ca.
Commenting today on Pan Orient's 2018 third quarter results, President and CEO Jeff Chisholm stated: "With the recent oil discovery in Concession L53 onshore Thailand and the commencement of road construction for the Anggun-1X exploration well in Indonesia, it is shaping up to be a very exciting next seven to eight months."
HIGHLIGHTS FOR THE FIRST NINE MONTHS 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 per cent ownership interest, road construction commenced at the beginning of November and the operator estimates that drilling will commence sometime between March 15 and May 15, 2019 depending on road construction during the rainy season.The joint venture is in the process to extend the exploration period for an additional four years when the six year exploration period ends on January 19, 2019, subject to Government of Indonesia approval. At the Thailand Joint Venture (where Pan Orient has a 50.01 per cent equity interest) a two well program was completed early in the fourth quarter of 2018 with an oil discovery from the L53-DD1 exploration well and a successful L53-DD2 appraisal well.Government of Thailand approval was received for a 90 day production test of the L53-DD1 well and approval for L53-DD2 is expected shortly. The submission for a new L53DD production license which encompasses the discovery area is anticipated in early December 2018. Oil sales, net to Pan Orient's 50.01 per cent interest in the Thailand Joint Venture for Concession L53, were 210 BOPD for the first nine months of 2018, with funds flow from operations of $3.1-million ($54.31 per barrel). Total corporate funds flow from operations for the first nine months of 2018 was $2.5-million, including Pan Orient's 50.01 per cent equity interest in the Thailand Joint Venture, and the net loss attributable to common shareholders was $1.4-million ($0.03 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 Sept. 30, 2018 of $33.0-million and no long-term debt.In addition, net to Pan Orient's 50.01 per cent equity interest in the Thailand Joint Venture is $6.6-million of working capital and non-current deposits to fund exploration and development activities at Concession L53.
2018 THIRD QUARTER OPERATING RESULTS
Net loss attributable to common shareholders for the third quarter of 2018 of $1.0-million ($0.02 loss per share) compared with $0.2-million ($0.00 loss per share) in the second quarter of 2018 and $1.8-million ($0.03 loss per share) in the third quarter of 2017.The change from the second quarter of 2018 is largely due to a foreign exchange loss of $368,000 in the third quarter of 2018 compared with a foreign exchange gain of $478,000 in the second quarter of 2018 as a result of a lower foreign exchange rate for Pan Orient's US dollar holdings. For the third quarter of 2018, the company recorded total corporate funds flow from operations, which includes the economic results of the 50.01 per cent interest in the Thailand joint venture, of $0.4-million ($0.01 per share) compared with $1.3-million ($0.02 per share) in the second quarter of 2018. Pan Orient had capital expenditures of $1.1-million in the third quarter of 2018, with $1.0-million in Indonesia primarily associated with the Anggun-1X exploration well and $0.2-million in Canada at the Sawn Lake SAGD property of Pan Orient's 71.8 per cent subsidiary Andora Energy Corporation ("Andora").In addition, Pan Orient's share of Thailand joint venture capital expenditures was $0.9-million for workover activity and construction costs for the L53-DD1 exploration well related to the access road and site, which was recorded in Investment in Thailand Joint Venture.At Sept. 30, 2018 Pan Orient had $33.0-million of working capital and non-current deposits.Working capital and non-current deposits were comprised of $31.5-million cash, $3.8-million of Indonesian and Canadian accounts and taxes receivable, $0.6-million of non-current deposits, and less accounts payable of $2.9-million.In addition to this, Pan Orient's Investment in Thailand Joint Venture has $6.6-million of working capital and non-current deposits and $2.2-million of equipment inventory to be utilized for future Thailand Joint Venture operations. Results net to Pan Orient's 50.01 per cent interest in the Thailand Joint Venture for Concession L53Concession L53 is a low cost operation that benefits from higher Brent crude oil reference prices.Average oil sales of 214 BOPD during the third quarter of 2018 generated $1.2-million in funds flow from operations, or $60.22 per barrel.This compares with 235 BOPD and $1.2-million of funds flow from operations, or $57.97 per barrel, in the second quarter of 2018.The average realized sales price per barrel increased 6 per cent from $86.74 in the second quarter of 2018 to $92.34 in the third quarter of 2018. Per barrel amounts during the third quarter of 2018 were a realized price for oil sales of $92.34, transportation expenses of $1.83, operating expenses of $15.37, general and administrative expenses of $10.28 and a 5 per cent royalty to the Thailand government of $4.58.Oil sales revenue during this period was allocated 30 per cent to expenses for transportation, operating, general & administrative and other, 5 per cent to the government of Thailand for royalties, and 65 per cent to the Thailand Joint Venture.
OUTLOOK
INDONESIA
East Jabung PSC, Onshore Sumatra (Pan Orient 49 per cent 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 per cent share of US$7.55-million).The quarry permit that was required in order to commence construction of the Anggun-1X exploration well access road has been approved and road construction has commenced.The operator estimates the Anggun-1X exploration well will commence drilling sometime between March 15 and May 15, 2019.The variation in timing is almost entirely a function of possible issues relating to road building during the rainy season.Anggun-1X is anticipated to take approximately 30 days to reach total depth with testing to commence immediately thereafter, if required.
As per the requirement under the East Jabung PSC to enter into the four year exploration period extension, the joint venture has submitted the final acreage relinquishment to the Government of Indonesia oil and gas regulator ("SKKMIGAS") bringing the remaining PSC area to 1,254.54 square kilometers, representing 20 per cent of the original PSC area.Once this relinquishment area has been reviewed and approved by the SKKMIGAS technical group, the joint venture will notify the Government of Indonesia of their election to enter into the four year exploration extension period that will commence when the six year exploration period ends on January 20, 2019.During the four year exploration extension period, the joint venture has the option of exiting or continuing with the PSC on an annual basis.
THAILAND
Concession L53 Onshore (Pan Orient Energy (Siam) Ltd., in which Pan Orient has 50.01 per cent ownership)
An oil discovery in October with the L53-DD1 exploration well was followed up with a successful appraisal well at L53-DD2.L53DD is located in the northern most portion of the Concession L53 "exploration reserve area"; approximately 28 kilometers north of any existing producing wells within Concession L53 and approximately 5 kilometers south of the PTT Exploration and Production Public company Limited operated U-Thong oil field located in the adjacent concession.An application has been submitted for Government of Thailand approval for a 90 day production test of the L53-DD1 and L53-DD2 wells, and L53-DD1 approval has been received. This will be followed by the submission of an L53DD production license area application that will encompass the discovery area and generation of the technical information to be provided to the company's reserve evaluators for inclusion of the L53DD discovery into the year-end 2018 independent reserves evaluation.Past experience has typically seen government approval of production licenses within three to five months of submission, at which time long term (not subject to 90 day production test) production can commence. In addition, work is currently underway utilizing the L53-DD1 and L53-DD2 well results to better define the hydrocarbon potential in the immediate vicinity of the L53-DD1 oil discovery that would form the basis for any potential future exploration drilling in the area.
The drilling of an appraisal well at L53B has been postponed due to the discovery with the L53-DD1 exploration well. Production of the existing L53-B discovery well will commence upon the in-country arrival of a variable speed control panel anticipated in December 2018.
Shareholders will be informed of the production test results for L53-DD1 and L53-DD2 after approximately the first seven to ten days of testing.At that time, a preliminary Thailand 2019 drilling program will also be outlined to Pan Orient shareholders.
CANADA
Sawn Lake (Operated by Andora, in which Pan Orient has a 71.8 per cent 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 per cent working interest and is the operator).The current high differential between the West Texas Intermediate reference price for light crude oil and the Western Canada Select reference price for heavy Canadian crude oil is a challenging economic environment for heavy oil producers in Canada.The level and stability of 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 is maintaining 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 (in thousands, except where indicated) Three months ended Sept. 30,Nine months ended Sept. 30, 2018 20172018 2017Financial Financial statement results -- excluding 50.01% Interest in Thailand joint venture Net (loss) attributed to common shareholders$(960) $(1,816)$(1,449) $(4,554)Per share -- basic and diluted(0.02) (0.03)(0.03) (0.08)Cash flow from (used in) operating activities (39) 447(2,162)(1,911)Per share -- basic and diluted0 0.01 (0.04) (0.03) Cash flow (used in) investing activities (240)(1,377) (4,448)(2,820) Per share -- basic and diluted0(0.03)(0.08) (0.05) Working capital32,403 39,70932,403 39,709Working capital and non-current deposits 32,993 40,41632,993 40,416 Long-term debt-- --Capital commitments 6602,012 6602,012Working capital and non-current deposits Beginning of period -- excluding Thailand joint venture 34,992 45,90836,897 49,818Fund flow (used in) operations (excluding Thailand joint venture)(789)(1,630) (626)(3,983) Issue of common shares-- - 22 Consolidated capital expenditures(1,136)(3,715) (3,258)(4,999)Disposal of petroleum and natural gas assets-- 133133 Amounts advanced from Thailand joint venture 55 58 128138Settlement of decommissioning liabilities -- - (457) Effect of foreign exchange (129)(205) (281)(256)End of period -- excluding Thailand joint venture32,993 40,41632,993 40,416 Pan Orient 50.01% interest in Thailand joint venture working capital and non-current deposits6,6154,864 6,6154,864Economic results -- including 50.01% interest in Thailand joint ventureTotal corporate funds flow (used in) operations by region Canada (682)(1,467) (370)(3,243) Thailand(10)(2)(25) (24) Indonesia (97)(161) (231)(716)Funds flow (used in) operations (excluding Thailand joint venture)(789)(1,630) (626)(3,983) Share of Thailand joint venture 1,193868 3,1422,800 Total corporate funds flow from (used in) operations404 (762)2,516 (1,183)Per share -- basic and diluted 0.01(0.01) 0.05(0.02) Capital expenditures -- petroleum andnatural gas properties Canada168447 664921Indonesia 9683,268 2,5944,078Consolidated capital expenditures (excluding Thailand joint venture) 1,1363,715 3,2584,999Share of Thailand joint venture capital expenditures897266 1,514816Total capital expenditures (including Thailand joint venture) 2,0333,981 4,7725,815Disposition -- petroleum and natural gas properties)--(133)(133) Investment in Thailand joint ventureBeginning of period32,804 32,62032,185 32,795Net (loss) from joint venture (90)(366) (378)(832) Other comprehensive gain (loss) from joint venture205 (595)1,185 (224) Amounts advanced (from) joint venture (55) (58) (128)(138)End of period32,864 31,60132,864 31,601
We seek Safe Harbor.
© 2018 Canjex Publishing Ltd. All rights reserved.