Pan Orient Energy Corp. reports 2018 year-end and fourth quarter consolidated financial and operating results.

Commenting on Pan Orient’s 2018 results, President and CEO Jeff Chisholm stated:
"2018 was an excellent year for the Thailand operation with substantial increases in year-end reserves and production as a result of the L53-DD oil discovery made in October. This was then followed up with the success of the L53-DD4 appraisal well confirming oil in a fault compartment that had been assigned possible reserves in the year-end 2018 reserve report. The success at L53-DD highlighted the hydrocarbon potential of the northern portion of Concession L53 and provided an increased understanding of the petroleum system in the immediate discovery area. As a result of post discovery analysis, an aggressive four to five well exploration drilling program is planned for the remainder of 2019 with the first 2 wells to commence in July.

Approval of the L53-DD Production License is anticipated in April 2019, at which point the L53-DD1 & L53-DD2 wells will be brought back on stream.  A 90 day test application has been submitted for the recently completed L53-DD4 well with approval anticipated shortly. The L53-DD3 appraisal well is currently drilling through the target zone to a total depth that will be reached shortly.

Construction for the Anggun-1X exploration well in Indonesian East Jabung PSC has been making steady progress despite heavy rain at times. The operator has indicated rig mobilization is anticipated to commence in early May with drilling to start in late June to July, subject to weather, of course. Of note, press reports indicate that Repsol, the operator of the East Jabung PSC, has made a significant gas discovery in the nearby Sakakemang PSC.  This large discovery has resulted in significant interest by industry players and has highlighted the potential for large discoveries still to be made within this region of South Sumatra."    

2018 HIGHLIGHTS

Thailand (net to Pan Orient’s 50.01% equity interest in the Thailand Joint Venture)

• The L53-DD oil field discovery in October 2018 resulted in a significant production increase and proved, probable and possible reserves at December 31, 2018 of 2.2 million barrels. Two wells were placed on 90 day production tests in late 2018 and an L53-DD Production License was applied for on December 21, 2018.
• The field netback per barrel at Concession L53 increased 35% to $65.20 per barrel in 2018 through higher realized oil prices, which were approximately 92% of the Brent oil reference price.  
• Strong financial results in Thailand from Pan Orient’s share of the Thailand Joint Venture with adjusted funds flow from operations of $5.1 million (including $2.0 million in the fourth quarter) funding capital expenditures of $3.8 million and working capital and long-term deposits at December 31, 2018 of $6.4 million.
• December 31, 2018 reserve report assigned proved plus probable crude oil reserves of 1.4 million barrels from conventional sandstone reservoirs (an increase of 150%) and a net present value using forecast prices and costs discounted at 10% per year of $39.5 million (an increase of 182%).  The reserve report also assigned 1.6 million barrels of possible reserves, with 1.3 million barrels assigned to the new L53-DD oil field.
• The discovery at L53-DD set up a 2019 Thailand a two well L53-DD appraisal drilling program, with the L53-DD4 well drilled and the L53-DD3 well currently underway. A four to five well exploration drilling program is planned to commence late in the second quarter to early in the third quarter.

Indonesia East Jabung Production Sharing Contract (Pan Orient is non-operator with a 49% ownership interest)

• Construction of the access road and drill pad for the Anggun-1X exploration well at the East Jabung Production Sharing Contract (“PSC”) commenced in November 2018 and is expected to be completed in June 2019.  The operator has advised that rig mobilization to the staging area is anticipated to commence in May and drilling in late June to July 2019.
• The East Jabung PSC received approval on January 11, 2019 for a four year exploration extension period to January 20, 2023 with a remaining area of 1,245.56 square kilometers, representing 20% of the original PSC area.

Corporate

• For 2018, total corporate adjusted funds flow from operations, including Pan Orient’s 50.01% interest in the Thailand Joint Venture, was $5.5 million and the net loss attributable to common shareholders was $40 thousand.
• Pan Orient has maintained a strong financial position for planned exploration activities at the East Jabung PSC in Indonesia with working capital and non-current deposits at December 31, 2018 of $33.1 million and no long-term debt. In addition to this, Pan Orient’s Investment in the Thailand Joint Venture includes $6.4 million of Thailand working capital and non-current deposits for funding 2019 Thailand Joint Venture exploration and development programs in addition to the Thailand adjusted funds flow from operations.

OUTLOOK 

INDONESIA - East Jabung PSC, Onshore Sumatra Indonesia (Pan Orient 49% ownership & Non Operator)

The Anggun-1X exploration well is approximately 5.6 kilometers to the northwest of the Ayu-1X exploration well drilled in 2017 and approximately 70 meters structurally up-dip from Ayu-1X at the Gumai sandstone target level. The Anggun-1X exploration well will target the Gumai sandstones (primary target) in a structural closure up-dip of the Ayu-1X drilling location and the Batu Raja limestone (secondary target) that is expected to be an independent closure from the Ayu-1X well.  The estimated dry hole cost of the Anggun-1X well, including permanent road, well pad construction and drilling, is US$15.4 million (Cdn$21.0 million), with Pan Orient’s 49% share of US$7.5 million (Cdn$10.2 million). The cost of the Anggun-1X well to the end of 2018 has been US$5.0 million, with Pan Orient’s 49% share being US$2.5 million (Cdn$3.3 million).

The operator has advised that drilling of Anggun-1X is anticipated to commence in late June to July 2019. There is a potential follow-up appraisal well in 2020 in the event of Anggun-1X success.

THAILAND - Concession L53 Onshore (Pan Orient Energy (Siam) Ltd., in which Pan Orient has 50.01% ownership)

A two well appraisal drilling program commenced with the spudding of the L53-DD4 well on February 11, 2019. The well encountered an interpreted, combined 15.6 meters of net oil pay within the AA2 and BB/CC sandstones between the true vertical depth of 1,010 to 1,103 meters. The L53-DD4 well penetrated a fault compartment with assigned year-end 2018 possible reserves (no proved or probable reserves were assigned) adjacent to and north of the main DD oil field fault compartment that was drilled previously by the L53-DD1 and L53-DD2 wells.  As a result, proved and probable reserves additions within this new fault compartment are anticipated at year-end 2019. The CC sand at L53-DD4 was encountered 7.5 meters structurally higher than at L53-DD1 and possesses superior reservoir quality and thickness. The AA sand at L53-DD4 (no proved or probable reserves assigned at this location at year-end 2018) was poorly developed; however, high quality oil pay was encountered in the deeper AA2 sand resulting in a new oil pool discovery. The DD/EE sands (no proved or probable reserves assigned at this location at year-end 2018) were water bearing at L53-DD4. A 90 day well test application for L53-DD4 has been submitted to the Government of Thailand and testing will commence when the approval is received.

The L53-DD3 was spudded on March 3, 2019 and is currently drilling.  The L53-DD3 well is essentially a twin of the earlier L53-DD2 well with the exception being that the AA sand that was faulted out in L53-DD2 is expected to be penetrated in a structurally higher position than at L53-DD1. L53-DD3 is designed to effectively drain the thick, high quality oil pay within the BB/CC sands at this structurally high location in a timely manner.

Seismic mapping incorporating the DD field drilling results has been completed and on the basis of this information, permits for a multi-well exploration drilling program to commence late in the second quarter to early in the third quarter of 2019 are underway. It is anticipated two prospects will be tested initially in the immediate DD field area with the first two exploration wells. A second three well exploration drilling program is expected to commence in late 2019. All exploration and development activities in 2019 are expected to be financed by Thailand working capital and adjusted funds flow from operations.

CANADA - Sawn Lake, Alberta (Operated by Andora, in which Pan Orient has a 71.8% ownership) 

Sawn Lake is a top quartile SAGD asset that has been de-risked through the demonstration project. Pan Orient continues to work with joint venture partners to move towards the potential commercial expansion to 3200 BOPD at the Sawn Lake, Alberta SAGD project (in which Andora has a 50% working interest and is the operator). It is recognized that stable crude oil prices, and specifically higher Western Canada Select reference prices, will have a significant impact on any decision regarding the timing and extent of future development.   

Link to Pan Orient Indonesia country profile