Pan Orient Energy Corp. ("Pan Orient") (TSX VENTURE:POE) is pleased to provide
highlights of its 2011 first 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 net to Pan Orient.
The Corporation today filed its unaudited consolidated financial statements as
at and for the three months ended March 31, 2011 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 Corporation's
website, www.panorient.ca.
2011 FIRST QUARTER HIGHLIGHTS
-- Funds flow from operations for the first quarter of 2011 was $12.4
million compared with $17.8 million for the fourth quarter of 2010 and
$12.3 million for the first quarter of 2010. Funds flow from operations
per share (basic) was $0.24 for the first quarter of 2011.
-- Net income attributable to common shareholders of $3.9 million, or $0.08
per share (basic), for the first quarter of 2011 compared with net
income attributable to common shareholders of $8.5 million, or $0.17 per
share (basic) for the fourth quarter of 2010 and $3.4 million ($0.07 per
share) for the first quarter of 2010.
-- Total capital expenditures for the first quarter of 2011 were $20.0
million, with $14.4 million in Thailand, $5.5 million in Indonesia and
$0.1 million in Canada.
-- Indonesia
-- At the Batu Gajah Production Sharing Contract ("PSC") on-shore
Sumatra (Pan Orient 97% working interest and operator), Pan Orient
completed a transaction which increased our interest from 90% to 97%
through repurchasing a 7% carried interest.
Late in March 2011, Pan Orient commenced the three well exploration
drilling program at Batu Gajah with the spudding of the Tuba Obi
Utara-1 (NTO-1) exploration well. The NTO-1 well encountered 10.5
feet of gas pay within good-quality sand near the top of the Lower
Talang Akar formation ("LTAF"). The follow-up NTO-1ST side track
well encountered the same gas sand formation identified at the NTO-1
well. Initial drilling results at North Tuba Obi are encouraging
with proven gas in the LTAF and additional hydrocarbon potential in
the overlying formations existing eastward towards the crest of the
Tuba Obi structure. Further appraisal drilling will be required to
determine the commerciality and size of this accumulation. Plans are
underway to seek Government of Indonesia approval for the drilling
of three additional Phase Two exploration wells at Batu Gajah in
late 2011 (bringing the total wells at Batu Gajah in 2011 to six
plus the NTO-1ST side track), including the Tuba Obi Utara-2 (NTO-2)
exploration well to be located approximately 5.7 kilometers east of
the NTO-1 well. Capital expenditures of $4.9 million in the first
quarter of 2011 at the Batu Gajah PSC included building of three
drilling locations, equipment inventory for the three well drilling
program, initial drilling costs for the NTO-1 well and exploration
operations.
-- At the Citarum PSC on-shore Java (Pan Orient 77% working interest
and operator), Pan Orient completed a transaction which increased
our interest from 69% to 77% through repurchasing an 8% carried
interest. Preparation for drilling is proceeding at the Citarum PSC
with land purchase and the building of drilling locations towards an
anticipated commencement of drilling of the first of three back to
back wells in late September 2011. Capital expenditures of $0.5
million in the first quarter of 2011 at the Citarum PSC included
initial costs for building of drilling locations and exploration
operations.
-- At the South CPP PSC, on-shore Sumatra, Pan Orient completed a
transaction which increased our interest from 90% to 97% through
repurchasing a 7% carried interest.
-- The cost to repurchase carried interests in the three PSC's was $1.8
million, including the issuance of 50,677 shares in Pan Orient at a
deemed market value of $0.3 million.
-- Subsequent to March 31, 2011, Pan Orient was notified that it was
the successful bidder on a 100% working interest basis for the 6,228
square kilometer East Jabung PSC located on and offshore south
Sumatra Indonesia. East Jabung PSC is directly east and adjacent to
the company's 97% working interest and operated Batu Gajah PSC.
-- Thailand
-- Average 2011 oil sales in Thailand for the first quarter of 2011 of
2,246 BOPD with 1,501 BOPD from Concession L44, 414 BOPD from
Concession L53, 210 BOPD from Concession L33, and 121 BOPD from
Concession SW1. Oil sales in Concession L44 declined to an average
of 1,501 BOPD in the first quarter of 2011 compared with an average
of 3,459 BOPD in the fourth quarter of 2010 as a result of wells
coming off high initial production rates, incursion of water at the
WBEXT-1C well in early January, and three significant wells being
brought back on-stream at reduced rates to minimize the water cut
after being shut-in for much of the quarter until the WBEXT
production license was granted on February 24th. Oil sales at
Concession L53 increased to 414 BOPD in the first quarter of 2011
from 88 BOPD in the fourth quarter of 2010 with increased production
from a workover of the L53-A well and new oil production from the
L53-A1 well.
Average oil sales in April 2011 were 2,035 BOPD, with 1,318 BOPD
from Concession L44, 478 BOPD from Concession L53, 158 BOPD from
Concession L33, and 81 BOPD from Concession SW1.
-- Funds flow from Thailand operations was $12.9 million for the first
quarter of 2011 ($63.61 per barrel). Capital expenditures in
Thailand were financed 89% by funds flow from operations. The change
from $17.7 million in funds flow from Thailand operations in the
fourth quarter of 2010, primarily as a result of a 45% decrease in
oil sales volumes, partially offset by a 20% increase in the
realized price for crude oil and a 75% decrease in current SRB and
income taxes.
For the first quarter of 2011, transportation expenses were $2.32
per barrel, operating expenses and other royalty $10.79 per barrel,
general and administrative expenses $4.90 per barrel and amounts to
the Thailand government of $9.71 per barrel resulted in after tax
funds flow from operations per barrel of $63.61. The WTI reference
price for crude oil per barrel increased 10% during the quarter to
CDN$94.48 and the realized price increased to 97% of this reference
price based on strength of oil product prices in Singapore. For the
first quarter of 2011, Thailand crude oil revenue of $91.26 per
barrel was allocated 20% to expenses for transportation, operating,
and general & administrative, 11% to the government of Thailand in
the form of royalties, Special Remuneratory Benefit ("SRB") and
Income Tax, and 69% to Pan Orient.
-- First quarter 2011 drilling program in Thailand with the drilling of
six wells (4.4 net wells) with two additional wells in Concession
L53 to build upon the 2010 oil discovery there, and four wells
focused on exploration in Concession L44 to add new reserves. In
addition, work continued to sidetrack the L33-2 exploration well
drilled in 2010. Pan Orient had two drilling rigs operating in
Thailand during the first quarter of 2011 and total capital
expenditures were $14.4 million.
-- The L53-A1 development well and L53-B appraisal well were
drilled during the quarter in Concession L53 (Pan Orient
operator and 100% ownership) and resulted in two new producing
oil wells. In addition, the L53-A well had a workover which
increased production from additional sandstone zones in the
well.
-- The Company had limited success in drilling four exploration
wells at Concession L44 (Pan Orient operator and 60% ownership)
during the quarter. Exploration wells were drilled at Si Thep,
Na Sanun East (NSE-E4) and two new exploration areas (L44-E and
L44-F) resulting in three unsuccessful wells and one well with
minor oil production.
-- At Concession L33 (Pan Orient operator and 60% ownership) work
continued during the quarter to sidetrack the L33-2 well in
order to evaluate the WBV1 volcanic reservoir. This well is on
test and producing at low oil rates.
-- Andora Energy, a private company owned controlled by Pan Orient which
has an oil sands project at Sawn Lake, Alberta, initiated a process to
identity and consider strategic alternatives late in February 2011. This
process is ongoing and is expected to be completed by the middle of
June.
In support of the review of its strategic alternatives, Andora acquired
an additional 10% working interest in the Sawn Lake Central (12
sections) and North Blocks (51 sections) from a private Alberta company
in consideration for the issuance to the vendor of 4,433,031 non-voting
special warrants of Andora. Each special warrant entitles the holder
thereof to receive one common share of Andora, at no additional
consideration and without any further action, upon the happening of a
liquidity event involving Andora, including a sale of the corporation, a
merger or other business combination, a farmin or farmout, an
acquisition or disposition of assets, among other alternatives. If a
liquidity event is not completed by November 25, 2011, the acquired
interests will be reconveyed back to the vendor and the special warrants
cancelled. Andora estimates this transaction represents a pro rata
addition of 29 million contingent resources barrels based on the
December 31, 2010 evaluation of "Best Case" contingent resources by
Sproule Unconventional Limited.
At March 31, 2011 Pan Orient owned 53.4% of the common shares of Andora
and none of the special warrants, resulting in an ownership interest of
49.6% of the total common shares of Andora on a diluted basis assuming
the exercise of the special warrants.
-- Financial
-- Pan Orient closed a bought deal financing on March 8, 2011 with the
issuance of 7,557,264 shares at a price of $6.55 per share for
proceeds of $46.6 million net of expenses. At March 31, 2011 there
were 56,543,807 common shares issued and outstanding.
-- The $20.0 million of capital expenditures in Thailand, Indonesia and
Canada were funded $12.4 million from funds flow from operations and
$7.6 million from working capital.
-- At March 31, 2011 Pan Orient had $69.2 million of working capital
and non-current deposits, and no long-term debt. In addition, at
March 31, 2011 Pan Orient had $10.6 million of equipment inventory
to be utilized for future Thailand and Indonesia operations that is
included in petroleum and natural gas assets on the balance sheet.
2011 Thailand Outlook
Thailand Production
Thailand oil production is currently 2,380 BOPD with 675 BOPD from Concession
L53 and 1,705 BOPD from Concessions L44, SW1 and L33, up 420 BOPD from the 1,960
BOPD reported on April 26, 2011. All increases are attributed to conventional
sandstone production added from the L53-B, L53-A3, L53-A2 and WBEXT-1E wells.
Concession L53
L53-B is currently producing at 58 BOPD from the K40-A sand and will be
perforated in a structurally higher sandstone interval within the next seven
days. No reserves at December 31, 2010 had been attributed to the L53-B lobe at
any stratigraphic level.
L53-A3 is currently producing at 195 BOPD from the K40-C sand and L53-A2 is
producing at 34 BOPD from the K40-A sand. L53-A2 will be sidetracked to target
the K40-A sand near the L53-A3 well (currently producing from the K40-C sand) in
order to produce from the excellent quality K40-A reservoir encountered by the
L53-A3 well, targeting production additions of 250-400 BOPD. Drilling of the
sidetrack will commence in the next five to six days.
The L53-D discovery well (240 BOPD) is currently being twinned after the initial
well had been sidetracked in 2010 to appraise the extent of the reservoir and
shut in after failing to encounter the target sand. It is anticipated this will
be completed in the next four days, at which time the rig will move to the
L53-A2 sidetrack discussed above. Upon the completion of the L53-A2 sidetrack,
the rig will be mobilized to Concession L44 for development and exploration
drilling until post monsoon (approximately October 2011) when the L53-G and
L53-E exploration prospects in Concession L53 will be drilled.
Concessions L44 & L33
The WBEXT-1E development well encountered an excellent quality "E" sand
reservoir approximately 500 meters west of the original WBEXT-1B discovery well,
and is currently producing at 139 BOPD. Results from the WBEXT field "E" sand
have been encouraging with stabilized rates of between 140-180 BOPD and an
inventory of approximately 15-20 locations remaining in the main fault
compartment alone. This reservoir will be a near term focus of drilling
activity.
In the Wichian Buri field, approximately 45 BOPD is currently shut-in while two
new cellars are added at the POE-3. POE-6 and WBN-2 surface locations. A six
well infill program is planned to commence shortly, targeting rates of 25-60
BOPD per well with each well taking approximately 4 days to complete a vertical
well and slightly longer time to complete highly deviated / horizontal wells.
Any success in the initial infill program will immediately be followed up by a
second, larger infill program.
Summary
Over the past 4 weeks 405 BOPD of production has been added from conventional
sandstone reservoirs, and with the WBEXT-1F well about to commence testing.
Within the next 7 days an additional 480 BOPD is anticipated to be added from
the twin of the L53-D discovery well which had briefly tested 240 BOPD before
being shut-in to drill a sidetrack well, and the WBEXT-1F development well which
had penetrated approximately 80 meters of gross "E" sand (measured thickness) in
the structurally highest position the "E" sand has been encountered to date.
Drilling is currently focused on the development of conventional sandstone
reservoirs at Concessions L53 and L44 in order to establish a stable platform of
production from which development of the main volcanic reservoir fields will be
launched in conjunction with further exploration drilling that will be targeting
75% volcanic and 25% sandstone reservoirs.
The Company is pleased with the production adds of the new conventional
sandstone reservoir wells and the performance of the older volcanic reservoir
wells whose performance has been very stable. The two active drilling rigs for
the remainder of 2011 provide Pan Orient with the flexibility to finally pursue
development of a number of sandstone fields that had been neglected in the past
while pursing higher initial flow rate wells with only 1 active rig.
Earlier guidance of 5,000 to 6,000 BOPD average for 2011 will be reviewed at the
end of the second quarter after the initial results of the development program
outlined above.
Pan Orient is a Calgary, Alberta based oil and gas exploration and production
company with operations currently located onshore Thailand, Indonesia and in
Western Canada.
This news release contains forward-looking information. Forward-looking
information is generally identifiable by the terminology used, such as "expect",
"believe", "estimate", "should", "anticipate" and "potential" or other similar
wording. Forward-looking information in this news release includes, but is not
limited to, references to: well drilling programs and drilling plans, estimates
of reserves and potentially recoverable resources, and information on future
production and project start-ups. By their very nature, the forward-looking
statements contained in this news release require Pan Orient and its management
to make assumptions that may not materialize or that may not be accurate. The
forward-looking information contained in this news release is subject to known
and unknown risks and uncertainties and other factors, which could cause actual
results, expectations, achievements or performance to differ materially,
including without limitation: imprecision of reserve estimates and estimates of
recoverable quantities of oil, changes in project schedules, operating and
reservoir performance, the effects of weather and climate change, the results of
exploration and development drilling and related activities, demand for oil and
gas, commercial negotiations, other technical and economic factors or revisions
and other factors, many of which are beyond the control of Pan Orient. Although
Pan Orient believes that the expectations reflected in its forward-looking
statements are reasonable, it can give no assurances that the expectations of
any forward-looking statements will prove to be correct.
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Three Months Ended Change
Financial and Operating Summary March 31,
(thousands of Canadian dollars
except where indicated) 2011 2010
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FINANCIAL
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Oil revenue, before royalties and
transportation expense 18,449 25,038 -26%
Funds flow from operations (Note 1) 12,362 12,336 0%
Per share - basic $ 0.24 $ 0.26 -7%
Per share - diluted $ 0.24 $ 0.25 -4%
Funds flow from operations by region
(Note 1)
Canada (424) 29
Thailand 12,859 12,364 4%
Indonesia (73) (57) 28%
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Total 12,362 12,336 0%
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Net income attributable to common
shareholders 3,928 4,070 -3%
Per share - basic $ 0.08 $ 0.09 -11%
Per share - diluted $ 0.08 $ 0.08 0%
Working capital 64,512 21,498 200%
Working capital plus non-current
deposits 69,166 25,358 173%
Long-term debt - -
Capital expenditures (Note 2) 19,972 20,269 -1%
Acquisitions - Indonesia (Note 3) 1,780 -
Acquisition - Sawn Lake, Canada
(Note 3) 3,192 -
Shares outstanding (thousands) 56,544 47,414 19%
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Funds Flow from Operations per
Barrel (Note 1)
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Canada operations $ (2.10) $ 0.09
Thailand operations 63.61 36.01 77%
Indonesia operations - G&A expense (0.36) (0.17) 113%
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$ 61.15 $ 35.93 70%
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Capital Expenditures (Note 2)
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Canada 68 63 8%
Thailand 14,414 13,419 7%
Indonesia 5,490 6,787 -19%
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Total 19,972 20,269 -1%
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Working Capital and Non-current
Deposits
----------------------------------------------------------------------------
Working capital & non-current
deposits - beginning of period 31,396 32,738 -4%
Funds flow from operations (Note 1) 12,362 12,336 0%
Capital expenditures (Note 2) (19,972) (20,269) -1%
Acquisitions - Indonesia (Note 4) (1,436) -
Non-cash settlement of Andora
receivable - (600)
Foreign exchange impact on working
capital (314) (373) -2%
Net proceeds on share transactions 47,130 1,526
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Working capital & non-current
deposits - end of period 69,166 25,358 173%
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Canada Operations
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Interest income 21 8
General and administrative recovery
(expense) (263) 29
Realized foreign exchange (loss) (182) (8)
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Funds flow from operations (Note 1) (424) 29
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----------------------------------------
Funds flow from operations per
barrel (Note 1)
Interest income $ 0.10 $ 0.02
General and administrative
(expense) recovery (1.30) 0.09
Realized foreign exchange (loss) (0.90) (0.02)
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$ (2.10) $ 0.09
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Indonesia Operations
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General and administrative (expense)
recovery (73) (57) 28%
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Wells drilled
Gross 1 -
Net 1.0 -
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Three Months Ended Change
March 31,
(thousands of Canadian dollars
except where indicated) 2011 2010
----------------------------------------------------------------------------
Thailand Operations
----------------------------------------------------------------------------
Total oil sales volume (bbls) 202,167 343,400 -41%
Average daily oil sales by
concession (BOPD)
L44 1,501 3,601 -58%
SW1 121 215 -43%
L33 210 -
L53 414 -
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Total 2,246 3,816 -41%
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Average oil sales price, before
transportation (CDN$/bbl) $ 91.26 $ 72.91 25%
Reference Price (volume weighted)
and differential
Crude oil (WTI $US/bbl) $ 94.48 $ 78.83 20%
Exchange Rate $US/$Cdn 1.00 1.06 -5%
Crude oil (WTI $Cdn/bbl) $ 94.48 $ 83.39 13%
Sales price / WTI reference price 97% 87% 10%
Funds flow from operations (Note 1)
Crude oil sales 18,449 25,038 -26%
Government royalty (956) (1,589) -40%
Other royalty (45) (21) 115%
Transportation expense (469) (864) -46%
Operating expense (2,137) (2,198) -3%
----------------------------------------
Field netback 14,842 20,366 -27%
General and administrative expense (992) (1,274) -22%
Interest income 17 28 -39%
Special Remuneratory Benefit (SRB) (23) (2,169) -99%
Current income tax (985) (4,587) -79%
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Funds flow from operations 12,859 12,364 4%
----------------------------------------
----------------------------------------
Funds flow from operations / barrel
(CDN$/bbl) (Note 1)
Crude oil sales $ 91.26 $ 72.91 25%
Government royalty (4.73) (4.63) 2%
Other royalty (0.22) (0.05) 347%
Transportation expense (2.32) (2.52) -8%
Operating expense (10.57) (6.40) 65%
----------------------------------------
Field Netback 73.41 59.31 24%
General and administrative expense (4.90) (3.70) 33%
Interest Income 0.08 0.08 0%
Special Remuneratory Benefit (SRB) (0.11) (6.32) -98%
Current income tax (4.87) (13.36) -64%
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Thailand - Funds flow from
operations $ 63.61 $ 36.01 77%
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Government royalty as percentage of
crude oil sales 5.2% 6.3% -1.2%
SRB as percentage of crude oil sales 0.1% 8.7% -8.5%
Income tax as percentage of crude
oil sales 5.3% 18.3% -13.0%
As percentage of crude oil sales
Expenses - transportation,
operating, G&A and other 19.7% 17.4% 2%
Government royalty, SRB and income
tax 10.6% 33.3% -23%
Funds flow from operations, before
interest income and realized
foreign exchange 69.6% 49.3% 20%
Wells drilled
Gross 6 5 20%
Net 4.4 3.0 47%
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(1) Funds flow from operations ("funds flow" before changes in non-cash
working capital and reclamation costs) is used by management to analyze
operating performance and leverage. Funds flow as presented does not
have any standardized meaning prescribed by IFRS and therefore it may
not be comparable with the calculation of similar measures of other
entities. Funds flow is not intended to represent operating cash flow or
operating profits for the period nor should it be viewed as an
alternative to cash flow from operating activities, net earnings or
other measures of financial performance calculated in accordance with
IFRS. All references to funds flow throughout this MD&A are based on
funds flow from operations before changes in non-cash working capital
and reclamation costs.
(2) Cost of capital expenditures, excluding any asset retirement obligation
and excluding the impact of changes in foreign exchange rates.
(3) Cost of acquisitions, including deemed value of equity issued in the
transaction.
(4) Cost of acquisitions, excluding deemed value of equity issued in the
transaction.
To view the Thailand 2011 Drilling - Concessions L33/43 & L44/43 map, the
Thailand 2011 Drilling - Concession L53 map and the Pan Orient 2011 Drilling
charts, please visit the following link:
http://media3.marketwire.com/docs/526poe.pdf