Pan Orient Energy Corp. ("Pan Orient") (TSX VENTURE:POE) is pleased to provide
highlights of its 2013 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 is today filing its unaudited consolidated financial statements
as at and for the three months ended March 31, 2013 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.
2013 FIRST QUARTER OPERATING RESULTS
-- Total corporate funds flow from operations for the first quarter of 2013
were $5.7 million compared with $5.8 million for the fourth quarter of
2012 and $18.7 million for the first quarter of 2012. Funds flow from
operations per share was $0.10 for the first quarter of 2013. The
reduction compared to the first quarter of 2012 is primarily due to the
sale in June 2012 of subsidiaries holding Pan Orient's 60% interests in
Thailand Concessions L44, L33 and SW1 and oil production at the L53-D
East field in Concession L53 in Thailand coming off flush production
levels.
-- Net income attributable to common shareholders of $0.3 million, or $0.01
per share, for the first quarter of 2013 compared with net income
attributable to common shareholders of $0.9 million, or $0.02 per share,
for the fourth quarter of 2012 and $8.1 million, or $0.14 per share, for
the first quarter of 2012.
-- Capital expenditures were $34.5 million for the first quarter of 2013
with $13.8 million in Thailand, $18.5 million in Indonesia and $2.2
million in Canada. Capital expenditures were partially funded by
Thailand funds flow from operations and existing working capital.
-- At March 31, 2013 Pan Orient had $87.4 million of working capital and
non-current deposits, and no long-term debt. In addition, Pan Orient had
$9.3 million of equipment inventory to be utilized for future Thailand
and Indonesia operations which is included in exploration and evaluation
assets in the consolidated statement of financial position. As at March
31, 2013 estimated commitments for Indonesia PSC's ("Production Sharing
Contracts") to November 2014 were $37.1 million for the Batu Gajah,
Citarum, South CPP and East Jabung PSC's. Estimated commitments in
Thailand at March 31, 2013 relating to Concessions L53 and L45 were $5.6
million to January 2016. Estimated commitments for Canada operations at
March 31, 2013 relating to the SAGD demonstration project of Andora
Energy Corporation ("Andora"), a subsidiary 71.8% owned by Pan Orient,
were $2.8 million to October 2018 relating the Sawn Lake Steam Assisted
Gravity Drainage ("SAGD") demonstration project.
-- Thailand
-- In the first quarter of 2013 Concession L53 averaged oil sales of
819 BOPD and generated $5.9 million in after tax funds flow from
operations, or $79.55 per barrel. This compares with oil sales in
the fourth quarter of 2012 of 1,029 BOPD and $6.3 million in after
tax funds flow from operations, or $66.66 per barrel. Compared with
the fourth quarter of 2012, oil sales declined 20% due to downtime
associated with workovers and declining oil production rates from
the deeper "C" sandstone zones at the L53-DST3 well and there was a
$8.28 per barrel reduction in operating expenses primarily due to
the decrease in water disposal costs from Pan Orient being able to
use its own water disposal facilities.
-- On a per barrel basis, after tax funds flow from operations of
$79.55 in the first quarter of 2013 resulted from oil sales of
$101.05, transportation expenses of $1.51, operating expenses of
$10.21, general and administrative expenses of $4.94 and a royalty
to the Thailand government of $4.88. Oil sales revenue during this
period was allocated 16% to expenses for transportation, operating,
and general & administrative, 5% to the government of Thailand for
royalties, and 79% to Pan Orient.
-- Capital expenditures at Concession L53 during the first quarter of
2013 of $13.8 million in included $9.3 million in drilling costs for
six wells, $3.2 million for 3D seismic programs, and $1.2 million
for well workovers and $0.1 million for other costs. The six well
program in the first quarter of 2013 consisted of two appraisal
wells in the L53-D East field and four exploration wells. These
wells added an average of 141 BOPD in the first quarter, 441 BOPD in
April 2013 and resulted in new oil pool discoveries with the L53-
DC1, L53- A4ST1, and L53-G2 wells. The L53-A4ST1 and L53-G2 wells
are outside existing production license areas and Pan Orient plans
to apply for a single contiguous production license over the L53-
A4ST1 and L53-G2 structures in June, with approval expected by the
fourth quarter of 2013.
-- The L53-DC1 and L53-DC2 appraisal wells are producing oil from a
new pool discovery located in the L53-D East oil field area of
Concession L53 producing from a fault compartment which had not
been penetrated by any earlier wells. For the determination of
crude oil reserves at December 31, 2012, no reserves had been
assigned to this new pool discovery with the L53-DC1 appraisal
well in Concession L53 which started drilling in January 2013.
On a combined basis, these two wells produced 21,078 barrels of
oil to April 30th and averaged 286 BOPD in April. Testing of the
individual sandstone zones continues and each well contains
three to four additional uphole, oil bearing sandstone zones
will be put on production at a future date as existing zones
water out.
-- The L53-DB1 exploration well targeting the L53-D West prospect
was unsuccessful and has been converted to a water disposal
well.
-- The L53-A4 exploration well targeting the L53-H prospect was
unsuccessful.
-- The L53-A4ST1 exploration well was a sidetrack to the L53-A4
well utilizing the same well bore but drilled 180 degrees in the
opposite direction to test a small independent structural
closure south east of the L53-A field and outside the L53-A
production license area. This well encountered net oil pay in
the "K40-A" sand and had produced on a 90 day production test at
approximately 15 to 50 BOPD with a water cut of approximately
93%. L53-A4ST1 is currently shut-in and Pan Orient plans to
convert the L53-A4ST1 well to a water disposal well if a deeper
high risk potential oil zone proves water bearing on a planned
future test, and after a production license covering this
structure has been granted.
-- The L53-G2 exploration well resulted in a new pool discovery at
the L53-G prospect. The L53-G2 well has been producing
approximately 340 to 350 BOPD of 24 degree API oil on a 90 day
production test since late April with a 0.5% water cut from the
"K40-D" sandstone zone. It is planned to continue producing the
well at this restricted rate throughout the duration of the
test. The well encountered a combined total of 20 meters of net
oil pay averaging 28% to 32% porosity in the "K40-D, C, B and A"
sands.
-- In early 2013 the exploration period for Concession L53 was renewed
until January 2016 with a relinquishment of 25% of concession lands
and new commitments including a 3D seismic survey and three
exploration wells with a stated commitment of US$2.6 million. After
the relinquishment, Concession L53 consists of 975 square
kilometers, including 14 square kilometers associated with the L53-A
and L53-D East fields held through production licenses which have a
20 year primary term after the end of the exploration period.
-- 3D seismic surveys commenced in Concession L53 during March 2013 to
acquire additional seismic data over the northeast corner of
Concession 53 and the adjacent lands in Concession L45.
-- Indonesia
-- Capital expenditures in Indonesia of $18.5 million with $3.7 million
at the Citarum PSC, $10.6 million at the Batu Gajah PSC, $3.4
million at the South CPP PSC and $0.8 million at the East Jabung.
-- At the Citarum PSC on-shore Java (Pan Orient operator and 97%
ownership) capital expenditures were $3.7 million as Pan Orient
continued well operations at Jatayu-1 and Cataka-1A.
-- The Jatayu-1 exploration well commenced drilling in March 2012
and was suspended in September 2012 due to drilling
difficulties. Drilling recommenced in early December 2012
utilizing slim hole drilling equipment. A severe overpressure
gas zone encountered created an unacceptable level of well
control risk in early January 2013 and drilling stopped above
the primary target formation. Formation water present in gas
zone suggested no commercial potential in the section that had
been drilled above the primary objective. The well was abandoned
in January 2013.
-- The Cataka-1A well spudded in early December 2012 and the well
was drilled and cased to a depth of 1,692 feet before the well
was suspended in mid-January 2013 due to numerous issues
encountered relative to the operation of the drilling rig. A
number of changes have been made with respect to drilling
personnel, equipment, contractors and well design for the re-
entry of the Cataka-1A well. Drilling is expected to recommence
by the end of May 2013 with an experienced Indonesian drilling
contractor.
-- At the Batu Gajah PSC on-shore Sumatra (Pan Orient operator and 77%
ownership) capital expenditures were $10.6 million directed to the
drilling of the Shinta-1 exploration well, the Buana-1 appraisal
well, commencement of the 400 square kilometer 3D seismic program
and other capital expenditures
-- The Shinta-1 exploration well encountered sub-commercial oil in
the primary Lower Talangakar sandstone target.
-- The Buana-1 well was an updip appraisal of the North Tuba Obi-1
well drilled in 2011, which targeted natural gas in the Lower
Talang Akar formation. Open hole wire line logs and pressure
data indicated the sands to be water bearing. These results
suggest the Buana-1 and the North Tuba Obi-1 fault compartments
are not in communication and the gas accumulation encountered in
the North Tuba Obi-1 well in 2011 is limited and sub-commercial.
The Buana-1 well continued drilling unsuccessfully to a total
depth of approximately 3,800 feet, as required by the Indonesian
oil and gas regulator and within the secondary basement
reservoir objective.
-- During the first quarter of 2013 work continued on site
preparation for the Kemala-1well. In light of drilling results
in the western portion of Batu Gajah PSC, the decision was made
to defer the drilling of Kemala-1, a third well initially
planned for 2013, until 2014 when the acquisition and
interpretation of the recently commenced 400 square kilometer 3D
seismic program has been completed.
-- On January 16, 2013 an additional 1,730 square kilometers
(gross) of exploration lands were relinquished at the Batu Gajah
PSC, to hold 793 square kilometers (gross).
-- At the South CPP PSC on-shore Sumatra (Pan Orient operator and 77%
ownership) capital expenditures of $3.4 million with $3.2 million
for the 227 kilometer 2D seismic program that was completed in May
2013 and $0.2 million for capitalized general and administrative
expenses and other capital expenditures.
-- At the East Jabung PSC on-shore Sumatra (Pan Orient operator and
100% ownership) capital expenditures of $0.8 million related
primarily to the initial costs of the 430 kilometer 2D seismic
program that has just commenced.
-- Canada
-- Activities are currently underway at the Sawn Lake SAGD
demonstration project for drilling of the SAGD well pair in the
third quarter and start-up of steam operations in the fourth quarter
of 2013. Capital expenditures in the first quarter of 2013 were $2.2
million for design and engineering work, site preparation and the
purchase of equipment. At March 31, 2013 there is an additional $2.8
million in commitments relating to contracts for the purchase of
equipment and materials and a natural gas transmission tariff.
OUTLOOK
-- Thailand
The L53-G3ST1 well, the second appraisal well to the L53-G2 oil
discovery, has just completed drilling to a measured depth of 1,500
meters (1,250 meters true vertical depth) at a subsurface location
approximately 350 meters south of the L53-G2 oil discovery, and is
currently logging. Prior to release of the E-01 drilling rig at the end
of the current drilling campaign, one additional well is planned for
L53-G field and three additional wells are planned to target the shallow
sands in various fault compartments within the L53-D East structure. The
Thailand capital budget is being increased approximately $8.7 million
for the addition of these four wells and recompletion activities.
The 260 square kilometer 3D seismic survey covering the northern portion
of Concession L53 and the adjacent lands in Concession L45 is expected
to be completed in June 2013 and set up an exploration drilling program
to commence in 2014.
Oil production averaged 879 BOPD for the month of April. Oil production
is currently 1,156 BOPD with a target at the end of the current drilling
program of greater than 1,500 BOPD. As expected, the L53-A4ST1 well has
now been shut in as a result of high water cut, resulting in a decrease
in production of 50 BOPD from the last production update on April 25th.
The L53-DC well, which represented 175 BOPD in the last production
update, is shut-in pending the arrival of a workover rig to perforate
the "A1" sand. A workover is also planned for the L53-DST3 well to
complete a lower zone with previously untested deep "C" sands. The
recently announced oil discovery at L53-G2 continues to perform well
with production averaging approximately 340 BOPD with a 0.5% water cut.
The average production for the remainder of the year will be severely
impacted by the time required to receive approval of the L53-G
production license and associated production EIA. Until a production
license is granted over the L53-G field, wells in the L53-G field will
be shut-in at the end of their respective 90 day test periods as per
government regulations. Historically, it has been an approximately 90
day period from the submission of the production license application to
approval. It is expected that sufficient data will be available to
complete an application in June 2013. Production environmental approval
has historically taken substantially longer than 90 days, but in a
number of cases approval has been granted to extend the 90 day
production test period until the environmental approval has been
received Given these uncertainties, an accurate estimate of what
production will average for the remainder of 2013 is not possible.
-- Indonesia
A 227 kilometer 2D seismic program has just been completed in the South
CPP PSC with data processing expected to be completed by June 2013 and
followed by the drilling of one exploration well in 2014.
A 400 square kilometer seismic program has been underway for
approximately one month in the Batu Gajah PSC, with acquisition expected
to be completed in the third quarter of 2013 and the drilling of up to
three exploration wells in 2014.
A 430 kilometer 2D seismic program has just commenced in the East Jabung
PSC with acquisition expected to be completed in October 2013 followed
by the drilling of up to two exploration wells in 2014.
The Cataka-1A well in the Citarum PSC is expected to commence drilling
in the last week of May 2013 and take approximately 30 days to reach the
top of the Parigi formation target at a depth of approximately 2,300
meters. The well was originally suspended in mid-January 2013 at a depth
of approximately 550 meters, 1,750 meters above the primary reservoir
objective. The continuation of drilling will utilize a number of changes
including a more experienced rig contractor and drilling team, a rotary
steerable directional drilling assembly and a managed pressure drilling
system. The Cataka prospect is a large, approximately 25 square
kilometer structure at the depth of the Parigi limestone objective
level.
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. Readers are cautioned
that well test results are not necessarily indicative of long-term performance
or of ultimate recovery.
--------------------------
Three Months
Ended
Financial & Operating Summary March 31,
(thousands of Canadian dollars except where
indicated) 2013 2012 Change
----------------------------------------------------------------------------
FINANCIAL
----------------------------------------------------------------------------
Oil revenue, before royalties and transportation
expense 7,444 25,654 -71%
Funds flow from operations (Note 1) 5,664 18,668 -70%
Per share - basic and diluted $ 0.10 $ 0.33 -70%
Funds flow from operations by region (Note 1)
Canada (123) (220) -44%
Thailand 5,860 18,954 -69%
Indonesia (73) (66) 11%
--------------------------
Total 5,664 18,668 -70%
--------------------------
Net income attributed to common shareholders 341 8,124 -96%
Per share - basic and diluted $ 0.01 $ 0.14 -96%
Working capital 85,215 45,379 88%
Working capital and non-current deposits 87,442 48,501 80%
Long-term debt - -
Petroleum and natural gas properties
Capital expenditures (Note 2) 34,509 21,471 61%
Shares outstanding (thousands) 56,760 56,685 0%
----------------------------------------------------------------------------
Funds Flow from Operations per Barrel (Note 1)
----------------------------------------------------------------------------
Canada operations $ (1.67) $ (0.95) 76%
Thailand operations 79.55 81.98 -3%
Indonesia operations (0.99) (0.29) 242%
--------------------------
$ 76.89 $ 80.75 -5%
----------------------------------------------------------------------------
Capital Expenditures (Note 2)
----------------------------------------------------------------------------
Canada 2,224 43 5072%
Thailand 13,793 13,613 1%
Indonesia 18,492 7,815 137%
--------------------------
Total 34,509 21,471 61%
----------------------------------------------------------------------------
Working Capital and Non-current Deposits
----------------------------------------------------------------------------
Working capital and non-current deposits & long
term accounts receivable - beginning of period 116,376 51,632 125%
Funds flow from operations (Note 1) 5,664 18,668 -70%
Capital expenditures (Note 2) (34,509) (21,471) 61%
Foreign exchange impact on working capital (219) (328) -33%
Net proceeds on share transactions 130 - 100%
--------------------------
Working capital and non-current deposits & long
term accounts receivable - end of period 87,442 48,501 80%
----------------------------------------------------------------------------
Canada Operations
----------------------------------------------------------------------------
Interest income 305 69 342%
General and administrative expense (Note 3) (430) (256) 68%
Current income tax recovery 82 - 100%
Realized foreign exchange loss (80) (33) 142%
--------------------------
Funds flow from operations (Note 1) (123) (220) -44%
--------------------------
--------------------------
Funds flow from operations per barrel
Interest income $ 4.14 $ 0.30 1280%
General and administrative expense (Note 3) (5.84) (1.11) 426%
Current income tax recovery 1.11 - 100%
Realized foreign exchange loss (1.09) (0.14) 676%
--------------------------
$ (1.67) $ (0.95) 76%
----------------------------------------------------------------------------
Indonesia Operations
----------------------------------------------------------------------------
General and administrative expense (Note 3) (75) (66) 14%
Realized foreign exchange gain 2 - 100%
--------------------------
Indonesia - Funds flow from operations (73) (66) 11%
--------------------------
Wells drilled
Gross 2 1 100%
Net 2.0 0.8 150%
----------------------------------------------------------------------------
----------------------------
Three Months Ended
March 31,
(thousands of Canadian dollars except where
indicated) 2013 2012 Change
----------------------------------------------------------------------------
Thailand Operations
----------------------------------------------------------------------------
Oil sales (bbls) 73,666 231,188 -68%
Average daily oil sales (BOPD) by Concession
L53 819 1,358 -40%
L44, L33, SW1 (interests sold June 15, 2012) - 1,183 -100%
----------------------------
Total 819 2,541 -68%
----------------------------
Average oil sales price, before transportation
(CDN$/bbl) $ 101.05 $ 110.97 -9%
Reference Price (volume weighted) and
differential
Crude oil (Brent $US/bbl) $ 112.17 $ 118.90 -6%
Exchange Rate $US/$Cdn 1.02 1.02 0%
Crude oil (Brent $Cdn/bbl) $ 114.23 $ 121.09 -6%
Sale price / Brent reference price 88% 92% -3%
Funds flow from operations (Note 1)
Crude oil sales 7,444 25,654 -71%
Government royalty (359) (1,273) -72%
Other royalty - (49) -100%
Transportation expense (111) (444) -75%
Operating expense (752) (2,126) -65%
----------------------------
Field netback 6,222 21,762 -71%
General and administrative expense (Note 3) (364) (921) -61%
Interest income 3 9 -67%
Current income tax (1) (1,896) -100%
----------------------------
Funds flow from operations 5,860 18,954 -69%
----------------------------
----------------------------
Funds flow from operations / barrel (CDN$/bbl)
(Note 1)
Crude oil sales $ 101.05 $ 110.97 -9%
Government royalty (4.87) (5.51) -12%
Other royalty - (0.21) -100%
Transportation expense (1.51) (1.92) -22%
Operating expense (10.21) (9.20) 11%
----------------------------
Field netback 84.46 94.13 -10%
General and administrative expense (Note 3) (4.94) (3.98) 24%
Interest income 0.04 0.04 2%
Current income tax (0.01) (8.20) -100%
----------------------------
Thailand - Funds flow from operations $ 79.55 $ 81.98 -3%
----------------------------
----------------------------
Government royalty as percentage of crude oil
sales 5% 5% 0%
Income tax as percentage of crude oil sales 0% 7% -7%
As percentage of crude oil sales
Expenses - transportation, operating, G&A and
other 16% 14% 3%
Government royalty, and income tax 5% 12% -8%
Funds flow from operations, before interest
income 79% 74% 5%
Wells drilled
Gross 6 6 0%
Net 6.0 4.4 36%
----------------------------------------------------------------------------
(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.
(2) Cost of capital expenditures, excluding any decommissioning provision
and excluding the impact of changes in foreign exchange rates.
(3) General & administrative expenses, excluding non-cash accretion on
decommissioning provision.
(4) Tables may not add due to rounding.
To view the map and mining tables associated with this release, please visit the
following link: http://media3.marketwire.com/docs/523boe1.pdf.
FOR FURTHER INFORMATION PLEASE CONTACT:
Pan Orient Energy Corp.
Jeff Chisholm
President and CEO (located in Bangkok, Thailand)
(403) 294-1770
jeff@panorient.ca
Pan Orient Energy Corp.
Bill Ostlund
Vice President Finance and CFO
(403) 294-1770
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