CALGARY, ALBERTA–(Marketwired – Nov. 14, 2013) – Pan Orient Energy Corp. (“Pan Orient”) (TSX VENTURE:POE) is providing its 2013 third 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 nine months ended September 30, 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 THIRD QUARTER OPERATING RESULTS
- Total corporate funds flow from operations for the third quarter of 2013 were $4.8 million compared with $5.7 million in the first quarter of 2013 and $6.5 million for the second quarter of 2013. Funds flow from operations per share was $0.08 for the third quarter of 2013.
- During the third quarter of 2013 there was a net loss attributable to common shareholders of $3.1 million, or $0.05 per share, compared with net income attributable to common shareholders of $0.3 million, or $0.01 per share, for the first quarter of 2013 and a net loss attributable to common shareholders of $97.7 million, or $1.73 per share, for the second quarter of 2013. The 2013 cumulative net loss for the first three quarters of 2013 of $100.4 million largely resulted from the $104.2 million write-down of exploration and evaluation assets associated with the Citarum and South CPP Production Sharing Contracts (“PSC’s”) in Indonesia. For this write-down, $99.6 million was recorded in the second quarter of 2013 and a further $4.6 million was recorded in the third quarter of 2013 primarily relating to costs incurred to complete drilling operations of the Cataka-1A well in July.
- Capital expenditures were $17.6 million for the third quarter of 2013 and included $13.2 million in Indonesia and $5.5 million in Thailand. There was a $1.1 million recovery of capital costs in Canada at the Sawn Lake steam assisted gravity drainage (“SAGD”) demonstration project of Andora Energy Corporation (“Andora”) due to the joint venture partners electing to participate for a 50% working interest in the project. The reduction of Pan Orient capital expenditures in the third quarter from $34.5 million in the first quarter of 2013 and $38.0 million for the second quarter of 2013 reflects completion of all 2013 drilling and seismic programs in Thailand and Indonesia except for completion of the seismic program at East Jabung which is currently underway. Capital expenditures were funded partially by the $4.8 million of funds flow from operations and the remainder through existing working capital.
- At September 30, 2013 Pan Orient had $40.9 million of working capital and non-current deposits, and no long-term debt. In addition, Pan Orient had $7.5 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.
- In the third quarter of 2013 Concession L53 averaged oil sales of 809 BOPD and generated $5.4 million in after tax funds flow from operations, or $73.13 per barrel. This compares with oil sales in the second quarter of 2013 of 955 BOPD and $6.6 million in after tax funds flow from operations, or $76.27 per barrel. Oil sales decreased 15% from the second quarter of 2013 primarily due to the L53-G2 well being shut-in from July 14th, when it was producing at approximately 301 BOPD, to September 3rd when permission was received to resume production testing, the shut-in of the L53-G3ST1 well on September 12th, and declines in other wells in the L53-A and L53-D fields which were partially offset with oil sales from the new L53-EXT and L53-G4 wells which were brought on during the quarter.
- Oil sales in October 2013 at Concession L53 were 1,156 BOPD. Estimated oil sales over the past 30 days has averaged 986 BOPD and current Thailand oil production is approximately 939 BOPD, excluding approximately 115 BOPD that is currently shut-in.
- The L53-G2 well drilled in late March 2013 was a new pool discovery outside of the existing production license areas in Concession L53 and a production license and associated environmental approval is required for the new L53-G field before permanent production can commence. The Company applied for the new production license for the L53-G oil pool in mid-August. Until a production license is granted and environmental approval received for the L53-G field, wells in the L53-G field (including L53-G2, L53-G3ST1 and L53-G4) are shut-in at the end of their respective 90 day test periods as per government regulations. Approval of the L53-G production license is anticipated in late November 2013 and environmental approval is anticipated sometime between late November 2013 and mid-January 2014. The Company received permission for an additional 90 day test period for the L53-G2 well only and this production testing extension will end on December 3rd. The L53-G2 well is currently producing 501 BOPD.
- On a per barrel basis, after tax funds flow from operations of $73.13 in the third quarter of 2013 was fairly consistent with the first two quarters of 2013 and resulted from oil sales of $99.34, transportation expenses of $1.60, operating expenses of $14.56, general and administrative expenses of $5.13 and a royalty to the Thailand government of $4.94. Oil sales revenue during this period was allocated 21% to expenses for transportation, operating, and general & administrative, 5% to the government of Thailand for royalties, and 74% to Pan Orient.
- Capital expenditures of $5.5 million in Thailand during the third quarter of 2013 included $2.2 million in drilling costs in Concession L53, including the L53-G4 well, and $3.3 million for well workovers in Concession L53 to evaluate different zones and add oil production. Pan Orient drilled the L53-G4 appraisal well in the third quarter to complete the drilling program. The well is currently producing at approximately 42 BOPD.
- The Thailand drilling program in Concession L53 was completed in August and consisted of 13 wells which resulted in:
- The L53-DC1, L53-DC2, L53-DC3 and L53-DC4 wells have produced oil from a new pool discovery from a new fault compartment within the L53-D East oil field area. Production from the heavy oil zones encountered in the shallow zones at the L53-DC East field has been inconsistent and various procedures are being implemented in an effort to improve oil production and deal with sand production. Installation of progressive cavity pumps is planned for the L53-DC3 well and two other wells in the L53-DC field and we are awaiting delivery of the pumps.
- The L53-DEXT exploration well was drilled in the second quarter of 2013 into a new fault compartment at the L53-D field. This well produced approximately 40 BOPD of 14 degree API heavier oil from a shallow “A3” sands during testing. The well is currently shut-in awaiting a workover to perforate additional possible oil pay zones above the existing perforations.
- The L53-G2 discovery well and the appraisal L53-G4 are producing oil from the new L53-G pool, and the L53-G3ST1 appraisal well has been shut-in since September 12th when it completed its 90 production test period. Oil sales to October 31, 2013 from these three wells have totaled 63,729 barrels of oil.
- Unsuccessful exploration wells at L53-DB1 (targeting the L53-D West prospect), L53-A4 (targeting the L53-H prospect), L53-F, and L53-EXT1 (targeting the deeper “A5” to “A3” oil bearing sands that were logged in the L53-DC4 pilot well). The L53-DB1 well has been converted to a water disposal well.
- The L53-A4ST1 exploration well drilled 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 well to a water disposal well.
- Wells drilled in this drilling program added an average of 533 BOPD in the third quarter of 2013, despite the L53-G2 well being shut in temporarily from July 14th to September 3rd, and the L53-G3ST1 well being shut-in temporarily on September 12th. Pan Orient has recently received environmental approval for drilling the L53-A Central prospect in Concession L53 and is waiting for environmental approval for drilling of the L53 North prospect and additional locations in L53-G field. The drilling of prospects at L53-A Central and L53 North is anticipated in 2014.
- The Company has conducted significant exploration activities in Indonesia during the first three quarters of 2013 with exploration drilling at the Batu Gajah and Citarum PSC’s and seismic programs at the Batu Gajah, South CPP and East Jabung PSC’s to evaluate exploration potential.
- Capital expenditures in Indonesia of $13.2 million in the third quarter of 2013 were $4.0 million for completion of drilling of the Cataka-1A well at the Citarum PSC, $8.4 million at the Batu Gajah PSC associated with the 3D seismic program, and $0.8 million at the East Jabung PSC for the 3D seismic program.
- During the first nine months of 2013 capital expenditures in Indonesia have been $48.3 million with $15.2 million at the Citarum PSC, $26.6 million at the Batu Gajah PSC, $4.5 million at the South CPP PSC and $2.0 million at the East Jabung. For the first nine months of 2013, capital expenditures were $22.9 million for exploration drilling, $21.7 million for seismic programs, $2.9 million for capitalized general and administrative expenses, and $0.8 for other exploration expenses.
- Citarum PSC onshore Java (Pan Orient operator and 97% ownership)
- Capital expenditures of $15.2 million in the first nine months of 2013 were associated with the continued drilling operations at the Jatayu-1 and Cataka-1A wells.
- Exploration drilling to date at the Citarum PSC has been very technically challenging and has not led to commercial discoveries. Pan Orient announced in July that the Company was initiating a farm-out process to seek a partner for continued exploration of the Citarum PSC and the farm-out process has commenced. The Citarum PSC has significant prospectivity for commercial quantities of crude oil and natural gas, including the defined Cataka and Jatayu prospects, within a region of existing infrastructure and a large deficit of natural gas supply relative to demand, good fiscal terms and an attractive large cost recovery pool.
- Pan Orient’s decision to discontinue drilling at the Citarum PSC and to initiate a farm-out process for continued exploration of the Citarum PSC and the future value of the Citarum PSC is dependent on the success of exploration drilling operations through the intended farm-out arrangement. As such, the Company reduced the carrying value of the Citarum PSC exploration and evaluation assets to zero in the second quarter of 2013 and recorded an impairment charge of $86.3 million and recorded a further $4.6 million impairment charge in the third quarter of 2013 primarily relating to costs incurred to complete drilling operations of the Cataka-1A well in July.
- Batu Gajah PSC onshore Sumatra (Pan Orient operator and 77% ownership)
- 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).
- Capital expenditures in the first nine months of 2013 of $26.6 with $4.7 million for drilling of the Shinta-1 exploration well, $4.5 million for the Buana-1 appraisal well, $16.3 million for the 400 square kilometer 3D seismic program which was completed in the third quarter and other capital expenditures of $1.1 million.
- With respect to the 400 square kilometers 3D seismic program, field acquisition has been completed over the Raka, Takar, Rafa and western prospect areas, and the 3D data is being processed and mapped.
- The operator of the Lemang PSC (directly adjacent to and west of a retained portion of Pan Orient’s Batu Gajah PSC), has announced that significant hydrocarbons have been encountered in two wells located close to the Lemang PSC / Batu Gajah PSC boundary. Mapping of 2D seismic data over these wells combined with 2D seismic acquired by Pan Orient in 2010 indicates a portion of this structural closure extends into the Batu Gajah PSC. Articles of the PSC contract indicate that unitization of the potential field will be mandatory in the event of a “shared” field. Pan Orient is currently evaluating the field and the potential for drilling a well in our portion of the field.
- South CPP PSC onshore Sumatra (Pan Orient operator and 77% ownership).
- Capital expenditures were $4.5 million in the first nine months of 2013 with $4.2 million for the 227 kilometer 2D seismic program which was completed in May 2013 and $0.3 million for capitalized general and administrative expenses and other capital expenditures.
- After the evaluation of the seismic program results, the Company decided in the second quarter of 2013 to relinquish the South CPP PSC. As part of the relinquishment, it is expected that the Company is required to pay the Government of Indonesia for unfulfilled firm commitments in the amount of $2.8 million, and this amount has been accrued for in the financial statements. As a result of the intended relinquishment the Company is reducing the carrying value of the South CPP PSC exploration and evaluation assets to zero and the Company recorded an impairment charge of $13.3 million for the exploration and evaluation assets of the South CPP PSC as at June 30, 2013.
- East Jabung PSC on-shore and offshore Sumatra (Pan Orient operator and 100% ownership)
- Capital expenditures of $2.0 million in the first nine months of 2013 related primarily to the initial costs of the 430 kilometer 2D seismic program which is expected to be completed in early 2014.
- Subsequent to September 30, 2013, the Company submitted an application to the GOI to voluntarily relinquish approximately 3,242.72 square kilometers of the PSC’s offshore area. The result of the relinquishment does not impact the PSC’s onshore exploration activities.
- As at September 30, 2013 estimated commitments for Indonesia PSC’s to October 2015 were $14.0 million for the Batu Gajah, Citarum and East Jabung PSC’s.
- The Sawn Lake SAGD demonstration project is significantly underway, in which Andora is the operator and has a 50% working interest. Andora is owned 71.8% by Pan Orient. The Sawn Lake SAGD demonstration project in 2013 consists of drilling one SAGD well pair, construction of a facility for steam generation, water handling and oil treating, and installing water source and disposal facilities with an estimated cost of $24.1 million. The SAGD wells have been drilled to a depth of 650 meters and have a horizontal length of 780 meters. Work is proceeding on installation of the facility.
- In the third quarter of 2013 our joint venture partners in the demonstration project provided notice of their election to participate for 50% in the demonstration project and provided the necessary funding to Andora. As part of the arrangement for the demonstration project, our joint venture partners have purchased a 50% interest in water facilities from Andora for $850,000 in the fourth quarter of 2013 and it is expected the joint venture partners will repurchase the 3% gross overriding royalty on their 40% working interest in the 12 sections of the Central Block for $2.8 million, under certain terms and conditions.
Between now and year end Thailand activities will be focused on a number of workovers and pump replacements on a number of the shallow heavy oil wells at the L53-D East field, and complete location construction for the L53 A Central prospect. Drilling at L53 A Central is currently planned for early in the first quarter of 2014, subject to rig availability.
Pan Orient possesses a diverse portfolio of high quality, high impact exploration and production opportunities in Indonesia and is currently seeking to farm-out a portion of the Company’s interests in the Batu Gajah, East Jabung and Citarum PSC’s. Initial response has been strong from a wide range of companies, necessitating the opening of a second data room. It is expected that farmout activities will extend into early 2014 and be followed by the drilling of up to seven wells in mid-2014, subject to a number of variables.
Data processing of the 400 square kilometer Batu Gajah PSC 3D seismic survey is currently underway and 2D seismic acquisition continues in East Jabung PSC with completion expected in the first quarter of 2014.
- Canada – Sawn Lake (Operated by Andora, in which Pan Orient has a 71.8% ownership)
At the Sawn Lake demonstration project drilling of the first SAGD well pair has been completed, final site preparation and construction is underway, and equipment for the facility is ready for installation. Steam injection at the Sawn Lake SAGD demonstration project is scheduled for January 2014, with production anticipated early in the second quarter of 2014.
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.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
|Financial and Operating Summary||Three Months Ended
|Nine Months Ended
|(thousands of Canadian dollars except where indicated)||2013||2012||2013||2012|
|Oil revenue, before royalties and transportation expense||7,379||7,808||23,316||45,964||-49||%|
|Funds flow from operations (Note 1)||4,797||3,348||16,998||28,982||-41||%|
|Per share – basic and diluted||$||0.08||$||0.06||$||0.30||$||0.51||-41||%|
|Funds flow from operations by region (Note 1)|
|Funds flow – Thailand disposition net proceeds (Note 2)||–||553||–||158,505||-100||%|
|Net income (loss) attributed to common shareholders||(3,109||)||(1,626||)||(100,445||)||85,783||-217||%|
|Per share – basic and diluted||$||(0.05||)||$||(0.03||)||$||(1.77||)||$||1.51||-217||%|
|Working capital & non-current deposits||40,879||134,061||40,879||134,061||-70||%|
|Capital expenditures (Note 3)||17,649||12,021||90,136||57,472||57||%|
|Shares outstanding (thousands)||56,760||56,720||56,760||56,720||0||%|
|Funds Flow from Operations per Barrel (Note 1)|
|Capital Expenditures (Note 3)|
|Working Capital and Non-current Deposits|
|Beginning of period||54,345||184,536||116,376||51,632||125||%|
|Funds flow from operations (Note 1)||4,797||3,348||16,998||28,982||-41||%|
|Thailand disposition net proceeds (Note 2)||–||553||–||158,505||-100||%|
|Thailand disposition – sale of working capital (Note 2)||–||–||–||(4,591||)||-100||%|
|Recovery of 2012 taxes paid on Thailand disposition||–||–||1,785||–||100||%|
|Capital expenditures (Note 3)||(17,649||)||(12,021||)||(90,136||)||(57,472||)||57||%|
|Accrued relinquishment costs||45||–||(2,733||)||–||100||%|
|Foreign exchange impact on working capital||(659||)||185||(1,541||)||(455||)||239||%|
|Net proceeds on share transactions||–||–||130||–||100||%|
|End of period||40,879||134,061||40,879||134,061||-70||%|
|Canada Operations (excluding 2012 Thailand disposition)|
|Interest income and realized foreign exchange loss||13||(1,404||)||514||(1,076||)|
|General and administrative expense (Note 4)||(161||)||(617||)||(1,002||)||(1,934||)||-48||%|
|Current income tax recovery||100||–||252||–||100||%|
|Funds flow from operations (Note 1)||(48||)||(2,021||)||(236||)||(3,010||)||-92||%|
|Funds flow from operations per barrel|
|Interest income and realized foreign exchange loss||$||0.16||$||(18.11||)||$||2.18||$||(2.51||)|
|General and administrative expense (Note 4)||(2.16||)||(7.96||)||(4.26||)||(4.51||)||-6||%|
|Current income tax recovery||1.34||–||1.07||–||100||%|
|General and administrative expense (Note 4)||(695||)||(284||)||(817||)||(405||)||102||%|
|Realized foreign exchange gain||95||–||114||–||100||%|
|Indonesia – Funds flow from operations||(600||)||(284||)||(703||)||(405||)||74||%|
|Three Months Ended
|Nine Months Ended
|(thousands of Canadian dollars except where indicated)||2013||2012||2013||2012||Change|
|THAILAND OPERATIONS (Note 2)|
|Oil sales (bbls)||74,458||77,477||235,073||428,635||-45||%|
|Average daily oil sales (BOPD) by Concession|
|L44, L33, SW1 (interests sold June 15, 2012)||–||–||–||658||-100||%|
|Average oil sales price, before transportation (CDN$/bbl)||$||99.34||$||100.78||$||99.19||$||107.23||-8||%|
|Reference Price (volume weighted) and differential|
|Crude oil (Brent $US/bbl)||$||110.31||$||108.76||$||108.04||$||114.95||-6||%|
|Exchange Rate $US/$Cdn||1.02||1.02||1.03||1.01||2||%|
|Crude oil (Brent $Cdn/bbl)||$||112.09||$||110.51||$||111.38||$||116.61||-4||%|
|Sale price / Brent reference price||89||%||91||%||89||%||92||%||-3||%|
|Funds flow from operations (Note 1)|
|Crude oil sales||7,397||7,808||23,316||45,964||-49||%|
|General and administrative expense (Note 4)||(382||)||(307||)||(1,134||)||(1,831||)||-38||%|
|Current income tax||(1||)||(2||)||(2||)||(3,408||)||-100||%|
|Thailand – Funds flow from operations (Note 1)||5,445||5,653||17,937||32,397||-45||%|
|Funds flow from operations / barrel (CDN$/bbl) (Note 1)|
|Crude oil sales||$||99.34||$||100.78||$||99.19||$||107.23||-8||%|
|General and administrative expense (Note 4)||(5.13||)||(3.96||)||(4.82||)||(4.27||)||13||%|
|Current income tax||(0.01||)||(0.03||)||(0.01||)||(7.95||)||-100||%|
|Thailand – Funds flow from operations (Note 1)||$||73.13||$||72.96||$||76.30||$||75.59||1||%|
|Government royalty as percentage of crude oil sales||5||%||5||%||5||%||5||%||0||%|
|SRB as percentage of crude oil sales||0||%||0||%||0||%||0||%||0||%|
|Income tax as percentage of crude oil sales||0||%||0||%||0||%||7||%||-100||%|
|As percentage of crude oil sales|
|Expenses – transportation, operating and G&A||21||%||23||%||18||%||17||%||6||%|
|Government royalty and income tax||5||%||5||%||5||%||12||%||-60||%|
|Funds flow from operations, before interest income and realized foreign exchange gain||74||%||72||%||77||%||70||%||9||%|
|(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)||Thailand Concessions SW1, L44 and L33 were sold on June 15, 2012. Proceeds of $185.3 million less transaction costs of $11.2 million and estimated tax of $15.6 million results in proceeds net of expenses of $158.5 million. After deducting $80.6 million related to the carrying value of petroleum and equipment, exploration and evaluation costs, and working capital sold (including the elimination of the associated deferred tax liabilities, employee pension liabilities, and decommissioning provision). The net after tax gain on sale is $77.9 million. The 2012 financial statements and operating results include revenue, expenses and capital expenditures associated with these properties to June 14, 2012.|
|(3)||Cost of capital expenditures, excluding any decommissioning provision and excluding the impact of changes in foreign exchange rates.|
|(4)||General & administrative expenses, excluding non-cash accretion and gain on settlement of decommissioning provision.|
To view accompanying map and table, visit the following link: http://media3.marketwire.com/docs/POE_111413_Map_Well_Table.pdf
President and CEO (located in Bangkok, Thailand)
Pan Orient Energy Corp.
Vice President Finance and CFO