2019 Second Quarter Financial & Operating Results

Source Press Release
Company Pan Orient Energy Corp. 
Tags Strategy - Corporate, Financial & Operating Data
Date August 21, 2019

Pan Orient Energy Corp. (“Pan Orient” or the “Company”) (POE – TSXV) reports 2019 second 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.  

The Company is today filing its unaudited consolidated financial statements as at and for the six months ended June 30, 2019 and related management’s discussion and analysis with Canadian securities regulatory authorities.  Copies of these documents may be obtained online at  or the Company’s website,  .

Commenting today on Pan Orient’s 2019 second quarter results, President and CEO Jeff Chisholm stated: “The strong second quarter of 2019 financial results reflected the substantial production increase from Thailand.  Before the end of August we’ll see the commencement of drilling in Thailand with the L53-DD5 exploration well that will be testing a 3D seismically defined structural closure due west of the recent L53-DD oil discovery.  A second Thailand exploration program is planned to commence in late October 2019.  Of particular note, we also expect to commence drilling of the much anticipated potentially high impact Anggun-1X exploration well in October 2019. Despite a long series of permit, weather and operational related delays, substantial road and well pad construction progress has been made with the weather finally cooperating these past three weeks”.

HIGHLIGHTS

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

  • Two successful Thailand appraisal wells (L53-DD3 and L53-DD4) were drilled in the first quarter of 2019 as a follow-up to the discovery of the Concession L53-DD field in the fourth quarter of 2018. 
  • Net to Pan Orient’s 50.01% equity interest in the Thailand Joint Venture, oil sales from Concession L53 averaged 791 BOPD in the first half of 2019.  During the second quarter of 2019 oil sales averaged 1,072 BOPD with 352 BOPD in April, 1,316 in May and 1,540 in June.  The 111% increase compared to the first quarter of 2019 oil sales of 507 BOPD is due to the approval of the L53-DD Production License on April 22ndand recommencement of production from the four L53-DD wells.
  • Adjusted funds flow from operations of $9.4 million in the first half of 2019 with $6.6 million ($68.16 per barrel) in the second quarter and $2.8 million ($60.35 per barrel) in the first quarter. 
  • Strong financial results in Thailand during the second quarter of 2019 increased working capital and long-term deposits at June 30, 2019, net to Pan Orient’s 50.01% equity interest, to $11.4 million in Thailand alone. 

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

  • Construction of the access road and wellpad for the Anggun-1X exploration well at the East Jabung Production Sharing Contract (“PSC”) in Indonesia continues to proceed although there have been delays for weather and additional work required for extra piles to support the rig substructure and mud tanks.  Capital expenditures at the East Jabung PSC for first half of 2019 have been $1.7 million.
  • 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

  • Total corporate adjusted funds flow from operations (including Pan Orient’s 50.01% equity interest in the Thailand Joint Venture) for the first half of 2019 of $7.3 million ($0.13 per share) with $5.7 million ($0.10 per share) in the second quarter of 2019 based on the strength of Thailand oil production.
  • The net income attributable to common shareholders for the first half of 2019 was $0.4 million ($0.01 per share) with $1.3 million ($0.02 per share) in the second quarter of 2019.
  • Under the renewed normal course issuer bid Pan Orient is authorized to purchase, for cancellation, up to 4,504,064 of its common shares (10% of the public float) during the period of May 16, 2019 to May 16, 2020.  To June 30, 2019 Pan Orient repurchased 63,400 common shares at an average price of $1.92 per share.
  • Pan Orient continues to maintain a strong financial position for exploration activities at the East Jabung PSC in Indonesia and at Concession L53 in Thailand with working capital and non-current deposits at June 30, 2019 of $28.9 million and no long-term debt.  In addition, Pan Orient’s 50.01% equity interest in the Thailand Joint Venture includes working capital and long-term deposits of $11.4 million and $2.9 million of equipment inventory to be utilized for future Thailand Joint Venture operations.  Total combined working capital and long-term deposits in Canada and Pan Orient’s 50.01% equity interest in the Thailand Joint Venture is $40.3 million.

OUTLOOK

INDONESIA

East Jabung PSC, Onshore Sumatra (Pan Orient 49% ownership & Non Operator)
The Operator of the East Jabung PSC, Repsol (Indonesia), after consultations with the winning bid rig contractor, advised Pan Orient of a one month delay related mainly to the extra piles required to support the rig substructure and mud tanks.  The approximate date for mobilization is expected in early September with drilling to commence 30 to 40 days after the start of mobilization.

THAILAND

Concession L53 Onshore (Pan Orient Energy (Siam) Ltd., in which Pan Orient has 50.01% ownership)
A drilling program of two exploration wells and one appraisal well started with rig mobilization on August 15th and drilling is expected to commence on August 27th.  The exploration wells at L53-DD5 and L53-DD6 are targeting exploration prospects offsetting the L53-DD field and the one appraisal well is L53-B1 at the L53-B field.

A second three to four well exploration drilling program, focused in the region of the L53-DD oil discovery, is likely to commence in late October to early November, approximately three months earlier than originally anticipated.  All exploration and development activities in 2019 are expected to be financed by Thailand working capital and Thailand adjusted funds flow from operations.

CANADA

Sawn Lake (Operated by Andora, in which Pan Orient has a 71.8% ownership) 
Since January 2019 the WTI reference price for crude oil has strengthened and the differential between WTI and the Western Canada Select reference price for heavy oil has narrowed.  Pan Orient is working with joint venture partners towards potential commercial expansion to 3200 BOPD at the Sawn Lake, Alberta steam assisted gravity drainage (“SAGD”) project (in which Andora has a 50% working interest and is the operator) using Andora’s proprietary Produced Water Boiler.  The Sawn Lake full field development plan using SAGD batteries incorporating Andora’s Produced Water Boiler has been defined and Andora is preparing a new contingent resources evaluation of its interests in the third quarter of 2019.  The level of stability in heavy oil prices will have a significant impact on any decision by the Sawn Lake partners regarding the timing and extent of investment in future development, and the ability to finance the project.



Financial and Operating Summary  Three Months Ended 
June 30, 
Six Months Ended 
June 30, 
% Change 
(thousands of Canadian dollars except where indicated)    2019      2018      2019      2018   
FINANCIAL           
Financial Statement Results – Excluding 50.01% Interest in Thailand Joint Venture (Note 1)           
Net income (loss) attributed to common shareholders    1,287      (151    438      (489  -190 
  Per share – basic and diluted  0.02    (0.00  0.01    (0.01  -190 
Cash flow from (used in) operating activities (Note 2)    158      2,547      (2,291    (2,123 
  Per share – basic and diluted  0.00     0.05    (0.04  (0.04 
Cash flow from (used in) investing activities (Note 2)    (1,050    (2,635    1,130      (4,208  -127 
  Per share – basic and diluted  (0.02  (0.05  0.02    (0.08  -127 
Cash flow used in financing activities (Note 2)    (150        (176     
  Per share – basic and diluted  (0.00      (0.00     
Working capital    28,304      34,305      28,304      34,305    -17 
Working capital & non-current deposits    28,902      34,992      28,902      34,992    -17 
Long-term debt                 
Shares outstanding (thousands)    54,837      54,900      54,837      54,900   
Capital Commitments (Note 3)    2,035      68      2,035      68    2891 
Working Capital and Non-current Deposits           
Beginning of period – Excluding Thailand Joint Venture    31,566      36,867      33,139      36,897    -10 
  Adjusted Fund flow from (used in) operations (excluding Thailand joint venture) (Note 4)    (967    47      (2,139    163    -1412 
  Consolidated capital expenditures (Note 5)    (1,213    (1,819    (1,918    (2,122  -10 
  Amounts received from Thailand Joint Venture    56      48      169      73    132 
  Disposal of petroleum and natural gas assets (Note 6)                133    -100 
  Finance lease payments    (28        (54     
  Normal course issuer bid    (122        (122     
  Effect of foreign exchange    (390    (151    (173    (152  14 
End of period - Excluding Thailand Joint Venture    28,902      34,992      28,902      34,992    -17 
Pan Orient 50.01% interest in Thailand Joint Venture Working Capital and Non-Current Deposits    11,445      6,324      11,445      6,324    81 
Economic Results – Including 50.01% Interest in Thailand Joint Venture (Note 7)           
Total corporate adjusted funds flow from (used in) operations by region (Note 4)           
  Canada (Note 8)    (912    68      (2,091    312    -770 
  Thailand (Note 1 & 9)    (8    (2    (16    (15 
  Indonesia    (47    (19    (32    (134  -76 
  Adjusted funds flow from (used in) operations (excl. Thailand Joint Venture)    (967    47      (2,139    163    -1412 
  Share of Thailand Joint Venture (Note 7)    6,656      1,247      9,416      1,949    383 
Total corporate adjusted funds flow from operations    5,689      1,294      7,277      2,112    245 
   Per share – basic and diluted  0.10      0.02    0.13      0.04    245 
Capital Expenditures – Petroleum and Natural Gas Properties (Note 5)           
  Canada (Note 8)    122      278      246      496    -50 
  Indonesia    1,091      1,541      1,672      1,626   
  Consolidated capital expenditures (excl. Thailand Joint Venture)    1,213      1,819      1,918      2,122    -10 
  Share of Thailand Joint Venture capital expenditures    1,633      151      4,311      617    599 
  Total capital expenditures (incl. Thailand Joint Venture)    2,846      1,970      6,229      2,739    127 
Disposition – Petroleum and Natural Gas Properties (Note 6)                (133  -100 
Investment in Thailand Joint Venture           
Beginning of period    35,180      33,875      34,504      32,185   
  Net income (loss) from Joint Venture    1,699      (97    2,353      (288  -917 
  Other comprehensive gain (loss) from Joint Venture    238      (926    373      980    -62 
  Amounts received from Joint Venture    (57    (48    (170    (73  133 
End of period    37,060      32,804      37,060      32,804    13 


 
Three  Months Ended 
June 30, 
Six Months Ended 
June 30, 
Change 
(thousands of Canadian dollars except where indicated)    2019      2018      2019      2018   
Thailand Operations           
Economic Results – Including 50.01% Interest in Thailand Joint Venture (Note 7)           
Oil sales (bbls)    97,537      21,373      143,137      37,744    279 
Average daily oil sales (BOPD) by Concession L53    1,072      235      791      209    279 
Average oil sales price, before transportation (CDN$/bbl)    81.57      86.74      81.12      81.87    -1 
Reference Price (volume weighted) and differential           
  Crude oil (Brent $US/bbl)    67.95      74.42      66.13      71.17    -7 
  Exchange Rate $US/$Cdn    1.37      1.29      1.37      1.30   
  Crude oil (Brent $Cdn/bbl)    92.99      96.21      90.52      92.25    -2 
  Sale price / Brent reference price    88    90    90    89 
Adjusted funds flow from (used in) operations (Note 4)           
  Crude oil sales    7,956      1,854      11,612      3,090    276 
  Government royalty    (417    (92    (595    (152  291 
  Transportation expense    (238    (40    (341    (68  401 
  Operating expense    (477    (288    (926    (548  69 
  Field netback    6,824      1,434      9,750      2,322    320 
  General and administrative expense (Note 9)    (217    (212    (413    (406 
  Interest income    22      16      22      16    38 
  Foreign exchange gain    19          41        1950 
  Thailand - Adjusted funds flow from operations    6,648      1,239      9,400      1,934    386 
Adjusted funds flow from (used in) operations / barrel  (CDN$/bbl) (Note 4)           
  Crude oil sales    81.57      86.74      81.12      81.87    -1 
  Government royalty    (4.28    (4.30    (4.16    (4.03 
  Transportation expense    (2.44    (1.87    (2.38    (1.80  32 
  Operating expense    (4.89    (13.47    (6.47    (14.52  -55 
  Field netback    69.96      67.09      68.12      61.52    11 
  General and administrative expense (Note 9)    (2.22    (9.92    (2.89    (10.76  -73 
  Interest Income    0.23      0.75      0.15      0.42    -64 
  Foreign exchange gain    0.19      0.05      0.29      0.05    441 
  Thailand – Adjusted funds flow from operations    68.16      57.97      65.67      51.24    28 
Government royalty as percentage of crude oil sales         
Income tax & SRB as percentage of crude oil sales                 
As percentage of crude oil sales           
  Expenses - transportation, operating, G&A and other    11    28    14    32  -18 
  Government royalty, SRB and income tax         
  Adjusted funds flow from operations, before interest income    84    67    81    63  18 
Wells drilled           
  Gross                 
  Net            1.0       
Financial Statement Presentation
Results – Excl. 50.01% Interest in Thailand Joint Venture (Note 1) 
         
  General and administrative expense (Note 9)    (8    (2    (16    (15 
  Adjusted funds flow used in consolidated operations    (8    (2    (16    (15 
Adjusted fund flow included in Investment in Thailand Joint Venture           
  Net income (loss) from Thailand Joint Venture    1,699      (97    2,353      (288  -917 
  Add back non-cash items in net loss    4,957      1,344      7,063      2,237    216 
  Adjusted funds flow from Thailand Joint Venture    6,656      1,247      9,416      1,949    383 
Thailand – Economic adjusted funds flow from operations (Note 7)    6,648      1,245      9,400      1,934    386 
  Three  Months Ended 
June 30, 
Six Months Ended 
June 30, 
Change 
(thousands of Canadian dollars except where indicated)  2019    2018    2019    2018   
Canada Operations (Note 8)           
Interest income  86    136    153    238    -36 
General and administrative expenses (Note 9)  (467  (507  (1,258  (1,021  23 
Realized foreign exchange gain (loss)          -86 
Unrealized foreign exchange gain (loss)  (532  432    (987  1,088    -191 
  Canada – Adjusted funds flow from (used in) operations  (912  68    (2,091  312    -770 
 Indonesia Operations           
General and administrative expense (Note 9)  (54  (32  (105  (102 
Exploration expense    (26    (27  -100 
Realized foreign exchange gain (loss)    39    73    (5  -1560 
  Indonesia – Adjusted funds flow used in operations  (47  (19  (32  (134    -76 
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