2019 Third Quarter Financial & Operating Results

Source Press Release
Company Pan Orient Energy Corp. 
Tags Capital Spending, Strategy - Corporate, Financial & Operating Data
Date November 14, 2019

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

The Company is today filing its unaudited consolidated financial statements as at and for the nine months ended September 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 third quarter results, President and CEO Jeff Chisholm stated: “The third quarter of 2019 saw the third new pool / field oil discovery in the L53-DD oil field region onshore Thailand and substantial progress towards the drilling of the Anggun-1X exploration well in Indonesia.  We are pleased to announce drilling of the Anggun-1X exploration well in Indonesia commenced November 14th and the well is expected to reach total depth in an estimated 20 to 30 days.  The fourth quarter will see preparations for an expanded Thailand exploration and appraisal drilling program that will commence in early January 2020."

HIGHLIGHTS

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

  • Successful 2019 drilling program to date with two appraisal wells in the first quarter (L53-DD3 and L53-DD4) brought on production, a new pool discovery in the third quarter with the L53-DD5ST1 exploration well and the L53-B1 appraisal well in the fourth quarter which will be put on production.  The L53-DD3 and L53-DD4 wells commenced production on April 25th after approval of the L53-DD Production License, the L53-DD5ST1 well commenced a 90 day production test for the new pool discovery on November 6th and the L53-B1 well will be put on production this week.
  • Net to Pan Orient’s 50.01% equity interest in the Thailand Joint Venture, oil sales from Concession L53 in 2019 increased from 507 BOPD in the first quarter and 1,072 BOPD in the second quarter to 1,418 BOPD in the third quarter as a result of strong production from the four L53-DD wells.
  • Adjusted funds flow from Thailand operations of $15.9 million ($57.99 per barrel) in the first nine months of 2019.  Adjusted funds flow from operations of $6.5 million ($49.56 per barrel) in the third quarter compared with $6.6 million ($68.16 per barrel) in the second quarter.  The reduction on a per barrel basis is due to 4% lower sales price and current income tax during the third quarter equivalent to $15.32 per barrel.  The Thailand operation became taxable in the third quarter of 2019 as cashflow from operations and realized foreign exchange gains exceeded available tax pools.   
  • Pan Orient received a dividend of $6.6 million from the Thailand Joint Venture during the third quarter.  A strong financial position is maintained in Thailand with working capital and long-term deposits at September 30, 2019, net to Pan Orient’s 50.01% equity interest, of $9.4 million. 

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

  • Drilling rig acceptance procedures for the Anggun-1X exploration well were completed and drilling commenced November 14th.  The Operator of the East Jabung PSC has revised the estimated dry hole cost of the Anggun-1X well, including the permanent road to US$20.5 million (Cdn$27.1 million), with Pan Orient’s 49% share of US$10.0 million (Cdn$13.3 million).  Total capital costs for the Anggun-1X well from inception to September 30, 2019 have been USD $10.5 million on a gross basis (USD $5.1 million or CAD $7.0 million net to Pan Orient).

Corporate

  • Total corporate adjusted funds flow from operations (including Pan Orient’s 50.01% equity interest in the Thailand Joint Venture) for the first nine months of 2019 of $13.7 million ($0.25 per share) with $6.4 million ($0.12 per share) in the third quarter of 2019 as a result of strong Thailand oil production and netbacks.
  • The net income attributable to common shareholders for the first nine months of 2019 was $1.6 million ($0.03 per share) with $1.1 million ($0.02 per share) in the third 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 September 30, 2019 Pan Orient repurchased 66,000 common shares at an average price of $1.93 per share.
  • Pan Orient maintains a strong financial position for exploration activities at the East Jabung PSC in Indonesia and potential development activities in Canada with working capital and non-current deposits at September 30, 2019 of $32.5 million and no long-term debt.  In addition, the Thailand Joint Venture is in a strong financial position for further exploration and development activities with working capital and long-term deposits of $9.4 million and $2.8 million of equipment inventory, net to Pan Orient’s 50.01% equity interest.

OUTLOOK

INDONESIA

East Jabung PSC, Onshore Sumatra (Pan Orient 49% ownership & Non Operator)
The Anggun-1X exploration well has commenced drilling and the results will have a significant impact on Pan Orient’s future strategy.

THAILAND

Concession L53 Onshore (Pan Orient Energy (Siam) Ltd., in which Pan Orient has 50.01% ownership)
The L53-DD5ST1 exploration well commenced a 90 day production test for the new pool discovery on November 6th and the L53-B1 appraisal well is about to be put on production.

A five to six well drilling program is planned to commence in early January 2020 with four or five exploration wells and an appraisal well.  The program will be focused on the general region of the L53-DD oil discovery, with one exploration well in the vicinity of the L53-D field further south in the Kamphaeng Saen basin.  Pan Orient Energy (Siam) Ltd. will be preparing a new December 31, 2019 independent reserves evaluation for Concession L53/48 which will reflect 2019 drilling results and well performance.

CANADA

Sawn Lake (Operated by Andora Energy Corporation, in which Pan Orient has a 71.8% ownership)
Andora is finalizing a new contingent resources evaluation of its interests at the Sawn Lake, Alberta steam assisted gravity drainage project.  Andora will work with the Sawn Lake partners in determining the timing and extent of investment in future development.

Corporate

Pan Orient continues to maintain a strong cash position for conducting key exploration and development activities and provide financial flexibility.  The results of the Anggun-1X well in Indonesia, results of the ongoing Thailand drilling program and the new independent evaluation reports on reserves and resources will be important in defining the go forward opportunities and strategies for Pan Orient.

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.

Financial and Operating Summary  Three Months Ended
September 30, 
Nine Months Ended
September 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    1,114      (960    1,552      (1,449  -207 
  Per share – basic and diluted  0.02    (0.02  0.03    (0.03  -207 
Cash flow from (used in) operating activities (Note 2)    75      (39    (2,216    (2,162 
  Per share – basic and diluted  0.00    (0.00  (0.04  (0.04 
Cash flow from (used in) investing activities (Note 2)    4,049      (240    5,179      (4,448  -216 
  Per share – basic and diluted  0.07    (0.00  0.09    (0.08  -216 
Cash flow from financing activities (Note 2)    188          12       
  Per share – basic and diluted  0.00        0.00       
Working capital    31,857      32,403      31,857      32,403    -2 
Working capital & non-current deposits    32,458      32,993      32,458      32,993    -2 
Long-term debt                 
Shares outstanding (thousands)    55,084      54,900      55,084      54,900   
Capital Commitments (Note 3)    2,049      660      2,049      660    210 
Working Capital and Non-current Deposits           
Beginning of period – Excluding Thailand Joint Venture    28,902      34,992      33,139      36,897    -10 
  Adjusted Fund flow used in operations (excluding Thailand joint venture) (Note 4)    (88    (789    (2,227    (626  256 
  Issuance of common shares    222          222        100 
  Consolidated capital expenditures (Note 5)    (2,482    (1,136    (4,400    (3,258  35 
  Amounts (advanced to) received from Thailand Joint Venture    (682    55      (512    128    -500 
  Disposal of petroleum and natural gas assets (Note 6)                133    -100 
  Dividend received from Thailand Joint Venture    6,624          6,624       
  Finance lease payments    (29        (83     
  Normal course issuer bid    (5        (127     
  Effect of foreign exchange    (4    (129    (178    (281  -37 
End of period - Excluding Thailand Joint Venture    32,458      32,993      32,458      32,993    -2 
Pan Orient 50.01% interest in Thailand Joint Venture Working Capital and Non-Current Deposits    9,401      6,615      9,401      6,615    42 
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)    (8    (682    (2,099    (370  467 
  Thailand (Note 1 & 9)    (16    (10    (32    (25  28 
  Indonesia    (64    (97    (96    (231  -58 
  Adjusted funds flow from (used in) operations (excl. Thailand Joint Venture)    (88    (789    (2,227    (626  256 
  Share of Thailand Joint Venture (Note 7)    6,479      1,193      15,895      3,142    406 
Total corporate adjusted funds flow from operations    6,391      404      13,668      2,516    443 
   Per share – basic and diluted  0.12      0.01    0.25      0.05    443 
Capital Expenditures – Petroleum and Natural Gas Properties (Note 5)           
  Canada (Note 8)    153      168      399      664    -40 
  Indonesia    2,329      968      4,001      2,594    54 
  Consolidated capital expenditures (excl. Thailand Joint Venture)    2,482      1,136      4,400      3,258    35 
  Share of Thailand Joint Venture capital expenditures    1,930      897      6,241      1,514    312 
  Total capital expenditures (incl. Thailand Joint Venture)    4,412      2,033      10,641      4,772    123 
Disposition – Petroleum and Natural Gas Properties (Note 6)                (133  -100 
Investment in Thailand Joint Venture           
Beginning of period    37,060      32,804      34,504      32,185   
  Net income (loss) from Joint Venture    1,351      (90    3,704      (378  -1080 
  Other comprehensive gain from Joint Venture    429      205      802      1,185    -32 
  Dividend paid    (6,624        (6,624     
  Amounts (received from) advanced to Joint Venture    682      (55    512      (128  -500 
End of period    32,898      32,864      32,898      32,864   


 
Three  Months Ended
September 30, 
Nine Months Ended
September 30, 
%  Change 
(thousands of Canadian dollars except where indicated)    2019      2018      2019      2018   
Thailand Operations           
Economic Results – 50.01% Interest in Thailand Joint Venture (Note 7)           
Oil sales (bbls)    130,415      19,644      273,553      57,388    377 
Average daily oil sales (BOPD) by Concession L53    1,418      214      1,002      210    377 
Average oil sales price, before transportation (CDN$/bbl)    77.99      92.34      79.63      85.45    -7 
Reference Price (volume weighted) and differential           
  Crude oil (Brent $US/bbl)    61.99      75.37      64.15      72.61    -12 
  Exchange Rate $US/$Cdn    1.34      1.32      1.36      1.31   
  Crude oil (Brent $Cdn/bbl)    83.27      99.82      87.05      94.86    -8 
  Sale price / Brent reference price    94    93    91    90 
Adjusted funds flow from (used in) operations (Note 4)           
  Crude oil sales    10,171      1,814      21,783      4,904    344 
  Government royalty    (539    (90    (1,134    (242  369 
  Transportation expense    (321    (36    (662    (104  537 
  Operating expense    (613    (302    (1,539    (850  81 
  Field netback    8,698      1,386      18,448      3,708    398 
  General and administrative expense (Note 9)    (241    (202    (654    (608 
  Interest income            22      16    38 
  Foreign exchange gain (loss)        (1    45         
  Current income tax    (1,998        (1,998       
  Thailand - Adjusted funds flow from operations    6,463      1,183      15,863      3,117    409 
Adjusted funds flow from (used in) operations / barrel  (CDN$/bbl) (Note 4)           
  Crude oil sales    77.99      92.34      79.63      85.45    -7 
  Government royalty    (4.13    (4.58    (4.15    (4.22  -2 
  Transportation expense    (2.46    (1.83    (2.42    (1.81  34 
  Operating expense    (4.70    (15.37    (5.63    (14.81  -62 
  Field netback    66.69      70.56      67.44      64.61   
  General and administrative expense (Note 9)    (1.85    (10.28    (2.39    (10.59  -77 
  Interest Income            0.08      0.28    -71 
  Foreign exchange gain (loss)    0.03      (0.05    0.16      0.02    844 
  Current income tax    (15.32        (7.30       
  Thailand – Adjusted funds flow from operations    49.56      60.22      57.99      54.31   
Government royalty as percentage of crude oil sales         
Income tax & SRB as percentage of crude oil sales    20             
As percentage of crude oil sales           
  Expenses - transportation, operating, G&A and other    12    30    13    33  -20 
  Government royalty, SRB and income tax    25      14   
  Adjusted funds flow from operations, before interest income    64    65    73    62  11 
Wells drilled           
  Gross                   
  Net    2.0          3.0         
Financial Statement Presentation
Results – Excl. 50.01% Interest in Thailand Joint Venture (Note 1) 
         
  General and administrative expense (Note 9)    (16    (10    (32    (25  28 
  Adjusted funds flow used in consolidated operations    (16    (10    (32    (25  28 
Adjusted fund flow included in Investment in Thailand Joint Venture           
  Net income (loss) from Thailand Joint Venture    1,351      (90    3,704      (378  -1080 
  Add back non-cash items in net loss    5,128      1,283      12,191      3,520    246 
  Adjusted funds flow from Thailand Joint Venture    6,479      1,193      15,895      3,142    406 
Thailand – Economic adjusted funds flow from operations (Note 7)    6,463      1,183      15,863      3,117    409 




  Three  Months Ended
September 30, 
Nine Months Ended
September 30, 
%  Change 
(thousands of Canadian dollars except where indicated)  2019    2018    2019    2018   
Canada Operations (Note 8)           
Interest income  125    151    278    389    -29 
General and administrative expenses (Note 9)  (427  (469  (1,685  (1,490  13 
Realized foreign exchange gain (loss)  (1        -100 
Unrealized foreign exchange gain (loss)  295    (364  (692  724    -196 
  Canada – Adjusted funds flow used in operations  (8  (682  (2,099  (370  467 
 Indonesia Operations           
General and administrative expense (Note 9)  (63  (90  (168  (192  -13 
Exploration expense    (3    (30  -100 
Realized foreign exchange gain (loss)  (1  (4  72    (9  -900 
  Indonesia – Adjusted funds flow used in operations  (64  (97  (96  (231    -58 
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