Pan Orient is a Canadian publicly listed (TSX-V: POE) junior oil and natural gas company based in Calgary, Alberta, Canada. The Company’s interests in principal properties are divided into two distinct groups: 1) partially developed concession located onshore Thailand, held by Pan Orient Energy (Siam) Ltd.; 2) undeveloped Canadian oil sands leases, held by Andora Energy Corporation. The undeveloped onshore interests at the East Jabung PSC in Indonesia expired in January 2020 and the operator is determining final steps to be taken for formal approval of the expiry by the Government of Indonesia, including reclamation requirements.

Thailand

Concession L53

The Company has a 50.01% equity interest in Pan Orient Energy (Siam) Ltd. which is the operator of and holds a 100% working interest in Concession L53/48 (“Concession L53”) in Thailand. Concession L53 is partially developed, has oil production and an active exploration and development program.

Pan Orient’s 50.01% equity interest in Pan Orient Energy (Siam) Ltd. is classified as a Joint Venture under IFRS and accounted for using the equity method. As a jointly controlled Joint Venture, Pan Orient’s 50.01% equity interest in the working capital, assets, capital expenditures, liabilities and operations of Pan Orient Energy (Siam) Ltd. are recorded as Investment in Joint Venture. Pan Orient’s 50.01% equity interest in Pan Orient Energy (Siam) Ltd. is the Company’s only investment in Thailand.

Pan Orient Energy (Siam) Ltd. holds a 100% interest in Thailand Concession L53, which has oil production, development and exploration operations. Concession L53 is located approximately 60 kilometers west of Bangkok consisted of 27.32 square kilometers associated with the L53-A, L53-B, L53-D, L53-G, L53-DD, L53-AA South and L53-AA fields that are held through production licenses (with a 20 year primary term ending in 2036 plus an additional 10 year renewal period that can be applied for).

The December 31, 2020 independent reserves evaluation for Thailand on-shore Concession L53 was prepared for Pan Orient Energy (Siam) Ltd., which is the operator and has a 100% working interest. The evaluation was conducted by Sproule International and was prepared in accordance with Canadian Securities Administrators National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities. Pan Orient has a 50.01% ownership interest in Pan Orient Energy (Siam) Ltd., but does not have any direct interest in, or control over, the crude oil reserves or operations of on-shore Concession L53. The values at December 31, 2020 identified as “Net to Pan Orient’s 50.01% Equity Interest in Pan Orient Energy (Siam) Ltd.” represent 50.01% of Pan Orient Energy (Siam) Ltd. reserves and values. Net to Pan Orient’s 50.01% equity interest in Pan Orient Energy (Siam) Ltd., proved plus probable crude oil reserves were 2,377 thousand barrels at December 31, 2020 from conventional sandstone reservoirs. Net to Pan Orient’s 50.01% equity interest in Pan Orient Energy (Siam) Ltd., proved, probable and possible crude oil reserves were 3,423 thousand barrels at December 31, 2020. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.

Canada

Andora is a private oil company, in which Pan Orient has a 71.8% ownership. Andora has interests in 39 sections (22.7 net sections) of Sawn Lake Alberta Crown oil sands within the central Alberta Peace River Oil Sands area. Andora is focused on developing the bitumen resources at the Sawn Lake property using steam assisted gravity drainage (“SAGD”) development.

The Sawn Lake property is in a pre-commercial stage and the commercial viability of the SAGD recovery process at Sawn Lake has not yet been established. No proved or probable reserves were assigned at December 31, 2020.

In early 2020 there was a severe decline in crude oil prices due to geopolitical events and the collapse of global demand for crude oil and related products resulting from COVID-19. This resulted in dramatically lower prices for heavy oil and bitumen, and deterioration in the economics for commercial expansion at Sawn Lake, and as a result, in that market there was no expected commercial development at Sawn Lake. An impairment expense of $85.8 million was recorded for the Sawn Lake interests and related capitalized costs in the first quarter of 2020. The Company will continue to monitor bitumen prices and other factors influencing the timing and extent of potential future SAGD development at Sawn Lake.

Andora is the operator of five oil sands leases with 27 gross sections (21.5 net sections) at Sawn Lake, where it has a working interest of either 50% or 100%, as at December 31, 2020. Andora is working to formerly relinquish three oil sands leases operated by another company with 12 gross sections (1.2 net sections), where Andora is a non-operator with a 10% working interest, and for which no contingent resources had been assigned in the September 30, 2019 Contingent Resources Report.

A SAGD demonstration project at Sawn Lake commenced in 2013 and is located in the Central Block of Sawn Lake where Andora is the operator and holds a 50% working interest. The demonstration project consisted of one SAGD well pair drilled to a depth of 650 meters and a horizontal length of 780 meters and the SAGD facility for steam generation, water handling and bitumen treating. Steam injection commenced in May 2014 and produced bitumen from September 2014 to February 2016. The demonstration project successfully captured the key data associated with the objectives of the demonstration project and operations were suspended at the end of February 2016. The demonstration project has proven that the SAGD process works in the Bluesky formation at Sawn Lake, established characteristics of ramp up through stabilization of SAGD performance, indicated the productive capability, instantaneous steam-oil ratio (“ISOR”), and provided critical information required for well and facility design associated with any future commercial development. Production results to date are not necessarily indicative of long-term performance or of ultimate recovery and the Sawn Lake demonstration project has not yet proven that it is commercially viable.

Regulatory approval was received on December 5, 2017 for potential commercial expansion to 3200 BOPD at the Sawn Lake, Alberta SAGD project (in which Andora has a 50% working interest and is the operator) using Andora’s proprietary Produced Water Boiler.

A September 30, 2019 Contingent Bitumen Resources Report (“Resources Report”) by Sproule Associates Limited evaluated Andora’s oil sands interests at Sawn Lake Alberta, Canada using forecast prices at September 30, 3019. The Resources Report assigned unrisked “Best Estimate” contingent resources to Andora were 227.8 million barrels of bitumen recoverable (163.6 million barrels net to Pan Orient’s 71.8% interest in Andora) assigned to the Sawn Lake Central and the Sawn Lake South blocks of Sawn Lake, both of which are operated by Andora.

Indonesia

East Jabung PSC

The 49% non-operated interest in the East Jabung PSC located onshore Sumatra, expired January 2020. Pan Orient was awarded the East Jabung PSC in 2011, a 2D seismic program was completed in 2014, and in 2015 Pan Orient farmed-out of a 51% participating interest and operatorship to a subsidiary of Repsol S.A. In 2017, the Ayu-1X and Elok-1X wells were drilled but did not encounter commercial hydrocarbons. The Anggun-1X exploration well was drilled in the fourth quarter of 2019 but did not encounter commercial hydrocarbons. The operator of the East Jabung PSC has provided notice to the Government of Indonesia of withdrawal from the East Jabung PSC, the PSC expired January 2020, and the operator is determining final steps to be taken for formal approval of the expiry from GOI, including reclamation requirements. Pan Orient is withdrawing from operations in Indonesia and the office in Jakarta was closed on March 31, 2020.