Pan Orient Energy Corp. – 2021 First Quarter Financial & Operating Results

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CALGARY, AB, May 13, 2021 /CNW/ – Pan Orient Energy Corp. (“Pan Orient” or the “Company”) (TSXV: POE) reports 2021 first quarter consolidated financial and operating results.  Please note that all amounts are in Canadian dollars unless otherwise stated, BOPD refers to barrels of oil per day and BOPD for Thailand operations represents volumes net to Pan Orient’s 50.01% equity interest in the Thailand Joint Venture.

The Company is today filing its unaudited consolidated financial statements as at and for the three months ended March 31, 2021 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 Company’s website, www.panorient.ca.

Commenting today on Pan Orient’s 2021 first quarter results, President and CEO Jeff Chisholm stated: “The drilling program which commenced in the first quarter of 2021 saw the drilling of two successful appraisal wells and one much needed water injection well.  Thailand production is anticipated to ramp up in the second quarter of 2021 and it appears that this may coincide with a very favorable oil price environment.  Of particular note, the revised Brent oil escalated reference price forecast issued on April 30th by Sproule and Associates estimated an average price of US$63 per barrel for the last eight months of 2021, which combined with the first four months actual price of US$62.16 per barrel, results in an estimated average price of US$62.71 per barrel for 2021.  The year-end 2020 Pan Orient reserve report used an average Brent oil reference price forecast of US$48 per barrel for 2021.  The Thailand asset is currently at a mature stage with possible future upside mainly related to increased oil recovery factors and prices and is currently at a stage that the Company has historically looked to crystalize value for shareholders.”

HIGHLIGHTS

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

  • A three well appraisal program has been completed with the L53-DD10 and L53-DD12 wells drilled during the first quarter, and the L53-DD11 well drilled in April 2021.
    • The L53-DD10 appraisal well in the L53-DD field was placed on production May 2nd from the “CC” sand. The well has averaged 351 BOPD during the seven day period of May 3rd to May 9th, net to Pan Orient’s 50.01% equity interest. Test results are not necessarily indicative of long-term performance or ultimate recovery.
    • The L53-DD12 well was drilled in March and encountered six meters of net oil pay in the “CC” sand transition zone. The decision was made to complete this well as a water injection well to provide pressure support to the up-dip L53-DD6ST2 well that is currently producing from the “CC” sand.
    • The L53-DD11 appraisal well in the L53-DD field was placed on production April 27th from the “BB” sand. The well has averaged 544 BOPD during the 11 day period of April 29th to May 9th, net to Pan Orient’s 50.01% equity interest. Test results are not necessarily indicative of long-term performance or ultimate recovery.
  • Net to Pan Orient’s 50.01% equity interest in the Thailand Joint Venture, oil sales from Concession L53 in the first quarter of 2021 were 1,353 BOPD, with 1,134 BOPD from the L53-DD field. Oil sales declined 11% from 1,491 BOPD in the fourth quarter of 2020 primarily due to the conversion of the L53-DD8 well, which had produced 175 BOPD in the fourth quarter of 2020, to a disposal well for the first quarter of 2021.
  • Adjusted Thailand funds flow from operations of $4.3 million ($35.46 per barrel) in the first quarter of 2021 increased 34% compared with $3.2 million ($23.54 per barrel) in the fourth quarter of 2020. The increase in funds flow from operations is attributable to a $1.2 million increase in oil sales and a $0.4 million reduction in operating, transportation and G&A expenses, partially offset by a $0.1 million increase in royalties and $0.5 million increase in income tax. The average realized oil price per barrel increased 30% in the first quarter of 2021 to $73.82 per barrel, reflecting an average Brent reference price of US$60.41 which has recovered from the low of US$18.38 in April 2020.
  • Thailand adjusted funds flow from operations of $4.3 million in the first quarter of 2021 funded $1.8 million of Thailand exploration and development activities and the Thailand Joint Venture paid a dividend to Pan Orient of $2.6 million during the first quarter of 2021. Pan Orient’s share of working capital and long-term deposits in Thailand at March 31, 2021 was $4.4 million.

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

  • The East Jabung Production Sharing Contract expired in January 2020 and the operator is determining final steps to be taken for formal approval of the expiry from the Government of Indonesia, including reclamation requirements. Pan Orient is withdrawing from operations in Indonesia and the office in Jakarta was closed March 31, 2020.
  • Activities of the Company in Indonesia are reported in 2020 and 2021 as discontinued operations. Discontinued operations in Indonesia for 2020 were $52 thousand of expenses and $32 thousand in unrealized foreign exchange gains on currency exchange rates since the end of 2020.

Sawn Lake (Operated by Andora Energy Corporation, in which Pan Orient has a 71.8% ownership)

  • After the impairment of Sawn Lake recorded at March 31, 2020, no operating expenses or G&A are capitalized. For the first quarter of 2021, Pan Orient reports total operating expense of $42 thousand associated with the Sawn Lake suspended SAGD facility and wellpair.
  • The Western Canada Select reference price for heavy oil has increased significantly since mid-2020 and Andora continues to review alternatives to move the Sawn Lake project forward with minimum development costs to Andora, including partnership or outright sale, and achieve value for Andora and Pan Orient shareholders.

Corporate

  • Corporate adjusted funds flow from operations (including Pan Orient’s 50.01% equity interest in the Thailand Joint Venture) in the first quarter were $3.4 million ($0.07 per share). The increase from $1.5 million ($0.03 per share) in the fourth quarter of 2020 is largely due to a $1.2 million increase in Pan Orient’s equity interest in Thailand Joint Venture adjusted funds flow from operations and a reduction in the unrealized foreign exchange loss in Canada on cash holdings denominated in US dollars (which was $0.3 million loss in the first quarter of 2021 compared with a $1.0 million loss in the fourth quarter of 2020).
  • Net income attributable to common shareholders for the first quarter of 2021 was $1.1 million ($0.02 income per share). This compares a net loss attributable to common shareholders for the first quarter of 2020 of $57.1 million ($1.05 loss per share), with a net $57.6 million impairment charge for the Sawn Lake, Alberta Exploration and Evaluation assets at March 31, 2020.
  • Pan Orient repurchased 1,441,500 common shares in the first quarter of 2021, at an average price of $0.86 per share, for $1.2 million. The Company has repurchased an additional 271,500 shares to May 11, 2021, at an average price of $0.89 per share. Common shares outstanding were 50.3 million at March 31, 2021 and 50.0 million at May 11, 2021.
  • Pan Orient retains a strong financial position with working capital and non-current deposits of $23.4 million and no long-term debt at March 31, 2021. In addition, the Thailand Joint Venture has $4.4 million in working capital and long-term deposits, net to Pan Orient’s 50.01% equity interest, and Thailand funds flow from operations are expected to expand the Company’s cash balance through the remainder of 2021.

OUTLOOK

THAILAND

Concession L53 Onshore (Pan Orient Energy (Siam) Ltd., in which Pan Orient has 50.01% ownership)

One additional appraisal well is anticipated between now and year-end, in addition to three or four workovers. The Thailand asset is currently at a mature stage with possible future upside that would be mainly related to increased recovery factors and oil prices. The L53 asset is at a stage that the Company has historically looked to crystalize value. The Company continues to view Thailand as a favorable jurisdiction to conduct business and would show great interest in any future acreage licensing rounds.  Near term, the geomodel utilized for the year-end 2020 reserves report will be updated based on the drilling program that was just completed and the workover program that is currently underway, and likely updating the 2020 year-end reservoir simulation.

CANADA

Sawn Lake (Operated by Andora Energy Corporation, in which Pan Orient has a 71.8% ownership)

During the first quarter of 2021, efforts were focused on seeking out alternative oil marketing arrangements and conducting scoping economics for what would be a notional small  scale re-start of production at Sawn Lake that would include the existing wellpair and one more wellpair. As 2021 proceeds, the Company will be in consultation with joint venture partners, better define potential alternative marketing arrangements and keep a close watch on heavy oil prices.  

COVID-19 Coronavirus

The operations in Thailand of Pan Orient Energy (Siam) Ltd. (“POS”) continue to be somewhat affected by the worldwide COVID-19 coronavirus pandemic.  The Thailand government imposed a state of emergency in late March 2020, giving it wide-ranging powers to address the crisis.  Domestic travel restrictions have now been eased but restrictions on foreigners entering Thailand remain in effect.  The infection and death rate was much lower in Thailand than in most western nations but a spike in both cases and deaths has been experienced since the end of the first quarter of 2021.

Prudent measures have been taken by POS to help protect the health and safety of staff, which are of paramount importance.  Fortunately, POS in Thailand has been able to complete its initial three well 2021 appraisal drilling program.  POS and Pan Orient are well-positioned to withstand these unprecedented events.  The Company is optimistic about a return to normal operations and less volatile market conditions but the outlook for world oil prices remains somewhat uncertain.

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 “forecast”, “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:  renewal, extension or termination of oil concessions and production sharing contracts; other regulatory approvals; well drilling programs and drilling plans; estimates of reserves and potentially recoverable resources; information on future production and project start-ups; expectations as to prices for oil produced and the impact of sales agreements; potential asset sale, acquisition or other transactions; and sufficiency of financial resources.  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, regulatory changes and delays, operating and reservoir performance, the effects of weather and climate change, the results of exploration and development drilling and related activities, supply, demand and resulting prices for oil and gas, the impact of the COVID-19 coronavirus, 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

March 31,

(thousands of Canadian dollars except where indicated)

2021

2020

% Change

FINANCIAL

Financial Statement Results – Excluding 50.01% Interest in Thailand Joint Venture
(Note 1)

Net income (loss) attributed to common shareholders

1,140

(57,117)

-102%

Per share – basic and diluted

$

0.02

$

(1.05)

-102%

Cash flow used in operating activities (Note 2 & 3)

(991)

(399)

149%

Per share – basic and diluted

$

(0.02)

$

(0.01)

149%

Cash flow from investing activities (Note 2 & 3)

2,610

4,202

-38%

Per share – basic and diluted

$

0.05

$

0.08

-38%

Cash flow used in financing activities (Note 2 & 3)

(1,240)

(699)

77%

Per share – basic and diluted

$

(0.02)

$

(0.01)

77%

Change in cash and cash equivalents used in discontinued operations (Note 3)

(33)

(526)

-94%

Working capital

22,805

25,779

-12%

Working capital & non-current deposits

23,415

26,386

-11%

Long-term debt

Shares outstanding (thousands)

50,303

53,400

-6%

Capital Commitments (Note 4)

801

719

11%

Working Capital and Non-current Deposits

Beginning of period – Excluding Thailand Joint Venture

23.577

22,158

6%

Adjusted funds flow from (used in) continuing operations (Note 3 & 6)

(924)

1,059

-187%

Adjusted funds flow used in discontinued operations (Note 3)

(20)

(343)

-94%

Consolidated capital expenditures (excluding Thailand Joint Venture) (Note 7)

(85)

-100%

Amounts received from (advanced to) Thailand Joint Venture

10

(2)

-600%

Dividend received from Thailand Joint Venture

2,600

4,300

-40%

Finance lease payments

(2)

(121)

-98%

Normal course issuer bid

(1,238)

(689)

80%

Automatic shares purchase plan (Note 8)

(629)

Effect of foreign exchange

41

109

-47%

End of period – Excluding Thailand Joint Venture

23,415

26,386

-11%

Pan Orient 50.01% interest in Thailand Joint Venture Working Capital and Non-Current
Deposits

4,438

5,862

-24%

Economic Results – Including 50.01% Interest in Thailand Joint Venture

Total corporate adjusted funds flow from (used in) operations by region (Note 6)

Canada

(916)

1,065

-186%

Thailand (Note 9)

(8)

(6)

33%

From continuing operations

(924)

1,059

-187%

Indonesia – Discontinued Operations

(20)

(343)

-94%

Adjusted funds flow from (used in) operations (excl. Thailand Joint Venture)

(944)

716

-232%

Share of Thailand Joint Venture (Notes 1 & 5)

4,326

3,688

17%

Total corporate adjusted funds flow from operations

3,382

4,404

-23%

Per share – basic and diluted

$

0.07

$

0.08

-18%

Capital Expenditures – Petroleum and Natural Gas Properties (Note 7)

      Canada

85

-100%

      Consolidated capital expenditures (excl. Thailand Joint Venture)

85

-100%

      Share of Thailand Joint Venture capital expenditures

1,829

3,779

-52%

      Total capital expenditures (incl. Thailand Joint Venture)

1,829

3,864

-53%

Investment in Thailand Joint Venture

Beginning of period

28,329

34,127

-17%

Net income from Joint Venture

1,902

556

242%

Other comprehensive loss from Joint Venture

(1,369)

(176)

678%

Dividend paid

(2,600)

(4,300)

-40%

Amounts (received from) advanced to Joint Venture

(10)

2

-600%

End of period

26,252

30,209

-13%

 

Three  Months Ended

March 31,

%

(thousands of Canadian dollars except where indicated)

2021

2020

Change

Thailand Operations

Economic Results – Including 50.01% Interest in Thailand Joint Venture (Note 5)

Oil sales (bbls)

121,733

107,951

13%

Average daily oil sales (BOPD) by Concession L53

1,353

1,186

14%

Average oil sales price, before transportation (CDN$/bbl)

$

73.82

$

63.63

16%

Reference Price (volume weighted) and differential

Crude oil (Brent $US/bbl)

$

60.41

$

48.94

23%

Exchange Rate $US/$Cdn

1.28

1.35

-5%

Crude oil (Brent $Cdn/bbl)

$

77.36

$

66.24

17%

Sale price / Brent reference price

95%

96%

-1%

Adjusted funds flow from (used in) operations (Note 6)

Crude oil sales

8,986

6,869

31%

Government royalty

(479)

(354)

35%

Transportation expense

(292)

(252)

16%

Operating expense

(756)

(740)

2%

Field netback

7,459

5,523

35%

General and administrative expense (Note 9)

(247)

(239)

3%

Foreign exchange gain

14

6

133%

Current income tax

(2,909)

(1,608)

81%

Thailand – Adjusted funds flow from operations

4,317

3,682

17%

Adjusted funds flow from (used in) operations / barrel  (CDN$/bbl) (Note 6)

Crude oil sales

$

73.82

$

63.63

16%

Government royalty

(3.93)

(3.28)

20%

Transportation expense

(2.40)

(2.33)

3%

Operating expense

(6.21)

(6.85)

-9%

Field netback

61.27

51.16

20%

General and administrative expense (Note 9)

(2.03)

(2.21)

-8%

Foreign exchange gain

0.12

0.06

107%

Current income tax

(23.90)

(14.90)

60%

Thailand – Adjusted funds flow from operations

$

35.46

$

34.11

4%

Government royalty as percentage of crude oil sales

5.3%

5.15%

Income tax & SRB as percentage of crude oil sales

32%

23%

As percentage of crude oil sales

Expenses – transportation, operating, G&A and other

14%

18%

-4%

Government royalty, SRB and income tax

38%

28%

10%

Adjusted funds flow from operations, before interest income

48%

54%

-6%

Wells drilled

Gross

2

4

-50%

Net

1.0

2.0

-50%

Financial Statement Presentation

Results – Excl. 50.01% Interest in Thailand Joint Venture (Note 1)

General and administrative expense (Note 9)

(9)

(6)

33%

Adjusted funds flow used in consolidated operations

(9)

(6)

33%

Adjusted fund flow Included in Investment in Thailand Joint Venture

Net income from Thailand Joint Venture

1,902

556

242%

Add back non-cash items in net income

2,424

3,132

-23%

Adjusted funds flow from Thailand Joint Venture

4,326

3,688

17%

Thailand – Economic adjusted funds flow from operations (Note 5)

4,317

3,682

17%

Canada Operations

Interest income

6

109

-94%

General and administrative expenses (Note 9)

(520)

(562)

-7%

Operating expense (Note 10)

(42)

Stock based compensation on restricted share units (Note 11)

(99)

Realized  foreign exchange loss (Note 12)

(1)

Unrealized foreign exchange gain (loss) (Note 12)

(260)

1,518

-117%

Canada – Adjusted funds flow from (used in) operations

(916)

1,065

-186%

 Indonesia – Discontinued Operations

General and administrative expense (Note 9)

(51)

(61)

-16%

Exploration expense

(1)

Unrealized foreign exchange gain (loss)

32

(282)

-111%

Indonesia – Adjusted funds flow used in operations

(20)

(343)

-94%

 

(1)

Pan Orient holds a 50.01% equity interest in Pan Orient Energy (Siam) Ltd. as a joint arrangement where the Company
shares joint control with the 49.99% equity interest holder.  The resulting joint arrangement is classified as a Joint Venture
under IFRS 11 and is accounted for using the equity method of accounting where Pan Orient’s 50.01% equity interest in the
assets, liabilities, working capital, operations and capital expenditures of Pan Orient Energy (Siam) Ltd. are recorded in
Investment in Thailand Joint Venture.

(2)

As set out in the Consolidated Statements of Cash Flows in the Consolidated Financial Statements of Pan Orient Energy Corp. 

(3)

The East Jabung Production Sharing Contract (“PSC”) expired in January 2020 and the operator is determining final steps
to be taken for formal approval of the expiry from the Government of Indonesia, including reclamation requirements. Pan
Orient is withdrawing from operations in Indonesia and the office in Jakarta was closed March 31, 2020.  For accounting
purposes, the operation in Indonesia for accounting purposes is considered a discontinued operation since 2020.

(4)

Refer to Commitments note disclosure of the March 31, 2021 and March 31, 2020 Interim Condensed Consolidated Financial
Statements.

(5)

For the purpose of providing more meaningful economic results from operations for Thailand, the amounts presented include
50.01% of results of the Thailand Joint Venture.  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, operations or working capital of on-shore
Concession L53.

(6)

Total corporate adjusted funds flow from operations is cash flow from operating activities prior to changes in non-cash working
capital, unrealized foreign exchange gain or loss plus the corresponding amount from Pan Orient’s 50.01% interest in the
Thailand Joint Venture which is recorded in Joint Venture for financial statement purposes.  This measure is used by
management to analyze operating performance and leverage.  Adjusted 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.  Adjusted 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. 

(7)

Cost of capital expenditures excluded decommissioning costs and the impact of changes in foreign exchange.

(8)

In December 2020, the Company entered into an Automatic Share Purchase Plan (“ASPP”), which permits an independent
broker to repurchase shares during certain blackout periods under the Company’s normal course issuer bid, subject to agreed
trading parameters and other instructions for such purchases.  At March 31, 2021, the Company recognized a provision of
$1.5 million (December 31, 2020 – $0.9 million) in accounts payable and accrued liabilities as an estimate for the number of
shares that may be repurchased during the potential blackout periods at the maximum share price under the ASPP.

(9)

General & administrative expenses, excluding non-cash accretion expense.  The nominal amount of G&A shown in the three
months ended March 31, 2021 and March 31, 2020 for Thailand operations related to G&A of the holding company of Pan
Orient Energy (Siam) Ltd.

(10)

Operating expense related to Andora’s suspended demonstration project facility and wellpair at Sawn Lake Central.  These
expenses were previously capitalized prior to the E&E impairment recorded during the first quarter of 2020.

(11)

On May 19, 2020, the Company granted 1,050,000 restricted share units (“RSUs”) to directors, senior management,
employees and consultant. At March 31, 2021, 679,999 RSUs are outstanding.  The amount represents the stock-based
compensation expenses.

(12)

Realized and unrealized foreign exchange gain or loss mainly related to the U.S. dollars denominated cash balances held in
Canada.

(13)

Tables may not add due to rounding.

 

SOURCE Pan Orient Energy Corp.