Pan Orient Energy Corp. ("Pan Orient") (TSX VENTURE:POE) is pleased to provide
highlights of its 2009 year end and fourth quarter consolidated financial and
operating results, and provide an outlook for 2010. Please note that all amounts
are in Canadian dollars unless otherwise stated and all oil volumes are net to
Pan Orient.
The Corporation today filed its audited consolidated financial statements as at
and for the year ended December 31, 2009 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.
2009 YEAR END & FOURTH QUARTER HIGHLIGHTS
-- Pan Orient had an active 2009 drilling program in Thailand with the
drilling of 24 wells (15.2 net wells) focused on exploration and
appraisal wells to add new reserves and new development drilling
opportunities for 2010. Six wells (4.4 net) were drilled in the fourth
quarter of 2009, with two horizontal wells at Bo Rang, an exploration
well at Si Thep, an appraisal well at NSE-G2, and two exploration wells
in Concession L53. Total capital expenditures in Thailand were $16.4
million in the fourth quarter of 2009 and a total of $52 million in
2009.
-- Pan Orient drilled 22 wells in Concession L44 during 2009 resulting in
16 producing wells, one well awaiting testing, and oil discoveries at Bo
Rang, NSE-F1, L44-W, Si Thep, NSE-H3, and NSE-J1 plus significant
appraisal wells at NSE-E2 and NSE-H1.
-- The December 31, 2009 Thailand reserves evaluation assigned proved oil
reserves of 9.5 million barrels, proved plus probable oil reserves of
36.7 million barrels and proved, probable and possible oil reserves of
85.6 million barrels (increases of 71%, 47% and 55% respectively from
December 31, 2008). Oil discoveries for Concession L44, net of a
technical revision which transferred reserves from the Na Sanun East
("NSE") field to the new NSE-F1 field, were 13.4 million barrels. The
net present value of proved and probable reserves after tax for
Concession L44 and Concession SW1, using forecast prices and discounted
at 10%, was $459 million and represents $9.68 per Pan Orient share.
-- Average Thailand oil sales in 2009 were 4,496 BOPD and 3,370 BOPD for
the fourth quarter of 2009.
-- Oil sales averaged 3,816 BOPD in the first quarter of 2010 (excluding an
average of 150 BOPD of oil production from the L53-A well which is being
stored in tanks until a production license for Concession L53 is
granted).
-- Pan Orient drilled the first two exploration wells at Concession L53
(100% working interest) during the fourth quarter of 2009 and work on
these wells continued into the first quarter of 2010. The L53-A well has
produced approximately 13,500 barrels of crude oil to tanks under a 90
day production test which expired on April 2nd. A contingent resource
report for the 2009 L53-A oil discovery is anticipated to be completed
by late April 2010 and will form the basis of a production license
application to be submitted to the Thailand Department of Mineral Fuels.
-- Pan Orient had cash flow from operations of $9.9 million in the fourth
quarter of 2009 ($0.21 per share) and $53.0 million for 2009 ($1.15 per
share). Pan Orient had net income of $7.0 million in the fourth quarter
of 2009 ($0.15 per share) and $15.1 million for 2009 ($0.33 per share).
-- Strong generation of after tax funds flow from Thailand operations
contributed $11.1 million for the fourth quarter of 2009 ($35.69 per
barrel) and $54.8 million for 2009 ($33.40 per barrel).
-- At December 31, 2009 Pan Orient had $32.7 million in working capital and
deposits, and no long-term debt.
-- Total 2009 capital programs in Thailand, Indonesia and Canada of $63.5
million were financed 83% by after tax funds flow from operations and
17% from working capital.
-- The December 31, 2009 reserves evaluation for the Sawn Lake, Alberta
heavy oil project operated by Andora Energy Corporation ("Andora")
(which is owned 53.2% by Pan Orient) assigned probable recoverable oil
reserves of 70.1 million barrels net to the 53.2% ownership interest of
Pan Orient. The associated net present value, using forecast prices and
discounted at 10%, is $466 million to Pan Orient and represents $9.82
per Pan Orient share. In 2009 Andora received Commercial Scheme Approval
for a Steam Assisted Gravity Drainage (SAGD) recovery process under the
Oil Sands Conservation Act from the Energy Resources Conservation Board
(ERCB) and approval from the Government of Alberta under the
Environmental Protection and Enhancement Act (EPEA). The Pilot location
is on Andora 100% owned acreage within the South Block of its Sawn Lake
Property in the Peace River Oil Sands Region.
-- At the Batu Gajah PSC in Indonesia (onshore Sumatra - POE 90% working
interest and operator) the acquisition of 500 line kilometres of 2D
seismic continues with completion anticipated in the second quarter of
2010. Up to nine well locations have been submitted for approval to the
Ministry of Forestry. The 2010 Indonesian high impact drilling program
will commence with three Batu Gajah exploration wells in the second half
of 2010. The exact timing largely a function of Ministry of Forestry
approvals for proposed well locations.
-- At the Citarum PSC in Indonesia (onshore Java - Pan Orient 69% working
interest and operator) the acquisition of more than 1,100 line
kilometres of 2D seismic data continues with completion anticipated late
in the second quarter of 2010. Seismic data processing and mapping of
the first third of the program has been completed with the
identification of three prospects in the region of the block directly
adjacent to the Pasar Jadi and Subang gas fields. Target depths are
shallow, ranging between 800 to 1,800 meters and mapped structural
closures are up to 25 square kilometres in maximum areal extent. The
three exploration wells at Citarum will start drilling immediately after
the three well program on the Batu Gajah PSC.
OPERATING RESULTS
-- Pan Orient had an active 2009 drilling program in Thailand with the
drilling of 24 wells (15.2 net wells) focused on exploration and
appraisal to add new reserves and new development drilling opportunities
for 2010. Total capital expenditures in Thailand for 2009 were $52.0
million for drilling, increased water handling capability, increased
levels of equipment inventory for future drilling, installation of
electric submersible pumps, and land purchase and construction for
future drilling locations. Capital expenditures in Thailand were fully
funded by oil sales in Thailand which generated $54.8 million in funds
flow from operations. In the fourth quarter of 2009 Pan Orient drilled
six wells (4.4 net) in Thailand and had capital expenditures of $16.4
million.
-- The independent reserves evaluation conducted by Gaffney, Cline &
Associates (Consultants) Pte. Ltd. of Singapore ("Gaffney Cline") for
the Thailand assets at December 31, 2009 assigned proved oil reserves of
9.5 million barrels, proved plus probable oil reserves of 36.7 million
barrels and proved, probable and possible oil reserves of 85.6 million
barrels. Compared with the reserves evaluation by Gaffney Cline at
December 31, 2008, this represents increases of 71%, 47% and 55%
respectively. The net present value of proved and probable reserves
after tax in Concession L44 (and including Concession SW1), using
forecast prices and discounted at 10%, is $459 million and represents
$9.68 per Pan Orient share.
Pan Orient had average oil sales of 4,496 barrels per day in 2009.
Reserve replacement of 2009 oil sales was approximately 3.4 times based
on proved reserves and 8.1 times based on proved and probable reserves.
Oil discoveries for Concession L44 were 13.4 million barrels, net of the
technical revision. The negative technical revision of approximately 6.6
million barrels of proved and probable reserves for the NSE Central
field was primarily a result of recognition in the December 31, 2009
reserve report that the NSE Central field and the new NSE-F1 field are
distinctly separate oil pools, and resulted in the transfer of volumes
previously attributed to the NSE-F1 area in the December 31, 2008
reserve report as part of the NSE Central field, to the new NSE-F1 field
as an oil discovery in 2009. The 2009 reserves growth in Concession L44
is attributed entirely to exploration success with new pool oil
discoveries made at NSE-F1, Bo Rang A, Bo Rang B, L44-W, NSE-J1, Si
Thep-2 and NSE-H3. The vast majority of estimated proved and probable
reserve additions are generally evenly distributed across four main
fields: Bo Rang A, Bo Rang B, NSE-F1 and NSE Central providing greater
depth to the overall reserve base in comparison to any prior year. The
December 31, 2009 Thailand reserves evaluation does not include any
contingent resources that are anticipated to be assigned to Concession
L53 (in which Pan Orient has a 100% working interest).
-- Pan Orient drilled 22 wells in Concession L44 in Thailand which resulted
in significant growth in proved and probable oil reserves, and the
diversification of reserves, production and drilling opportunities
through the discovery of new oil fields.
-- The drilling of ten wells in Na Sanun East at a cost of
approximately $12.8 million resulted in eight producing wells and
included significant appraisal wells at NSE-E2 and NSE-H1, a new
volcanic pool oil discovery at NSE-H3, and the discovery of a new
producing sandstone reservoir at NSE-J1. These wells produced
245,228 barrels of oil in 2009 and generated an estimated $9.4
million in after tax funds flow from operations. Production for the
first quarter of 2010 from these wells was 515 BOPD.
-- Pan Orient had a significant oil discovery at Bo Rang with the new
volcanic Bo Rang "A" and Bo Rang "B" pools. Five producing wells
were drilled in the Bo Rang field in 2009 at a cost of approximately
$10.7 million. Late in the fourth quarter of 2009 Pan Orient drilled
the first of four horizontal wells to develop the Bo Rang field. The
reserves evaluation at December 31, 2009 assigned 11.1 million
barrels of proved and probable reserves to this new field. These
wells produced 65,634 barrels of oil in 2009 and generated an
estimated $2.9 million in after tax funds flow from operations.
Production for the first quarter of 2010 from these wells was
125,582 barrels of oil, or 1,395 barrels per day.
During the first quarter of 2010, Pan Orient drilled two new
horizontal development wells at Bo Rang "B" which were put on
production in March 2010 at approximately 360 BOPD each. Production
for the first quarter of 2010 from Bo Rang, including these two new
wells was 1,670 BOPD.
-- Pan Orient had an oil discovery at L44-W in the first half of 2009.
Four wells were drilled in 2009 at a cost of approximately $8.8
million and resulted in two producing wells. The L44-W exploration
well produced 23,000 barrels of oil during the 90 day production
testing period which expired in July 2009. The production license
necessary to resume production was granted in December 2009; however
production from this well could not be re-established due to close
proximity of the well to the field oil water contact resulting in a
high water cut. The L44-W4 horizontal well was drilled in the fourth
quarter and average production in the quarter was 331 BOPD. The
reserves evaluation at December 31, 2009 assigned 1.1 million
barrels of proved and probable reserves to this new field. These
wells produced 53,543 barrels of oil in 2009 and generated an
estimated $2.2 million in after tax funds flow from operations.
Production from L44-W4 for the first quarter of 2010 was 22,924
barrels of oil, or 255 BOPD.
-- The NSE-F1 vertical well resulted in the discovery of the NSE-F1
field and established commercial production 1 kilometer from the
nearest Na Sanun East producer. The reserves evaluation at December
31, 2009 assigned 7.2 million barrels of proved and probable
reserves to the new NSE-F1 field and noted that there was a transfer
of previously assigned volumes from Na Sanun East Central following
the discovery of the new NSE-F1 accumulation, which is now regarded
as a separate pool from the main Na Sanun East Central Field. This
well produced 8,331 barrels of oil in 2009 and generated an
estimated $0.3 million in after tax funds flow from operations.
Production for the first quarter of 2010 from the NSE-F1 well was 21
BOPD. Pan Orient will commence development of the NSE-F1 field using
horizontal wells during the second quarter of 2010.
-- Starting in February 2010 Pan Orient began drilling with a new
drilling rig with superior equipment and which is better suited to
horizontal drilling. This new drilling rig is capable of drilling
approximately three wells per month, improving drilling performance,
and reducing the overall cost of drilling.
-- In July 2009, Pan Orient received formal approval for the three year
extension of Concession L44 and Concession L33 to July 16, 2012.
This extension of Concession L44 had new commitments for three
exploration wells and Pan Orient drilled these required wells by the
end of 2009 through activity at Bo Rang and L44-W. The extension of
Concession L33 has new commitments of two exploration wells plus
geological studies with a combined expenditure obligation to Pan
Orient of US$0.6 million.
-- Pan Orient was granted the new Bo Rang production license in
Concession L44 by the Thailand Department of Mineral Fuels in
December 2009, which includes the Bo Rang, L44-W and NSE-F1 fields.
Pan Orient also received environmental approval for eighteen surface
pad locations which can accommodate two to three wells each. Of
these new approved surface locations, nine are at Bo Rang, five at
NSE-F1 and four at L44-W.
-- Pan Orient drilled the first two exploration wells in Concession L53
(100% working interest) during the fourth quarter of 2009 and work
continued on these wells into the first quarter of 2010. Total capital
expenditures relating to Concession L53, including the drilling of the
two wells, plus equipment inventory for additional drilling was $8.1
million in 2009. There is approximately $3.8 million in additional
capital expenditures incurred in the first two months of 2010. The L53-A
well has produced approximately 13,500 barrels of crude oil to tanks
under a 90 day production test which expired on April 2nd. Results for
the L53-D well were disappointing and far below pre-drill expectations
with regard to oil bearing reservoir thickness and areal extent. The
December 31, 2009 Thailand reserves evaluation does not include any
contingent resources that are expected to be assigned to Concession L53.
A contingent resource report for the 2009 L53-A oil discovery is
anticipated to be completed by late April 2010 and will form the basis
of a production license application to be submitted to the Thailand
Department of Mineral Fuels. It is expected that a production license
will be granted by the end of July, and at that time oil production will
resume, the crude oil inventory will be sold, and further development
will proceed.
-- Thailand oil sales for the fourth quarter of 2009 were 3,370 BOPD
compared with 3,648 BOPD for the third quarter of 2009. Oil sales
averaged 4,496 BOPD in 2009 compared with 4,947 BOPD in 2008. Oil sales
averaged 3,816 BOPD in the first quarter of 2010 (excluding an average
of 150 BOPD of oil production from the L53-A well which is being stored
in tanks until a production license for Concession L53 is granted).
Pan Orient experienced significant fluctuations in production levels
during 2009. Production had peaked in the fourth quarter of 2008 at
6,982 BOPD as a result of strong initial production from wells drilled
during the second half of 2008 in the Na Sanun East field. Production
declined as a result of the natural production decline in volcanic
reservoirs which can be initially very prolific, accelerated drainage of
one pool in Na Sanun East, increased water production, and reduced
production from the L44-HD1 well which had produced 1,575 BOPD in 2008
and produced 607 BOPD in 2009. Pan Orient's 2009 drilling program was
concentrated on exploration and appraisal drilling for discovery of new
oil pools which added new reserves and future drilling opportunities,
but did not result in immediate production equal to the decline. The 22
wells drilled in Concession L44 during 2009 produced 372,968 barrels of
oil, or 1,022 BOPD on average for the year, and these wells produced on
average 2,189 BOPD in the first quarter of 2010. Looking forward, the
oil discoveries of Pan Orient in 2009 have diversified and expanded the
oil reserves, production portfolio and drilling opportunities.
-- Capital expenditures in Indonesia were $2.0 million for the fourth
quarter and a total of $10.6 million for 2009. These expenditures were
primarily related to ongoing seismic programs being conducted in both
the Citarum Production Sharing Contract area and Batu Gajah Production
Sharing Contract area. These seismic programs will be completed in the
first half of 2010 with an additional cost of approximately $10 million.
FINANCIAL RESULTS
-- Fourth Quarter of 2009
-- The financial results for Pan Orient in the fourth quarter of 2009
compared to the third quarter of 2009 reflect an 8% decrease in oil
production offset by a 6% increase in realized crude oil prices, and
foreign exchange losses due to the strengthening Canadian dollar.
Pan Orient continued its active drilling program in Thailand in the
fourth quarter of 2009 with four wells (2.4 net) drilled in
Concession L44 and two exploration wells (2.0 net) in the 100% owned
Concession L53. Pan Orient was also active in Indonesia during the
quarter with seismic acquisition programs at the Citarum and the
Batu Gajah PSCs.
-- Funds flow from operations for the fourth quarter was $9.9 million
compared with $11.2 million for the third quarter of 2009 and $25.0
million for the fourth quarter of 2008. Funds flow from operations
per share (basic) was $0.21 for the fourth quarter of 2009. There
was a $1.1 million decrease in funds flow from operations compared
with the third quarter of 2009. In the fourth quarter of 2009, the
Company recorded a $0.7 million foreign exchange loss as a result of
the strengthening Canadian dollar and the movement of funds from the
Thailand operations to Canada. In addition, general and
administrative expenses in the fourth quarter of 2009 for Canada,
including Andora Energy Corporation ("Andora"), were $0.4 million
compared with a slight net general and administrative expense
recovery reported for the third quarter of 2009.
-- For the fourth quarter of 2009, Thailand generated $11.1 million in
funds flow from operations, compared with $11.2 million the third
quarter of 2009 primarily as a result of the 8% decrease in oil
sales volumes offset by a 6% increase in the realized price for
crude oil. For the quarter, transportation expenses were $2.45 per
barrel, operating expenses $7.35 per barrel, general and
administrative expenses $2.37 per barrel and amounts to the Thailand
government of $23.94 per barrel resulted in after tax funds flow
from operations per barrel of $35.69. The WTI reference price for
crude oil per barrel increased 8% during the quarter to CDN$81.42
from CDN$75.43 in the third quarter of 2009, as the 12% increase in
the United States dollar WTI reference price was reduced through the
rise in the Canadian dollar. Operating expenses increased to $2.3
million or $7.35 per barrel in the fourth quarter from $2.0 million
or $5.95 per barrel in the third quarter of 2009 as a result of
lower production levels and additional expenses for maintenance and
water hauling. For the fourth quarter of 2009, Thailand crude oil
revenue was allocated 17% to expenses for other royalties,
transportation, operating, and general & administrative, 33% to the
government of Thailand in the form of royalties, Special
Remuneratory Benefit ("SRB") and Income Tax, and 50% to Pan Orient
(before interest income and realized foreign exchange gain).
-- Net income of $7.0 million, or $0.15 per share (basic), for the
fourth quarter of 2009 compared with net income of $10.8 million, or
$0.24 per share (basic), for the fourth quarter of 2008.
-- Year Ended December 31, 2009
-- The 2009 financial results for Pan Orient compared to the 2008
financial results reflect the 9% decrease in oil production on a
year over year basis, a relatively consistent funds flow from
operations in Thailand per barrel, and foreign exchange losses due
to the Canadian dollar strengthening 11% against the Thai Baht and
16% against the U.S. dollar.
-- Funds flow from operations for 2009 was $53.0 million compared with
$63.9 million for 2008, representing funds flow from operations per
share (basic) of $1.15 compared with $1.40 for the prior year. The
$10.9 million decrease in funds flow from operations from the prior
year is primarily due to a $7.0 million reduction in funds flow from
Thailand operations and a $4.2 million reduction in funds flow from
Canada.
-- Thailand operations in 2009 generated $54.8 million in funds flow
from operations after tax, or $33.40 per barrel in 2009 compared
with $61.9 million or $34.17 per barrel in 2008. The Thailand
operations in 2009 experienced a 9% decrease in oil sales volumes
and a 27% decrease in the realized crude oil price; however funds
flow from operations in Thailand per barrel was relatively
consistent due to reductions in Thailand SRB and income tax. For
2009, transportation expenses were $2.36 per barrel, operating
expenses $4.60 per barrel, general and administrative expenses $2.07
per barrel and amounts to the Thailand government of $17.61 per
barrel resulted in after tax funds flow from operations per barrel
of $33.40. Operating expenses increased to $7.6 million or $4.60 per
barrel in 2009 from $3.8 million or $2.10 per barrel in 2008 due to
the increased number of wells, expenses for maintenance and water
hauling, and a lower production level. For 2009, Thailand crude oil
revenue was allocated 15% to expenses for other royalties,
transportation, operating, and general & administrative, 29% to the
government of Thailand in the form of royalties, SRB and income tax,
and 55% to Pan Orient (before interest income and realized foreign
exchange gain).
-- Each of the four concessions in Thailand are subject to the SRB tax
at sliding scale rates of 0-75%, applied on a concession by
concession basis to petroleum profits as defined in Thai tax
legislation which includes a deduction for capital spent. Concession
L44, which contributed 95% of Pan Orient's oil production in 2009,
is the only producing concession which currently pays SRB. The SRB
tax rate for a concession is largely based on the amount of revenue
for the concession. The SRB expense as a percentage of crude oil
sales was reduced to 7% in 2009 compared with 24% in 2008 due to the
significant level of capital reinvestment in Concession L44 and
lower revenue resulting from the lower oil price and production
level.
-- For the calculation of Thailand taxable income the SRB is fully
deductible, exploratory expenses for producing concessions
(including expenditures for drilling and representing approx.68% of
capital expenditures) are fully deductible, other capital
expenditures in the field (representing approx.28% of capital
expenditures) are deducted as tax depletion based on the amount of
production compared to the reserve base. Additions to the inventory
of capital items (representing approx.4% of capital expenditures)
are not deductible until used in field operations. The reduction in
Thailand income taxes in 2009 also reflects lower oil revenue and
the significant level of capital reinvestment in Concession L44.
-- The Canadian dollar appreciated 11% against the Thai Baht and 16%
against the U.S. dollar in 2009. The impact of foreign exchange was:
-- The realized foreign exchange gain in 2009 was $3.7 million
resulting from the movement of funds from Thailand to Canada,
and the associated reclassification of accumulated historic
exchange gains on repatriation of funds. Of this amount, it is
deemed that there was a $0.2 million loss associated with
operating activities and a $3.9 million gain related to
investing activities (associated with the investment in
Thailand).
-- The translation of the carrying value of all foreign operations,
including all assets and liabilities in Thailand and Indonesia,
into Canadian dollars resulted in a total translation loss of
$18.8 million in 2009 due to the strengthening of the Canadian
dollar. Of this amount, a $10.6 million was recorded as an
unrealized foreign exchange loss in the income statement, and
$8.2 million was recorded as a loss to accumulated other
comprehensive income.
-- Funds flow from Canada was negative $1.7 million in 2009 compared
with a funds flow of $2.5 million in 2008. General and
administrative expenses for Canada were $1.4 million in 2009
compared with $3.1 million in 2008. In 2009, the Company recorded a
realized foreign exchange loss of $0.2 million compared with the
realized foreign exchange gain of $5.9 million in 2008 resulting
from the movement of funds from Thailand to Canada, and the
associated reclassification of accumulated historic exchange gains
and losses on repatriation of funds.
-- Net income for 2009 was $15.1 million or $0.33 per share (basic)
compared with $31.8 million or $0.70 per share (basic) for 2008. The
lower net income in 2009 is the result of a lower level of funds
flow from operations in 2009 and foreign exchange losses.
-- Pan Orient continues to maintain its financial strength and
flexibility. At December 31, 2009 Pan Orient had $32.7 million of
working capital and deposits, and no long-term debt. In 2009 Pan
Orient had internally generated funds flow from operations of $53.0
million, funding 83% of the $63.5 million of capital expenditures in
Thailand, Indonesia and Canada. In addition, at December 31, 2009
Pan Orient had $6.9 million of equipment inventory to be utilized
for future Thailand and Indonesia operations that is included in
petroleum and natural gas assets on the balance sheet.
-- Capital expenditures in Indonesia were $2.0 million for the fourth
quarter and a total of $10.6 million for 2009. These expenditures
were primarily related to ongoing seismic programs being conducted
in both the Citarum Production Sharing Contract area and Batu Gajah
Production Sharing Contract area. These seismic programs will be
completed in the first half of 2010 with an additional cost of
approximately $10 million.
2010 OUTLOOK
Pan Orient's total capital program budget for 2010 is $67 million. This capital
program will be funded through cash flow generated from the Thailand operations
plus an additional $6.9 million of equipment inventory on hand at the beginning
of 2010, and will utilize to the extent necessary a portion of the $32.7 million
of working capital and deposits at December 31, 2009.
-- Thailand
-- Average oil sales target of 6,000 BOPD
-- At this level of production, we expect operating expenses of $4.25
per barrel, transportation expense of $2.05 per barrel and general &
administrative expenses of $2.10 per barrel.
-- 2010 Thailand capital program of $38 million that includes the
drilling of 34 wells on Concessions L44, L53 and L33.
-- Full scale development of the Bo Rang B, Bo Rang A, L44-W and NSE-F1
discoveries made in 2009 will commence towards the end of April when
four surface pads, capable of handling three wells per pad, are
completed. This drilling is part of the remaining development well
program planned for the remainder of 2010 with up to 27 wells
utilizing a single drilling rig. In the event of oil prices
remaining near current levels, consideration will be given to
utilizing a second rig to target the significant exploration
potential that is currently undrilled on Pan Orient's Thailand
acreage in Concession L44 and Concession L53.
-- Exploration drilling will commence upon the completion of this
current phase of development and appraisal drilling.
-- In the first quarter of 2010, Pan Orient drilled five wells. Two
horizontal development wells were drilled at Bo Rang "B" (L44V-D3
and L44V-D4) and are each on production at 360 BOPD net to Pan
Orient. The NSE-G3 exploration well drilled in the first quarter is
currently suspended and will be re-entered and sidetracked in order
to test a deeper volcanic objective after completion of the current
development drilling program. The NSE-E3 horizontal well has been
drilled on the NSE-E1 structure and is currently being tested. The
NSE-H3 well is currently drilling through the primary reservoir
objective.
-- The current political situation in Thailand has not affected Pan
Orient's operations in any way to date and is believed by management
to be unlikely to affect operations in the future. Any change to
this assessment will be immediately communicated to shareholders.
-- Indonesia
-- 2010 Indonesia capital program of $29 million
-- $10 million for the completion of the 500 kilometers of 2D seismic
in the Batu Gajah PSC, and 1,110 kilometers of 2D seismic in the
Citarum PSC
-- $19 million for the 2010 Indonesian high impact drilling program in
the second half of 2010 starting with the drilling three wells at
the Batu Gajah PSC and then continuing with three wells at the
Citarum PSC. The exact timing of the drilling program will largely
be a function of Ministry of Forestry approvals for proposed well
locations.
-- Sawn Lake, Canada
-- The work program for the Sawn Lake heavy oil project will be
determined in the first half of 2010.
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.
-----------------------------------------------
Three Months Ended Year Ended Change
Operations Summary December 31, December 31,
(thousands of Canadian
dollars except where
indicated) 2009 2008 2009 2008
----------------------------------------------------------------------------
FINANCIAL
----------------------------------------------------------------------------
Oil revenue, before royalties
and transportation expense 22,280 36,329 98,236 147,554 -33%
Funds flow from operations
(Note 1) 9,945 24,973 52,950 63,897 -17%
Per share - basic $ 0.21 $ 0.55 $ 1.15 $ 1.40 -18%
Per share - diluted $ 0.20 $ 0.52 $ 1.10 $ 1.31 -18%
Funds flow from operations by
region (Note 1)
Canada (1,062) 5,149 (1,716) 2,490
Thailand 11,063 20,102 54,811 61,865 -11%
Indonesia (56) (278) (145) (458) -68%
---------------------------------------
Total 9,945 24,973 52,950 63,897 -17%
---------------------------------------
Net Income 6,996 10,813 15,145 31,751 -52%
Per share - basic $ 0.15 $ 0.24 $ 0.33 $ 0.70 -53%
Per share - diluted $ 0.14 $ 0.22 $ 0.31 $ 0.65 -52%
Working capital 28,659 42,087 28,659 42,087 -32%
Working capital plus deposits 32,738 46,386 32,738 46,386 -29%
Long-term debt - - - -
Capital expenditures (Note 2) 18,960 16,598 63,495 40,491 57%
Acquisition - Indonesia
(Note 3) - 516 - 20,180
Shares outstanding
(thousands) 46,313 45,568 46,313 45,568 2%
----------------------------------------------------------------------------
Funds flow from operations
per barrel
----------------------------------------------------------------------------
Canada operations $ (3.42) $ 8.02 $ (1.04) $ 1.37
Thailand operations 35.69 31.30 33.40 34.17 -2%
Indonesia operations - G&A
expense (0.18) (0.43) (0.09) (0.26) -65%
---------------------------------------
$ 32.09 $ 38.88 $ 32.27 $ 35.28 -9%
----------------------------------------------------------------------------
Capital Expenditures (Note 2)
----------------------------------------------------------------------------
Canada 567 909 917 1,827 -50%
Thailand 16,351 10,460 51,996 31,319 66%
Indonesia 2,042 5,229 10,582 7,345 44%
---------------------------------------
Total 18,960 16,598 63,495 40,491 57%
----------------------------------------------------------------------------
Working Capital and Deposits
----------------------------------------------------------------------------
Working Capital & Deposits -
beginning of period 39,830 40,022 46,386 40,763 14%
Funds flow from operations
(Note 1) 9,945 24,973 52,950 63,897 -17%
Capital expenditures
(Note 2) (18,960) (16,598) (63,495) (40,491) 57%
Indonesia acquisition - 1,131 - (15,157)
Foreign exchange impact on
working capital 1,338 (2,803) (4,214) (1,964) 115%
Net (expenditures) proceeds
on share transactions 585 (339) 1,111 (662)
---------------------------------------
Working Capital & Deposits
- end of period 32,738 46,386 32,738 46,386 -29%
----------------------------------------------------------------------------
Canada Operations
----------------------------------------------------------------------------
Interest income 12 70 43 485 -91%
General and administrative
expense (359) (989) (1,450) (3,134) -54%
Realized foreign exchange
gain (loss) (692) 6,179 (247) 5,870 -104%
Foreign new ventures
expenditures (23) (111) (62) (731) -92%
-----------------------------------------------
Funds flow from operations (1,062) 5,149 (1,716) 2,490 -169%
Funds flow from operations
per barrel
Interest income $ 0.04 $ 0.11 $ 0.03 $ 0.26 -90%
General and administrative
expense (1.16) (1.54) (0.88) (1.73) -49%
Realized foreign exchange
gain (loss) (2.23) 9.62 (0.15) 3.24 -105%
Foreign new ventures
expenditures (0.07) (0.17) (0.04) (0.40) -91%
---------------------------------------
$ (3.42) $ 8.02 $ (1.04) $ 1.37 -176%
----------------------------------------------------------------------------
-----------------------------------------------------
Three Months Year Ended Change
Ended December 31,
December 31,
(thousands of Canadian
dollars except where
indicated) 2009 2008 2009 2008
----------------------------------------------------------------------------
Thailand Operations
----------------------------------------------------------------------------
Total production 310,006 642,302 1,640,894 1,810,439 -9%
Average daily oil
production (bbls/d) 3,370 6,982 4,496 4,947 -9%
Average oil sales
price, before
transportation
(CDN$/bbl) $ 71.87 $ 56.56 $ 59.87 $ 81.50 -27%
Reference Price (volume
weighted) and
differential
Crude oil (WTI
$US/bbl) $ 75.97 $ 58.15 $ 58.56 $ 93.49 -37%
Exchange Rate $US/$Cdn 1.072 1.211 1.157 1.087 6%
Crude oil (WTI
$Cdn/bbl) $ 81.42 $ 70.41 $ 67.72 $ 98.93 -32%
Sales price / WTI
reference price 88% 80% 88% 82% 6%
Funds flow from
operations
Crude oil sales 22,280 36,329 98,236 147,554 -33%
Government royalty (1,344) (2,897) (6,729) (10,027) -33%
Other royalty (37) (29) (114) (309) -63%
Transportation expense (761) (1,557) (3,866) (4,551) -15%
Operating expense (2,278) (1,114) (7,555) (3,809) 98%
---------------------------------------------
Field Netback 17,860 30,732 79,972 128,857 -38%
General and
administrative
expense (735) (182) (3,394) (1,900) 79%
Interest Income 14 354 407 506 -20%
Special Remuneratory
Benefit (SRB) (1,868) (6,358) (6,751) (35,489) -81%
Current income tax (4,208) (4,445) (15,423) (30,109) -49%
---------------------------------------------
Funds flow from
operations 11,063 20,102 54,811 61,865 -11%
---------------------------------------------
Funds flow from
operations per barrel
(CDN$/bbl)
Crude oil sales $ 71.87 $ 56.56 $ 59.87 $ 81.50 -27%
Government royalty (4.34) (4.51) (4.10) (5.54) -26%
Other royalty (0.12) (0.05) (0.07) (0.17) -59%
Transportation expense (2.45) (2.42) (2.36) (2.51) -6%
Operating expense (7.35) (1.73) (4.60) (2.10) 119%
---------------------------------------------
Field Netback 57.61 47.85 48.74 71.17 -32%
General and
administrative
expense (2.37) (0.28) (2.07) (1.05) 97%
Interest Income 0.05 0.55 0.25 0.28 -11%
Special Remuneratory
Benefit (SRB) (6.03) (9.90) (4.11) (19.60) -79%
Current income tax (13.57) (6.92) (9.40) (16.63) -43%
---------------------------------------------
Thailand - Funds flow
from operations $ 35.69 $ 31.30 $ 33.40 $ 34.17 -2%
---------------------------------------------
Government royalty as
percentage of sales 6% 8% 7% 7% 0%
SRB as percentage of
crude oil sales 8% 18% 7% 24% -17%
Income tax as
percentage of crude
oil sales 19% 12% 16% 20% -5%
As percentage of crude
oil sales
Expenses -
transportation,
operating, G&A and
other 17% 8% 15% 7% 8%
Government royalty,
SRB and income tax 33% 38% 29% 51% -22%
Funds flow from
operations, before
interest income and
realized foreign
exchange gain 50% 54% 55% 42% 14%
Wells drilled
Gross 6 7 24 22 9%
Net 4.4 4.2 15.2 13.2 15%
----------------------------------------------------------------------------
------------------------------------
Year Ended December 31, Change
(thousands of Canadian dollars except
where indicated) 2009 2008
----------------------------------------------------------------------------
RESERVES
----------------------------------------------------------------------------
Onshore Thailand
----------------------------------------
(reserves assigned to concessions SW1
and L44/43; 60% interest) Note4
Proved oil reserves (thousands of
barrels) 9,525 5,580 71%
Proved plus probable oil reserves
(thousands of barrels) 36,684 24,963 47%
Net present value of proved + probable
reserves, after tax discounted at 10% 459,000 357,000 29%
Per Pan Orient share - basic Note 6 $ 9.68 $ 7.83 24%
Net present value of proved + probable
reserves, after tax discounted at 15% 362,000 296,000 22%
Per Pan Orient share - basic Note 6 $ 7.63 $ 6.50 17%
Canada
----------------------------------------
(53.2% share of the oil sands leases of
Andora at Sawn Lake, Alberta) Note 5
Probable oil reserves (thousands of
barrels) 70,121 70,253 0%
Net Present value of probable reserves,
after tax discounted at 10% 466,000 487,695 -4%
Per Pan Orient share - basic Note 6 $ 9.82 $ 10.70 -8%
Net present value of probable reserves,
after tax discounted at 15% 318,000 320,796 -1%
Per Pan Orient share - basic Note 6 $ 6.70 $ 7.04 -5%
----------------------------------------------------------------------------
International Concessions at December 31, 2009
----------------------------------------------------------------------------
All amounts Financial
reflect Pan Commitments - P+P
Orient's Net Square Note 7 (CDN 2009 Avg Reserves
interest Status Kilometers thousands) Production (Mstb)
----------------------------------------------------------------------------
Onshore Thailand
------------------
SW1A (60% working Developed 14 - - 232 1,980
interest &
operator)
L44/43 (60% Partially 539 $ 19 to July 4,264 34,704
working interest developed 2012
& operator)
L33/43 (60% Undeveloped 557 $ 680 to July - -
working interest 2012
& operator)
L53/48 (100% Undeveloped 3,997 $ 1,498 to - -
working interest January
& operator) 2013
Indonesia -
------------------
Citarum PSC, West Undeveloped 1,986 18,562 to - -
Java (69% working October
interest & 2010
operator) Note 8
& 9
Batu Gajah PSC, Undeveloped 2,270 27,902 to - -
South Sumatra January
(90% working 2011
interest &
operator) Note 8
&9
South CPP PSC, Undeveloped 4,026 5,231 to - -
Central Sumatra November
(90% working 2011
interest &
operator) Note 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 Canadian GAAP 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 Canadian GAAP. All
references to funds flow throughout this report are based on funds flow
from operations before changes in non-cash working capital and
reclamation costs.
(2) Cost of capital expenditures, excluding any asset retirement obligation
and excluding the impact of changes in foreign exchange rates.
(3) Cost of Indonesian acquisition in 2008 allocated to
petroleum and natural gas properties.
(4) Thailand reserves as at December 31, 2009 and December 31, 2008 as
evaluated by Gaffney Cline & Associates (Consultants) Pte. Ltd. of
Singapore assessed at forecast crude oil reference prices and costs. The
reference price for crude oil per barrel (US$ WTI per barrel) is $80.00
for 2010, $83.60 for 2011, $87.40 for 2012, $91.30 for 2013, $95.30 for
2014, $99.40 for 2015, and prices increase at 2% per year thereafter.
The engineered values disclosed may not represent fair market value.
(5) Pan Orient's 53.2% share of the reserves of Andora Energy Corporation, a
private company, as at December 31, 2009 and December 31, 2008 as
evaluated by DeGolyer and MacNaughton Canada Limited assessed at
forecast crude oil reference prices and costs. The reference price for
crude oil per barrel (crude bitumen 9 API Plant Gate in Canadian
dollars) is $58.32 for 2010, $59.21 for 2011, $58.83 for 2012 and prices
increasing to $67.81 in 2021. The engineered values disclosed may not
represent fair market value.
(6) Per share values calculated based on 47,414,200 Pan
Orient Shares outstanding at March 31, 2010.
(7) Share of commitments reflect amounts to be paid by Pan Orient, including
carried interest partners in Indonesia. Note that commitments for a
concession in Thailand or a Production Sharing Contract ("PSC") in
Indonesia include the completion of a work program as well as the amount
of expenditure. Work program commitment is based on the original
contract and timing is subject to government approval.
(8) Indonesia financial commitments as provided above represent the current
exploration phase that the Company is conducting. The obligation period
ending for Citarum and Batu Gajah differs from the PSC agreement as
commitments from previous years have been deferred and rolled forward.
Every year the Company submits a work program for each PSC to the GOI
and along with it, a request to roll forward any incomplete commitments
from the previous year. Although this request is a departure from the
original contract, it is considered standard practice in Indonesia. The
above obligation periods for Citarum and Batu Gajah are consistent with
this practice.
(9) Amounts recorded in the financial statements and work commitments for
Indonesian PSCs include amounts paid by Pan Orient on behalf of a
partner's carried interest (10% for Batu Gajah, 11% for Citarum and 10%
for South CPP).
Thailand 2009 Drilling Program
----------------------------------------------------------------------------
Oil Sales - 2009 Drilled Wells 2009
(net Pan Orient) Wells Field
Only Reserves
----------------------------------------
Est.
Net to Pan 2009 Year end
Orient (Cdn$ 2009 Capital 2009 % of 2010 Q1 Funds P+P
thousands) Expenditures (bbls) 2009 (bbls)(bbls/d) flow (mmbls)
----------------------------------------------------------------------------
(Note 3) (Note 4)
Na Sanun
East
(Note 1) 12,829 245,228 15% 46,357 515 9,367 13.8
NSE-D2 16,946 2,604 29 519
NSE-G1 - - -
NSE-H1 77,276 14,917 166 2,905
NSE-H2 23,238 3,779 42 851
NSE-E2 104,993 23,011 256 4,232
NSE-H3 (new
volcanic
reservoir) 15,322 379 4 570
NSE-I1 970 - - 28
NSE-J1 (new
sandstone
reservoir) 5599 1,238 14 233
NSE-J2 883 428 5 29
NSE-G2 - - -
NSE-F1
(Note 1) 1,259 8,331 1% 1,877 21 260 7.2
L44-W (new
field) 8,809 53,543 3% 22,924 255 2,223 1.1
L44-W 23,106 12 0 795
L44-W2 4 - -
L44-W3 (HZ) - - -
L44-W4 (HZ) 30,433 22,912 255 1,428
Bo Rang A&B
(new fields) 10,688 65,634 4% 125,582 1,395 2,940 11.1
BR-1RD 8,161 - - 323
BR-2(HZ) 5,516 40,731 453 200
L44V-D2(HZ) 17,209 10,054 112 773
BR-3D1(HZ) 23,890 41,113 457 1,134
BR-4D1(HZ) 10,858 33,684 374 510
Wichian
Buri, Na
Sanun, POE-6,
Si Thep 3.5
Si Thep 2
(new
sandstone
zones) 232 262 3 10
L44R-2 No P+P
488 - - - - assigned
Concession
L53 -100%
POE (Note
2) (new To be
field) 6,357 - - - determined
L53-A
L53-D
----------------------------------------------------------------------------
Capital -
Drilling 42,089 372,968 23% 197,002 2,189 14,800 36.7
---------------------------------------------------
Equipment
inventory 2,352
2008 Wells 1,896
Other
capital 5,659
-------------------------
Total
Thailand
Capital 51,996
----------------------------------------------------------------------------
1 Gaffney, Cline & Associates (Consultants) Pte. Ltd. of Singapore states
that the negative technical revisions relate to the transfer of volumes
from Na Sanun Central following the discovery of the NSE-F1 accumulation,
by wells NSE-F1 and NSE-F1ST, which is now regarded as a separate pool
from the main Na Sanun Central Field. As the NSE-F wells were drilled in
2009, the transferred volume from the Na Sanun Central field is now
included in the "Discoveries" category.
2 Pan Orient is in the process of applying for a production license for
Concession L53/48. Contingent resources will be determined by Gaffney
Cline as part of the application process. During the first quarter of
2010, approximately 13,500 barrels of oil was produced under a 90 day
test permit and is being stored in tanks until the production license is
received.
3 Estimated funds flow from operations after general and administrative
expenses, SRB and income tax. SRB and income tax allocated to each
property using an average effective SRB and income tax rate for the year.
4 Independent reserves evaluation as at December 31, 2009 by Gaffney, Cline
& Associates (Consultants) Pte. Ltd. of Singapore ("Gaffney Cline") for
the Thailand assets and was prepared in accordance with National
Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.
Reserves shown for the field, including all wells drilled to Dec31-09.
To vew the Thailand 2009 Drilling - Consession L44/43 map, please click the
following link: http://media3.marketwire.com/docs/414poe_l44-43.pdf
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