The Energy Report - Thu, Aug 25, 2016

Pan Orient Energy's Exploration Drilling Set to Commence Q4/16

Pan Orient Energy's strong balance sheet puts it in position to begin drilling at East Jabung in Indonesia at the end of this year.

Pan Orient Map
Pan Orient East Jabung Map

Pan Orient Energy Corp. (POE:TSX.V; POEFF:OTC) released second quarter results last week. President and CEO Jeff Chisholm provided an overview of operations, reporting that in Thailand "the second quarter of 2016 was focused on operating cost reductions and procurement/planning for an imminent four-well workover program and a fourth quarter 2016 exploration drilling program."

In Indonesia, Chisholm stated, "activity centered on completing the Batu Gajah PSC extension application, which was submitted just after quarter-end, and planning for an Akeh-1 hydrocarbon discovery appraisal well."

In Canada, Chisholm added, "reservoir modeling incorporating recent demonstration project well performance data was completed for the Sawn Lake Bluesky formation reservoir and this has formed the basis for an updated Sawn Lake contingent resources report that is currently underway and expected to be completed in September."

"These activities in all three focus areas are intended to continue moving these assets up the value curve with modest capital expenditure in a time of low oil price," Chisholm concluded.

Mackie Research published a report on Aug. 17 in which it maintained a Buy rating on Pan Orient. Analyst Bill Newman stated, "POE has a strong balance sheet with no debt and $51.1 million of net positive working capital. We maintain our BUY recommendation and $3.25 target price on POE's strong financial position and high-impact exploration potential in Indonesia."

Homing in on the East Jabung PSC (production sharing contract) project in Indonesia, in which Pan Orient holds a 49% working interest, Newman noted that "construction of a road and drilling pad is expected to commence in late Q3/16, which should be followed by the drilling of an exploration well in Q4/16 targeting the 250-million barrel Anggun prospect. The first US$10 million of the cost of the exploration well will be funded by POE's farm-in partner." The Anggun prospect "has three potential reservoir targets: the Intra Air Benakat formation, the Gumai Formation and the Batu Raja Formation," Newman added.

At Pan Orient's Batu Gajah PSC, where it holds a working interest of 77%, the company "is making preparations towards drilling of the Akeh-2 deviated appraisal well from the existing Akeh-1 well pad. The well is targeted to spud in late 2016 or early 2017. In June 2016, POE applied for an additional exploration period beyond the stated January 15, 2017, expiry date to allow more time to drill the Akeh-2 delineation well," said Newman.

On Thailand's L53/48 Concession, where Pan Orient holds a 50.01% working interest, Newman said, "Average Q2/16 production in Thailand of 238 bbl/day net to POE was in line with our forecast of 250 bbl/day." In Q3/16, he added, "POE plans to commence a four well workover program. In addition, in Q4/16, POE plans to drill an exploration well targeting the "A" North East prospect."

The Sawn Lake SAGD [steam assisted gravity drainage] pilot project in Canada demonstrated, according to Newman, that the "SAGD process works in the Bluesky formation at Sawn Lake, and showed the production capability and ISOR [instantaneous steam-oil ratio] of the reservoir. A new contingent resources report is being prepared that incorporates results of the demonstration project." In April the company applied to potentially expand the demonstration project to 3,200 bbl/day.

Newman concluded that "exploration drilling on the East Jabung block represents substantial resource upside."

1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or her family owns, shares of the following companies mentioned in this article: None.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: Pan Orient Energy Corp. The companies mentioned in this article were not involved in any aspect of the article preparation. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
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