Pan Orient Energy Corp.: 2008 Financial and Operating Results
07:10 EDT Wednesday, April 22, 2009
CALGARY, ALBERTA--(Marketwire - April 22, 2009) -
NOT FOR DISSEMINATION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.
Pan Orient Energy Corp. ("Pan Orient") (TSX VENTURE:POE) is pleased to provide highlights of its 2008 fourth quarter and 2008 year-end consolidated financial and operating results. Please note that all amounts are in Canadian dollars unless otherwise stated.
The Corporation today filed its audited financial statements as at and for the year ended December 31, 2008 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.
2008 HIGHLIGHTS
- Pan Orient achieved tremendous growth during 2008 in terms of oil production, funds flow from operations, net income, reserve additions, and an increase in exploration acreage & internally generated drilling prospects.
-- Average daily oil production in 2008, net to Pan Orient, increased 408% to 4,947 barrels per day from 974 barrels per day in 2007, and averaged 6,982 per day in the fourth quarter of 2008. Oil production for the first quarter of 2009, net to Pan Orient, is estimated to be 6,165 barrels per day with the reduction from the fourth quarter of 2008 a result of wells coming off flush production and drilling programs in the last three months focusing on exploration targets versus development opportunities.
-- Funds flow from operations increased 439% to $63.9 million for 2008 from $11.9 million in 2007, with $24.9 million in the fourth quarter of 2008 despite the downturn in commodity prices. On a per share basis (diluted), funds flow from operations was $1.31 for 2008 and $0.52 for the fourth quarter of 2008.
-- Net Income of $31.8 million for 2008 and $10.8 million in the fourth quarter of 2008 reflects the success Pan Orient has achieved in creating value through full cycle exploration and drilling. On a per share basis (diluted), net income was $0.65 for 2008 and $0.23 for the fourth quarter of 2008.
-- Year-end proven plus probable reserves reported for Thailand increased by 47% to 25 million barrels.
-- Pan Orient acquired high working interests and operatorship in three concessions in Indonesia resulting in 11,468 square kilometers of new exploration lands. These lands complement the exploration lands onshore Thailand which includes a significant portion of Concession L44/43 which is currently undeveloped, Concession L33/43 and Concession L53/48.
-- Pan Orient continued its emphasis on exploration activities with seismic programs, geological & geophysical work and drilling to deliver growth and profitability through the drill bit. With respect to future development programs, Pan Orient has now built an inventory of 17 development locations in Na Sanun East and will become more active in development and appraisal drilling in 2009.
- The results achieved by Pan Orient in 2008 are the result of successful exploration and development of the Na Sanun East field in Concession L44/43 for which Pan Orient is the operator and a 60 percent working interest owner. The Na Sanun East field commenced production in January 2007 and daily production net to Pan Orient grew to approximately 6,800 barrels per day in December 2008.
- During 2008, the capital program of Pan Orient drilled 22 (13.2 net) wells in Thailand with 20 (12.0 net) wells drilled in the Na Sanun East field and an overall drilling success rate of 68%. Drilling for the year was balanced between exploration targeting new reserves and development.
- The operations in Thailand delivered very strong results for 2008 with $65.7 million in funds flow from operations, transportation and operating expenses of $4.62 per barrel, and funds flow from operations per barrel after tax of $36.27. For the fourth quarter of 2008, the Thailand operations generated $23.8 million in funds flow from operations, operating and transportation expenses were $4.16 per barrel, and funds flow from operations per barrel after tax of $36.27 even though the reference price for crude oil declined to US$58.15 per barrel. For Thailand production in 2008, crude oil revenue was allocated 7% to expenses for other royalties, transportation, operating, and general & administrative, 51% to the government of Thailand in the form of royalties, Special Remuneratory Benefit and Income Tax, and 42% to Pan Orient (before interest income and realized foreign exchange gain).
- These strong results have been achieved while preserving financial strength and flexibility. At December 31, 2008 Pan Orient had $46.4 million of working capital and deposits, and no long-term debt. Internally generated funds flow from operations of $63.9 million in 2008 completely funded the $40.5 million of capital expenditures in Thailand, Indonesia and Canada, $15.2 million for the cash portion of acquisition of exploration interests in Indonesia, and increased working capital plus deposits by $5.6 million.
OPERATIONS
Pan Orient's base capital budget for 2009 will be approximately $60 million, with 57% directed towards exploration and development in Thailand and 43% high grading exploration opportunities in Indonesia. The base 2009 capital program includes the following:
- Thailand
-- Capital program of $34 million that includes the drilling of 29 wells. Exploration and development activity will continue in Concession L44/43 (operator and 60% working interest owner) with the drilling of 25 wells, site upgrades and workovers. In addition, there is expected to be two exploration wells drilled in Concession L33/43 (operator and 60% working interest owner) and two exploration wells drilling in Concession L53/48 (operator and 100% working interest owner).
- Indonesia
-- Capital program of $26 million that includes 500 kilometers of 2D seismic in the Batu Gajah PSC, and 1,250 kilometers of 2D seismic in the Citarum PSC to bring exploration prospects and leads on those concessions up to drill ready status.
-- In addition to the stated capital budget of $26 million for Indonesia, there will be a contingent budget of an additional $7 million related to the cost of long lead time drilling equipment and the potential drilling of one exploration well in late 2009.
- Sawn Lake, Canada
-- No capital expenditures are planned by Andora for 2009.
The $60 million capital program for 2009 will be funded through utilizing the $46.4 million of working capital and deposits at December 31, 2008, plus an additional $5.4 million of equipment inventory on hand at the beginning of 2009, and through cash flow generated from the Thailand operations.
OUTLOOK
Thailand
The 29 wells Pan Orient plans to drill on three company operated concessions will utilize two drilling rigs which are under long term contract. At least two wells are planned on the 100% working interest L53/48 concession starting in October 2009. The remainder of the Thailand drilling program in Concession L44/43 and L33/43 will focus on the continued development of the NSE field (south and central), appraisal at NSE-E1, NSE north, Na Sanun, NSE-F1 and up to four exploration wells in the Bo Rang and Si Thep areas.
The 2009 program is intended to strike a balance between development drilling targeting new production, and exploration defining potential new reserves. The goal is to reach and hold production in the range of 7,200 to 9,000 barrels per day net to Pan Orient (12,000 to 15,000 barrels per day gross) by the third quarter of 2009 and add proven and probable reserves of 12 million barrels net. Any exploration success will be evaluated after initial appraisal drilling as to the impact on production targets with updated guidance provided by the company at that time.
Indonesia
At the Citarum PSC located onshore Java (operated and 69% working interest) a 2D seismic program is currently underway, with the initial 750 kilometer program approximately 25% complete. Upon completion of this initial 750 kilometer program, an additional 500 kilometers of infill 2D will be acquired in order to convert leads defined in the reconnaissance program into drillable prospects. All seismic operations are anticipated to be completed by year end with drilling anticipated in the second quarter of 2010.
At the Batu Gajah PSC located in South Sumatra (operated and 90% working interest) a 2D seismic program is planned to commence within the next 2 months with 500 kilometers of 2D data to be acquired over five prospects and leads defined on pre-existing data. It is anticipated this program will be completed late in the third quarter of 2009 with the drilling of 3 exploration wells to commence in the first quarter of 2010 with a possibility of the drilling of the first well starting in late 2009.
Sawn Lake, Canada
Andora is currently waiting on approval from the Alberta Energy Resources Conservation Board (ERCB) to build and operate a Steam Assisted Gravity Drainage (SAGD) demonstration project. The proposed project includes a single well pair designed for peak anticipated production rates of 750 barrels per day. Given the current oil price environment it is most likely the decision by Andora to proceed with the demonstration project will be deferred into 2010.
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2008 Highlights Three Months Ended Years Ended Year
(thousands of Canadian December 31, December 31, Over
dollars except where Year
indicated) 2008 2007 2008 2007 Change
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FINANCIAL
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Oil revenue, before
royalties and
transportation
expense 36,329 15,435 147,554 24,034 514%
Funds flow from
operations (Note 1) 24,973 7,942 63,897 11,853 439%
Per share $0.55 $0.18 $1.40 $0.29 389%
Per share - diluted $0.52 $0.17 $1.31 $0.28 368%
Funds flow from
operations by region
Canada 1,407 (418) (1,313) (1,512)
Thailand 23,845 8,360 65,667 13,365 391%
Indonesia (278) - (458) -
Net Income 10,813 6,699 31,751 4,843 556%
Per share $0.24 $0.15 $0.70 $0.12 482%
Per share - diluted $0.23 $0.14 $0.65 $0.11 490%
Working capital 42,087 38,586 42,087 38,586 9%
Working capital
plus deposits 46,386 40,763 46,386 40,763 14%
Long-term debt - - - -
Capital expenditures
(Note 2) 16,598 6,524 40,491 22,226 82%
Acquisition - Indonesia
(Note 3) 516 20,180 -
Shares outstanding
(thousands) 45,568 45,219 45,568 45,219 1%
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THAILAND OPERATIONS
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Avg. daily oil
production (bbls/d) 6,982 2,320 4,947 974 408%
Avg. oil sales price,
before transportation
(CDN$/bbl) $56.56 $72.32 $81.50 $67.60 21%
Funds flow from
operations
Crude oil sales 36,329 15,435 147,554 24,034 514%
Field Netback 30,733 13,439 128,857 19,589 558%
Funds flow from
operations 23,845 8,360 65,667 13,365 391%
Funds flow from
operations per barrel
(CDN$/bbl)
Crude oil sales $56.56 $72.32 $81.50 $67.60 21%
Government royalty (4.51) (3.86) (5.54) (3.53) 57%
Other royalty (0.04) (0.50) (0.17) (0.85) -80%
Transportation expense (2.42) (2.38) (2.51) (2.43) 3%
Operating expense (1.74) (2.61) (2.11) (5.69) -63%
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Field Netback 47.85 62.97 71.17 55.10 29%
General and
administrative expense (0.29) (2.12) (1.05) (4.53) -77%
Realized foreign
exchange 5.83 2.10
Interest Income 0.55 0.09 0.28 0.10 192%
Special Remuneratory
Benefit (SRB) (9.90) - (19.60) -
Current income tax (6.92) (21.77) (16.63) (13.07) 27%
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Thailand - Funds flow
from operations $37.12 $39.17 $36.27 $37.59 -4%
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Wells drilled
Gross 7 4 22 15 47%
Net 4.2 2.4 13.2 9.0 47%
Success Rate 71% 75% 68% 80% -12%
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OVERALL CORPORATE OPERATIONS
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Thailand - funds flow from
operations per barrel $37.12 $39.17 $36.27 $37.59 -4%
Canada and Indonesia
Operations
Interest income 0.11 1.01 0.27 1.52 -82%
General and
administrative expense (1.97) (2.97) (1.98) (4.37) -55%
Realized foreign
exchange gain (loss) 3.79 - 1.14 (1.29)
Foreign new ventures
expenditures (0.17) - (0.40) (0.11) 259%
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$38.88 $37.21 $35.29 $33.34 6%
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Total corporate G&A expense
per barrel - cash based $2.26 $5.09 $3.03 $8.90 -66%
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Years Ended Year
(thousands of Canadian December 31, Over
dollars except where Year
indicated) 2008 2007 Change
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RESERVES
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Onshore Thailand (reserves assigned
to concessions SW1 and L44/43; 60%
interest) (Note4)
Proved reserves (thousands of barrels) 5,580 3,849 45%
Proved plus probable reserves
(thousands of barrels) 24,963 17,006 47%
Net present value of proved +
probable reserves, after tax
discounted at 10% 357,000 252,000 42%
Net present value of proved +
probable reserves, after tax
discounted at 15% 296,000 222,000 33%
Canada (53.2% share of the oil sands
leases of Andora at Sawn Lake, Alberta)
(Note 5)
Probable reserves (thousands of barrels) 70,253 73,451 -4%
Net present value of probable reserves,
after tax discounted at 10% 487,695 281,000 74%
Net present value of probable reserves,
after tax discounted at 15% 320,796 158,000 103%
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Operations Summary Three Months Ended Years Ended Year
(thousands of Canadian December 31, December 31, Over
dollars except where Year
indicated) 2008 2007 2008 2007 Change
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THAILAND OPERATIONS
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Average daily oil
production (bbls/d) 6,982 2,320 4,947 974 408%
Average oil sales price,
before transportation
(CDN$/bbl) $56.56 $72.32 $81.50 $67.60 21%
Reference Price
(volume weighted)
and differential
Crude oil (WTI $US/bbl) $58.15 $91.34 $93.37 $82.47 13%
Exchange Rate $US/$Cdn 1.211 0.982 1.087 1.024 6%
Crude oil (WTI $Cdn/bbl) $70.41 $89.74 $98.93 $84.44 17%
Sales price /
WTI reference price 80% 81% 82% 80% 2%
Funds flow from
operations
Crude oil sales 36,329 15,435 147,554 24,034 514%
Government royalty (2,897) (824) (10,027) (1,254) 700%
Other royalty (29) (107) (309) (303) 2%
Transportation expense (1,557) (507) (4,551) (864) 427%
Operating expense (1,114) (558) (3,809) (2,024) 88%
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Field Netback 30,733 13,439 128,857 19,589 558%
General and
administrative expense (183) (452) (1,900) (1,612) 18%
Realized foreign
exchange 3,744 3,802
Interest Income 354 19 506 34 1388%
Special Remuneratory
Benefit (SRB) (6,358) - (35,489) -
Current income tax (4,445) (4,646) (30,108) (4,646) 548%
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Funds flow from
operations 23,845 8,360 65,667 13,365 391%
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Government royalty as
percentage of sales 8% 5% 7% 5% 2%
SRB as percentage of crude
oil sales 21% - 24% - 24%
Income tax as percentage
of crude oil sales 14% 35% 20% 24% -4%
As percentage of crude
oil sales
Expenses - transportation,
operating, G&A and other 8% 11% 7% 20% -13%
Government royalty, SRB
and income tax 38% 35% 51% 25% 26%
Funds flow from
operations, before
interest income and
realized foreign
exchange gain 54% 54% 42% 55% -13%
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Capital Expenditures (Note 2)
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Thailand 10,460 6,318 31,319 21,164 48%
Indonesia 5,299 - 7,345 -
Canada 909 206 1,827 1,062 72%
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Total 16,598 6,524 40,491 22,226 81%
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International Concessions at December 31, 2008
Net Net Share of
Square Commitments P+P
Status Kilometers Note 6 2008 Avg Reserves
(CDN thousands) BBLS/D (Mstb)
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Onshore Thailand
SW1A (60% working
interest &
operator) Developed 14 795 900
L44/43 (60%
working
interest &
operator) Partially $29 to July 4,152 24,063
developed 1,111 2009
L33/43
(60% working
interest &
operator) Undeveloped 1,170
L53/48
(100% working
interest &
operator) Undeveloped 3,997 $954 to January
2010
Indonesia
Citarum, West
Java (69%
working
interest &
operator) Undeveloped 1,991 25,014 to October
2009
Batu Gajah,
South Sumatra
(90% working
interest &
operator) Undeveloped 3,590 40,294 to January
2010
South CPP,
Central Sumatra
(90% working
interest &
operator) Undeveloped 4,026 6,175 to November
2011
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(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.
(3) Cost of acquisition allocated to petroleum and natural gas properties
(see Note 3 of the notes to consolidated financial statements).
(4) Thailand reserves as at December 31, 2008 as evaluated by Gaffney
Cline & Associates Ltd., Singapore. (refer to news release of March
16, 2009)
(5) Pan Orient's 53.2% share of the reserves of Andora Energy Corporation,
a private company, as at December 31, 2008 as evaluated by DeGolyer
and MacNaughton Canada Limited. (refer to news release of February 23,
2009)
(6) Share of commitments reflect amounts to be paid by Pan Orient,
including carried interest partners in Indonesia. Note that
commitments for a concession include the completion of a work program
as well as the amount of expenditure. Commitments have been
translated at December 31, 2008 from US dollars to Canadian dollars at
the rate of US$1 equals CAD$1.233.
AI
