A little bit of both I guess
Discontinuing Coverage
Following a review of FirstEnergy research resources, we are
discontinuing coverage on Pan Orient Energy.
Market Perform Ranking and $6.75 per Share Target Price
We discontinue coverage with a ranking of Market Perform
and a target price of $6.75 per share. With considerable uncertainty
pertaining to the drilling program in Thailand and
delays in Indonesia, we have diffi culty assigning full value to
the Company’s risked upside. Further, production in Thailand
has been negatively impacted due to challenges posed
by drilling in volcanic formations and the 2010 reserve writedown.
We feel there is considerable risk in the Company’s
guidance, and believe Pan Orient will have diffi culty meeting
production targets that range between 5,000 bbl/d and 6000
bbl/d in 2011e.
Our target price implies a target EV/2011e boe/d of
US$152,157 and a target EV/2011e DACF multiple of 9.0x.
Operational Update
Current production of 1,960 bbl/d is materially below our
estimates due to water incursion in the Thailand wells, delays
in exploration drilling, unsuccessful exploration drilling, and
failure to bring on shut-in volumes. Each update seems to
have its share of drilling delays, in this case in both Indonesia
and Thailand, but more worrisome is the volatility of production.
We fi nd it increasingly diffi cult to forecast production
given the huge variation in water cuts and the penchant of
the Company to miss guidance for production additions.
AI
