this,is,from,a,year,ago,,,all shown to come to pass
A few (very quick) key points to remind ourselves of in these extreme circumstances:
1. PANR has no debt
2. Clean capital structure
3. Strong supportive shareholders
4. >12 months cash on hand – Audit Report signed off 2 weeks ago
5. We are a "conventional" oil company as opposed to "unconventional" ie shale. Lower cost of production
6. Our project models are robust at oil prices much lower than the shales. With the downturn in the oil price we will see significant cost reductions coming through (drilling costs, service provider costs etc). We’ll be updating our models to reflect the changed macro environment but believe at this stage Greater Alkaid should be breakeven between $20-30/bbl
7. Low royalty rates 12-17% (some of the lowest in USA)
8. Our assets located virtually under and adjacent to the pipeline and highway infrastructure
9. We are "onshore" versus the capex intensive "offshore" players. Significant advantage
10. We have phased development potential for big oil as opposed to major upfront capex
11. Oil service rates will plummet and we are well positioned to take advantage of this to get costs down
12. Our Alaskan play is a long term play – this is a 40 year or more play, exposed to long term oil prices. Realistically, in a best case scenario, we would only likely have a maximum 1 or 2 wells on stream in the next 12 months (subject to a successful farmout), so it is long term not short term prices that are key
13. Helicopter view – The Saudi’s are posturing that they will increase production rates, drive the oil price down and deal a fatal blow to the US shale sector. And perhaps to punish the Russian’s for failure to co-operate. Longer term this should be to PANR’s benefit (in theory, leading to higher oil prices and lower USA drilling costs). This unconventional sector has been slowly dying over the past year anyway – equity prices have significantly fallen already, rig rates have dropped considerably and we know that there are many companies strangled with debt who are trying to refinance. You would have to assume that all debt refinancings would be ‘paused’ (or terminated) for now and we should start to see bankruptcies soon. The debt market for E&P companies has changed fundamentally overnight. Saudi oil is reported to be breakeven at +/- $40 bbl so they are taking short term pain to wield a decisive blow to the sector, in order to reset it and to prompt a stronger oil price going forward, which is what they need. PANR will benefit from this – conventional, onshore assets with low break-evens are the right place to be positioned in the sector. The Saudi’s are not stupid; this is a strategic move for their long-term benefit
14. Farmout – it is too early to tell what impact this will have on PANR farmout efforts. Any companies burdened with debt or high cost assets may now have other problems to deal with within their own portfolios, however the counter argument may be that these long term, conventional, low breakeven costs are the right types of assets to be exposed to. We do know that the oil and gas sector globally doesn't function at $30 oil, so there will be large casualties, and natural selection will play a role in what emerges. But the demand for oil and gas continues – we still need energy to survive so this is a big tree shake.
15. Regional activity – 88 Energy & Premier Oil are presently drilling the Charlie#1 well on the adjacent acreage to Pantheon’s. Results will feed through over next 30-60 days. Pantheon is up-dip and about 3500ft shallower, so should they have success (in what has been labelled as one of the biggest onshore wells to be drilled in the world in 2020) then there should be extremely positive implications for Pantheon’s acreage.
16. Finally, I leave you with Bill Armstrong’s (Armstrong Oil & Gas, Inc) quote from 25 February, 2020, just over a week ago: “The Nanushuk (Brookian) play on the North Slope of Alaska, is currently the world’s hottest, conventional, onshore play. Since our discovery of the Pikka Field in 2013, the Nanushuk play has had an extremely high exploration success rate with five large new discoveries, yet the play is still in its infancy and has barely been explored.”
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