(Disclosure: The following represents my opinions only. I am not receiving any compensation for writing this article, nor does Hydra Capital have any business relationship with companies mentioned in this post. I am long POE.V)
Did Pan Orient Finally Catch Some Good Luck with the Drill Bit?
After market close on Thursday Pan Orient announced that, on the basis of open-hole wireline logs and formation pressure samples, a decision has been made to test three intervals interpreted as being potentially hydrocarbon-bearing in the targeted Lower Talang Akar Formation. The press release is pretty sparse on detail, but I had a chance to catch up with Jeff Chisholm this morning from Bangkok.
First off, testing isn't free, so you don't test a well if you think it's dry. Second, the pressure data that they gathered over the interval of interest showed a hydrocarbon gradient, which in layman's terms, means that whatever the fluid is in the target formation, it's less dense than water. Unfortunately, their MDT sampling tool failed (that's a wireline tool that collects reservoir fluid samples in a chamber while downhole), so they didn't get direct samples of the reservoir fluid, which is why the wording of the release remains cautious. After all, until a sample has been recovered and hydrocarbon has been brought to surface, we're still dealing with interpretive data. On a final note, well logs show multiple porous sands (~25% porosity) and oil and gas shows were noted during the drilling of the interval.
It's not a slam dunk, but the ball is in the air and appears to be headed for the basket. Two to three weeks for test results. In terms of potential value, it's still early days, but successful testing and production at Akeh would put POE in a position to monetize their US$50 million cost-recovery pool at the rate of 80-90% of revenue generated. On success, my best guess for present value net to POE is in the $1-1.25/share range for Akeh, which would put my core NAV estimate at around C$2.50-2.75/sh. At that price I would still pay nothing for Sawn Lake (that's a 154 mmbbl net 2C contingent SAGD resource where pilot well pair production is exceeding mid-case engineering estimates), nothing for the remainder of the prospects/fields on the Batu Gaja acreage (see this link for more information on other Batu Gaja targets, including Takar, which looks to be a prior gas discovery), and nothing for the possible company-maker East Jabung Anggun prospect (expected drilling Q2 2016).
As it stands, POE still trades well under its cash value of about C$1.50-1.60/share. That's good enough for me.
September 24, 2015 17:00 ET
Pan Orient Energy Corp.: Indonesia Akeh-1 Exploration Well Drilling Update
CALGARY, ALBERTA--(Marketwired - Sept. 24, 2015) - Pan Orient Energy Corp. (TSX VENTURE:POE) -
Batu Gajah PSC, Onshore Sumatra Indonesia (POE 77% & Operator)
The Akeh-1 exploration well has been drilled and cased to a depth of 1,850 meters. On the basis of open hole wireline logs and formation pressure samples, a decision has been made to test three intervals interpreted as potentially hydrocarbon bearing within the primary target Lower Talang Akar formation. Testing is anticipated to be completed in approximately 14 to 21 days at which time a further update will be provided.
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 press 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 press release includes, but is not limited to, references to well testing and the timing thereof. By its very nature, the forward-looking information contained in this press release requires Pan Orient and its management to make assumptions that may not materialize or that may not be accurate. In addition, the forward-looking information is subject to known and unknown risks and uncertainties and other factors, some of which are beyond the control of Pan Orient, which could cause actual results, expectations, achievements or performance to differ materially. Although Pan Orient believes that the expectations reflected in its forward-looking information are reasonable, it can give no assurances that those expectations will prove to be correct. Pan Orient undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
- Pan Orient Energy Corp.
President and CEO (located in Bangkok, Thailand)
Pan Orient Energy Corp.
Vice President Finance and CFO