Research Capital Corp. advised that Canadian oil and gas explorer and producer Pan Orient Energy Corp. may be "getting out while the getting is good," and is exploring opportunities to exit from its assets in Thailand and Canada.
In an October 28 research note, Research Capital Corp. analyst Bill Newman CFA advised that Calgary-based oil and gas exploration and production company
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2021/11/17 7:16:23
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Pan Orient Energy Corp. (POE:TSX.V), which is focused on developing oil and gas assets in Thailand, may be "looking to get out while the getting is good."
Research Capital stated that "this morning, Pan Orient Energy announced the initiation of a process to accelerate shareholder value, which could involve the sale of both the Thailand assets and Canada assets." The firm additionally reported that it intends issue a special distribution to shareholders in the amount of CA$0.40 per share.
The report indicated that the special distribution and any other return of excess working capital will require shareholder approval. The voting process is expected to occur in mid-January 2022 and if approved the distribution is expected to be made sometime in Mid-February 2022.
Research Capital pointed out that earlier this year, Pan Orient Energy said it was considering the sale of its assets in Thailand as they have reached a mature stage.
The report mentioned that earlier today, the company reported it is now engaged in discussions with unnamed parties to purchase both the Thailand and the Canadian (Sawn Lake) assets. The analyst noted that it is highly likely that each respective asset will be acquired by different parties. Research Capital explained that it is anticipated that 100% of the net proceeds from the asset sales will be returned to Pan Orient's stockholders.
The analyst noted that Pan Orient Energy owns a 50.01% interest in the Thailand L53/48 Concession, which according to a reserves report prepared by Sproule International Ltd., has estimated net proven (1P) reserves of 1.4 million barrels of oil. Production attributed to Pan Orient's 50.01% interest in the Thailand assets is approximately 1,595 boe/d.
The report estimated the total value of the resource to be CA$25 million, or CA$0.50/share. The report completed by Sproule International also calculated the value of estimated proven plus probable (2P) reserves at CA$39 million, or CA$0.78/share.
The values placed on the Thailand reserves were calculated using Brent crude oil reference prices of US$48.00 during 2021, US$50.00 for 2022, US$55.00 for 2023, US$56.10 for 2024 and US$57.22 for 2025 increasing 2.0% annually thereafter. Research Capital indicated that current Brent future prices are now significantly higher at US$77.79 for 2022 and US$71.79 for 2023.
The analyst noted that the firm's interest in the Sawn Lake heavy oil assets located in central Alberta are held through its subsidiary Andora Energy Corp., which holds a 71.8% ownership position in the property. Andora operates five oil sands leases with 27 gross sections at Sawn Lake. Commercial viability has yet to be established so therefore no proven or probable reserves have been assigned, though Research Capital noted that "a historic, independent resource report effective December 31, 2014, showed a net Contingent Best Estimate resource of 153.0 million barrels."
Research Capital stated that timing could be good for a sale of assets which would positively impact the firm's market valuation and share price. The analyst wrote, "Based upon proven Thailand reserves only, and no value of the Canadian assets, and our expected exit 2021 working capital balance of CA$36.5 million we calculate a conservative valuation of CA$1.35 per fully diluted share."
Research Capital stated it is maintaining its "Buy" recommendation and CA$1.35 target price for Pan Orient Energy Corp. shares. The company's shares trade on the TSX Venture Exchange under the symbol "POE" and is currently trading at CA$1.20/share.