Pan Orient Highlights Operating Results for 2010 Year-End

Pan Orient provided highlights of its 2010 year end and fourth quarter consolidated financial and operating results, and provided an outlook for 2011. Please note that all amounts are in Canadian dollars unless otherwise stated and BOPD refers to barrels of oil per day net to Pan Orient.

2010 HIGHLIGHTS

  • Funds flow from operations of $59.0 million ($1.22 per share) and net income attributable to common shareholders of $20.6 million ($0.43 per share) for 2010.
  • Total 2010 capital programs in Thailand, Indonesia and Canada of $61.3 million were financed 96% by after tax funds flow from operations and 4% from working capital.
  • Capital expenditures were $43.4 million in Thailand, $17.0 million in Indonesia and $0.9 million in Canada.
  • Average 2010 oil sales in Thailand of 3,884 BOPD with 4,056 BOPD for the fourth quarter of 2010.
  • Strong generation of after tax funds flow from Thailand operations with $17.7 million for the fourth quarter of 2010 ($47.46 per barrel) and $58.2 million for 2010 ($41.05 per barrel).
  • Drilling of 25 exploration and appraisal wells in Thailand during 2010 with 10 wells at the Wichian Buri Extension Field ("WBEXT"), five wells at Bo Rang, seven wells at Na Sanun East, two wells at Concession L33, and one well at Concession L53.
  • Discovery of the WBEXT field in Concession L44 (Pan Orient operator and 60% ownership) resulted in a new 12.45 square kilometer production license, 382,051 barrels of oil sales in the second half of 2010, and 8.2 million barrels of proven plus probable reserves were assigned at year-end.
  • Drilling of two exploration wells in Concession L33 (Pan Orient operator and 60% ownership) resulted in the first discovery of hydrocarbons at commercial rates in Concession L33, a new 11.94 square kilometer production license, oil sales of 25,039 barrels commencing in November 2010, and 2.8 million barrels of proven plus probable reserves were assigned at year-end.
  • At Concession L53 (Pan Orient operator and 100% ownership) a production license of 2 square kilometers was granted to Pan Orient, first oil sales from Concession L53 commenced in August 2010, and 1.4 million barrels of proven plus probable reserves were assigned at year-end.
  • Thailand proved plus probable reserves of 31.9 million barrels at December 31, 2010 with 12.4 million barrels of new oil field discoveries in 2010 offset by a 15.7 million barrel downward revision of previously assigned reserves mainly at the Na Sanun Central and NSE-F1 fields in Concession L44/43. The net present value of proved and probable reserves after tax (using forecast prices and discounted at 10%) of Cdn$509 million, representing $9.00 per Pan Orient share based on the current 56.5 million Pan Orient shares outstanding.
  • At December 31, 2010 Pan Orient had $31.4 million of working capital and long-term deposits, and no long-term debt.
  • Subsequent to the year-end, Pan Orient closed a bought deal financing on March 8, 2011 with the issuance of 7,557,264 shares at a price of $6.55 per share for proceeds of $46.7 million net of expenses.

2010 OPERATING RESULTS

  • Total 2010 capital programs in Thailand, Indonesia and Canada of $61.3 million were financed 96% by the $59.0 million in after tax funds flow from operations and 4% from working capital. Capital expenditures were $43.4 million in Thailand, $17.0 million in Indonesia and $0.9 million in Canada.
  • Active 2010 drilling program in Thailand with the drilling of 25 wells (15.4 net wells) focused on exploration and appraisal wells to add new reserves and new development drilling opportunities for 2011. Six wells (4.0 net) were drilled in the fourth quarter of 2010, with five appraisal or exploration wells at the WBEXT field in Concession L44, and the L53-C well in Concession L53 (which spudded on December 30, 2010). Total capital expenditures in Thailand were $11.7 million in the fourth quarter of 2010 and a total of $43.4 million in 2010.
  • Pan Orient drilled 22 wells in Concession L44 (Pan Orient operator and 60% ownership) during 2010 resulting in 12 producing wells and 5 wells which are waiting for workovers or sidetracking operations to evaluate different potential reservoirs.
  • The WBEXT field was discovered in the third quarter of 2010 and a total of 10 exploration or appraisal wells were drilling during the year with capital expenditures for drilling of $14.7 million, and resulted in 382,051 barrels of oil sales. A production license of 12.45 square kilometers was granted for the portion of the field in Concession L44 by the Thailand Department of Mineral Fuels in February 2011. Proved and probable oil reserves assigned at December 31, 2010 were 8.2 million barrels from volcanic and sandstone reservoirs (with 5.3 million barrels assigned to reserves in Concession L44 and 2.9 million barrels assigned to reserves in Concession L33).
  • Five wells were drilled at the Bo Rang fields during the first half of 2010 with capital expenditures for drilling of $5.8 million to further appraise and develop this field which was discovered in 2009. Oil sales in 2010 from the four producing wells resulting from this drilling program were 226,504 barrels.
  • Seven wells were drilled at Na Sanun East in the Central and NSE-F1 fields during the first half of 2010 to continue appraisal of these fields and to evaluate further exploration potential. The program resulted in three producing wells, the NSE-G3 well which will be sidetracked to test a deeper volcanic objective, the NSE-F4 well which is being evaluated for a potential workover, and two wells not capable of production. Capital expenditures related to this drilling program were $10.7 million and oil sales in 2010 were 69,952 barrels.
  • The two exploration wells drilled in Concession L33 (Pan Orient operator and 60% ownership) during the third quarter of 2010 resulted in the first discovery of hydrocarbons at commercial rates in Concession L33. Oil sales commenced in November 2010 with a production license of 11.94 square kilometers for the L33 field being granted by the Thailand Department of Mineral Fuels. Total capital expenditures during 2010 for drilling were $1.9 million and resulted in 25,039 barrels of oil sales and proved and probable oil reserves assigned at December 31, 2010 of 2.8 million barrels.
  • Production in Concession L53 (100% ownership by Pan Orient) commenced in August 2010 with the L53-A well being placed back on-stream after Pan Orient received formal approval by the Thailand Department of Mineral Fuels for the 2.0 square kilometers L53-A Production License around the L53-A exploration well. Oil sales were 28,676 barrels in 2010, with 8,097 barrels (88 BOPD) in the fourth quarter of 2010. This new core area of operations west of Bangkok began production during 2010 and revenue from oil sales was used to fund the start-up of operations. This area has active operations in 2011 with a workover of the L53-A well to produce from additional sandstone zones, and drilling of new wells at L53-C (spudded December 30, 2010), L53-B and L53-A1. Proved and probable oil reserves assigned at December 31, 2010 were 1.4 million barrels from sandstone reservoirs.
  • The independent reserves evaluation conducted by Gaffney, Cline & Associates (Consultants) Pte. Ltd. of Singapore ("Gaffney Cline") for the Thailand assets at December 31, 2010 assigned proved plus probable reserves of 31.9 million barrels at December 31, 2010, a 13% decrease from 36.7 million barrels at December 31, 2009. Proved plus probable reserves at December 31, 2010 include 12.4 million barrels of new oil field discoveries in 2010 at the Wichian Buri Extension field ("WBEXT") in Concessions L44/43 & L33/43, the L33 field in Concession L33/43, and the L53A field in Concession L53/48 offset by a 15.7 million barrel downward revision of previously assigned reserves mainly at the Na Sanun Central and NSE-F1 fields in Concession L44/43.
  • The net present value of proved and probable reserves after tax for the four concessions in Thailand, using forecast prices and discounted at 10%, is Cdn$509 million, an increase of 11% over the prior year and representing $9.00 per Pan Orient share, based on the current 56.5 million Pan Orient shares outstanding.
  • Average Thailand oil sales in 2010 were 3,884 BOPD and 4,056 BOPD for the fourth quarter of 2010. Pan Orient continued to experience significant fluctuations in production levels in 2010 from volcanic reservoirs which can be initially very prolific before they achieve a stabilized production level and water cut.
  • Oil sales averaged 2,246 BOPD in the first quarter of 2011 reflecting the temporary shut-in of WBEXT-1, WBEXT-1A and WBEXT-1B wells starting in December 2010 at the expiry of their respective 90 day production test periods, and reduced oil production of the WBEXT-1C well as a result of water incursion as outlined in the press releases of January 6th and February 9th, 2011. The WBEXT production license was granted on February 24, 2011 and the three temporarily shut-in wells were brought on-stream at reduced rates to minimize the water cut.
  • The oil sands project at Sawn Lake, Alberta operated by Andora Energy Corporation (which is owned 53.4% by Pan Orient) as at December 31, 2010 was evaluated by Sproule Associates Ltd. ("Sproule"). The contingent resource volumes estimated in the Sproule report are considered contingent until such time as commercial recovery has been demonstrated, regulatory approvals have been obtained and the company has committed to proceed with commercial development. Contingent Resources are further classified as "High", "Best" and "Low" in accordance with the level of certainty.

The report assigned Sawn Lake "Best Case" contingent resources of 114.4 million barrels attributed to the 53.4% ownership interest of Pan Orient in Andora. The net present value of the "Best Case" (discounted at 10% before income tax using forecast prices) attributed to Sawn Lake contingent resources is $222 million to the 53.4% ownership interest of Pan Orient in Andora. The Net present value of the "Best Case" (discounted at 10% after income tax using forecast prices) attributed to Sawn Lake contingent resources is $136 million to the 53.4% ownership interest of Pan Orient in Andora.

  • Capital expenditures in Indonesia were $1.6 million for the fourth quarter and a total of $17.0 million for 2010.

At the Batu Gajah PSC in 2010 (onshore Sumatra - POE 97% working interest and operator) there was completion of the 500 line kilometre 2D seismic program, the associated seismic data processing and mapping, permitting and initial field work related to the 2011 three well exploration program. The Tuba Obi Utara-1 well started drilling in March 2011 and will be followed immediately by the SE Tiung-1 and Betano-1 wells. Capital expenditures in 2010 related to the Batu Gajah PSC were $8.3 million.

At the Citarum PSC in 2010 (onshore Java - Pan Orient 77% working interest and operator) there was completion of the 2D seismic program and the associated seismic data processing and mapping. Targets have been selected for a three well exploration program that is scheduled for commencement of drilling late in the third quarter or early in the fourth quarter of 2011. Capital expenditures in 2010 related to the Citarum PSC were $8.3 million.

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