Pan Orient Energy Posts 2008 Financial, Operating Results

Pan Orient Energy Corp. has provided highlights of its 2008 fourth quarter and 2008 year-end consolidated financial and operating results. Please note that all amounts are in Canadian dollars unless otherwise stated.

2008 HIGHLIGHTS

  • Pan Orient achieved tremendous growth during 2008 in terms of oil production, funds flow from operations, net income, reserve additions, and an increase in exploration acreage & internally generated drilling prospects.
  • Average daily oil production in 2008, net to Pan Orient, increased 408% to 4,947 barrels per day from 974 barrels per day in 2007, and averaged 6,982 per day in the fourth quarter of 2008. Oil production for the first quarter of 2009, net to Pan Orient, is estimated to be 6,165 barrels per day with the reduction from the fourth quarter of 2008 a result of wells coming off flush production and drilling programs in the last three months focusing on exploration targets versus development opportunities.
  • Funds flow from operations increased 439% to $63.9 million for 2008 from $11.9 million in 2007, with $24.9 million in the fourth quarter of 2008 despite the downturn in commodity prices. On a per share basis (diluted), funds flow from operations was $1.31 for 2008 and $0.52 for the fourth quarter of 2008.
  • Net Income of $31.8 million for 2008 and $10.8 million in the fourth quarter of 2008 reflects the success Pan Orient has achieved in creating value through full cycle exploration and drilling. On a per share basis (diluted), net income was $0.65 for 2008 and $0.23 for the fourth quarter of 2008.
  • Year-end proven plus probable reserves reported for Thailand increased by 47% to 25 million barrels.
  • Pan Orient acquired high working interests and operatorship in three concessions in Indonesia resulting in 11,468 square kilometers of new exploration lands. These lands complement the exploration lands onshore Thailand which includes a significant portion of Concession L44/43 which is currently undeveloped, Concession L33/43 and Concession L53/48.
  • Pan Orient continued its emphasis on exploration activities with seismic programs, geological & geophysical work and drilling to deliver growth and profitability through the drill bit. With respect to future development programs, Pan Orient has now built an inventory of 17 development locations in Na Sanun East and will become more active in development and appraisal drilling in 2009.
  • The results achieved by Pan Orient in 2008 are the result of successful exploration and development of the Na Sanun East field in Concession L44/43 for which Pan Orient is the operator and a 60 percent working interest owner. The Na Sanun East field commenced production in January 2007 and daily production net to Pan Orient grew to approximately 6,800 barrels per day in December 2008.
  • During 2008, the capital program of Pan Orient drilled 22 (13.2 net) wells in Thailand with 20 (12.0 net) wells drilled in the Na Sanun East field and an overall drilling success rate of 68%. Drilling for the year was balanced between exploration targeting new reserves and development.The operations in Thailand delivered very strong results for 2008 with $65.7 million in funds flow from operations, transportation and operating expenses of $4.62 per barrel, and funds flow from operations per barrel after tax of $36.27. For the fourth quarter of 2008, the Thailand operations generated $23.8 million in funds flow from operations, operating and transportation expenses were $4.16 per barrel, and funds flow from operations per barrel after tax of $36.27 even though the reference price for crude oil declined to US$58.15 per barrel. For Thailand production in 2008, crude oil revenue was allocated 7% to expenses for other royalties, transportation, operating, and general & administrative, 51% to the government of Thailand in the form of royalties, Special Remuneratory Benefit and Income Tax, and 42% to Pan Orient (before interest income and realized foreign exchange gain).
  • These strong results have been achieved while preserving financial strength and flexibility. At December 31, 2008 Pan Orient had $46.4 million of working capital and deposits, and no long-term debt. Internally generated funds flow from operations of $63.9 million in 2008 completely funded the $40.5 million of capital expenditures in Thailand, Indonesia and Canada, $15.2 million for the cash portion of acquisition of exploration interests in Indonesia, and increased working capital plus deposits by $5.6 million.

OPERATIONS

Pan Orient's base capital budget for 2009 will be approximately $60 million, with 57% directed towards exploration and development in Thailand and 43% high grading exploration opportunities in Indonesia. The base 2009 capital program includes the following:

Thailand

Capital program of $34 million that includes the drilling of 29 wells. Exploration and development activity will continue in Concession L44/43 (operator and 60% working interest owner) with the drilling of 25 wells, site upgrades and workovers. In addition, there is expected to be two exploration wells drilled in Concession L33/43 (operator and 60% working interest owner) and two exploration wells drilling in Concession L53/48 (operator and 100% working interest owner).

Indonesia

Capital program of $26 million that includes 500 kilometers of 2D seismic in the Batu Gajah PSC, and 1,250 kilometers of 2D seismic in the Citarum PSC to bring exploration prospects and leads on those concessions up to drill ready status.

In addition to the stated capital budget of $26 million for Indonesia, there will be a contingent budget of an additional $7 million related to the cost of long lead time drilling equipment and the potential drilling of one exploration well in late 2009.

Sawn Lake, Canada

No capital expenditures are planned by Andora for 2009.

The $60 million capital program for 2009 will be funded through utilizing the $46.4 million of working capital and deposits at December 31, 2008, plus an additional $5.4 million of equipment inventory on hand at the beginning of 2009, and through cash flow generated from the Thailand operations.

OUTLOOK

Thailand

The 29 wells Pan Orient plans to drill on three company operated concessions will utilize two drilling rigs which are under long term contract. At least two wells are planned on the 100% working interest L53/48 concession starting in October 2009. The remainder of the Thailand drilling program in Concession L44/43 and L33/43 will focus on the continued development of the NSE field (south and central), appraisal at NSE-E1, NSE north, Na Sanun, NSE-F1 and up to four exploration wells in the Bo Rang and Si Thep areas.

The 2009 program is intended to strike a balance between development drilling targeting new production, and exploration defining potential new reserves. The goal is to reach and hold production in the range of 7,200 to 9,000 barrels per day net to Pan Orient (12,000 to 15,000 barrels per day gross) by the third quarter of 2009 and add proven and probable reserves of 12 million barrels net. Any exploration success will be evaluated after initial appraisal drilling as to the impact on production targets with updated guidance provided by the company at that time.

Indonesia

At the Citarum PSC located onshore Java (operated and 69% working interest) a 2D seismic program is currently underway, with the initial 750 kilometer program approximately 25% complete. Upon completion of this initial 750 kilometer program, an additional 500 kilometers of infill 2D will be acquired in order to convert leads defined in the reconnaissance program into drillable prospects. All seismic operations are anticipated to be completed by year end with drilling anticipated in the second quarter of 2010.

At the Batu Gajah PSC located in South Sumatra (operated and 90% working interest) a 2D seismic program is planned to commence within the next 2 months with 500 kilometers of 2D data to be acquired over five prospects and leads defined on pre-existing data. It is anticipated this program will be completed late in the third quarter of 2009 with the drilling of 3 exploration wells to commence in the first quarter of 2010 with a possibility of the drilling of the first well starting in late 2009.

Sawn Lake, Canada

Andora is currently waiting on approval from the Alberta Energy Resources Conservation Board (ERCB) to build and operate a Steam Assisted Gravity Drainage (SAGD) demonstration project. The proposed project includes a single well pair designed for peak anticipated production rates of 750 barrels per day. Given the current oil price environment it is most likely the decision by Andora to proceed with the demonstration project will be deferred into 2010.
 

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