Oil and gas E&P for active spin outs
“The market is valuing the new company very low, and given our continued high oil price outlook, we believe this is a buying opportunity,” noted a report from Research Capital Corp. regarding Pan Orient Energy Corp.
Pan Orient Energy Corp. (POE: TSX.V) has agreed to be taken over, including its Thai assets, for approximately C$0.99 per share in cash consideration by DIALOG Group subsidiary Berhad, Research Capital analyst Bill Newman reported. Corp. 14 research notes. DIALOG is a Malaysian provider of technical services to the oil, gas and petrochemical industry.
Additionally, Pan Orient will divest all of its non-Thai assets, including its Sawn Lake project and C$7.1 million (C$7.1 million) of working capital and long-term deposits, into a new entity. which will be called CanAsia Energy Corp. Pan Orient shareholders will own CanAsia and will receive one CanAsia share for each Pan Orient share they own.
“At the C$1.12 share price, the market is valuing the new company very little, and given our expectations of continued high oil prices, we believe this is an opportunity. buying,” Newman wrote.
In other news, Pan Orient, which is now focused on the Sawn Lake heavy oil project in northern Alberta, released an updated independent resource estimate for it. Pan Orient owns Sawn Lake through its 71.8% stake in Andora Energy, the operator of the project.
The best estimate indicates a contingent resource of 248,200,000 net barrels towards Andora and, consequently, 178,200,000 net barrels towards Pan Orient. The associated post-tax net present value discounted at 15% is CA$165 million for Andora’s stake and CA$119 million for Pan Orient.
Years ago, as part of a steam-assisted gravity drainage (SAGD) pilot project, Andora advanced Sawn Lake to steady-state production of 620 barrels per day (620 bpd) , reaching an instantaneous steam/oil ratio of 2.1.
“The demonstration project has proven that the SAGD process works in the Bluesky formation at Sawn Lake, however, the project has been sidelined by low oil prices,” Newman explained.
Research Capital is bullish on Sawn Lake and estimates initial production at 1,235 bpd, Newman noted.
“Given the relatively large amount of capital invested in the SAGD facilities to date, the relatively low amount of capital requirements for the development phase, and our bullish outlook for oil prices, we believe it is very likely development of Swan Lake will continue,” Newman added.
Because Sawn Lake is at an early stage, the investment firm values CanAsia at C$0.32 per share based on an assumption of C$25,000 per barrel of oil outstanding, “leaving a development additional upside for the investor,” Newman wrote.
As for Pan Orient, Research Capital maintains its buy rating and its target price of C$1.35 per share.
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