Pan Orient Energy Corp. (POE:TSX.V) agreed to be taken over, including its Thai assets, for about CA$0.99 per share in a cash consideration by DIALOG Group Berhad subsidiary, reported Research Capital Corp. analyst Bill Newman in a June 14 research note. DIALOG is a Malaysian technical service provider to the oil, gas, and petrochemical industry.
Also, Pan Orient will spin out all of its non-Thailand assets, including its Sawn Lake project and CA$7.1 million (CA$7.1M) of working capital and long-term deposits, into a new entity to be called CanAsia Energy Corp. Current Pan Orient shareholders will own CanAsia and receive one CanAsia share for each Pan Orient share they own.
"At the share price of CA$1.12, the market is pricing in very little for the new company, and given our expectations for continued strong oil prices, we believe this is a buying opportunity," Newman wrote.
In other news, Pan Orient, shifting its focus now to the Sawn Lake heavy oil project in northern Alberta, released an updated independent resource estimate on it. Pan Orient holds Sawn Lake through its 71.8% ownership of Andora Energy, the project operator.
The best estimate indicates a contingent resource of 248,200,000 barrels of bitumen net to Andora and, thus, 178,200,000 barrels net to Pan Orient. The associated after-tax net present value discounted at 15% is CA$165M for Andora's interest and CA$119M for Pan Orient.
Years ago, in a steam-assisted gravity drainage (SAGD) pilot project, Andora advanced Sawn Lake to steady-state production of 620 barrels per day (620 bbl/d), achieving an instantaneous steam: oil ratio of 2.1.
"The demonstration project proved that the SAGD process works in the Bluesky Formation at Sawn Lake, however, the project was sidelined by low oil prices," Newman explained.
Research Capital is bullish on Sawn Lake and estimates initial production at 1,235 bbl/d, Newman noted.
"Given the relatively significant amount of capital invested to date in the SAGD facilities, the relatively small amount of capital need for the phase development, and our bullish outlook for oil prices, we believe its highly likely that the Swan Lake development will proceed," added Newman.
Because Sawn Lake is early stage, the investment firm values CanAsia at CA$0.32 per share based on an assumed CA$25,000 per flowing barrel, "leaving additional development upside for the investor," wrote Newman.
As for Pan Orient, Research Capital maintains its Buy rating and CA$1.35 per share target price on it.
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1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures for Research Capital Corp., Pan Orient Energy Corp., June 14, 2022
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