Pan Orient Energy Corp.

Pan Orient Energy Corp.

January 25, 2010 08:49 ET

Pan Orient Energy Corp.: Operations Update

CALGARY, ALBERTA--(Marketwire - Jan. 25, 2010) - Pan Orient (TSX VENTURE:POE) is pleased to announce an update on operations and the 2010 capital program for Thailand and Indonesia. Highlights include:

  • Thailand Concession L53 (100% WI and operator)
    • L53-D exploration well - oil discovery tested at a restricted rate of 228 bopd
    • L53-A exploration well - oil discovery tested with combined rate of 337 bopd
  • Thailand Concession L44 (60% WI and operator)
    • Bo Rang "B" Field - BR-2ST2 horizontal appraisal well on production at 866 bopd
    • High impact NSE-G3 exploration well targeting a new volcanic zone approaching target depth
  • 2009 average production of 3,369 bopd (net) for the fourth quarter of 2009
  • 2009 exit production of 5,200 bopd (net) excluding test production from the L53 concession
  • 2010 average production target of 6,000 bopd (net)
  • 2010 capital program of CDN$67 million including 34 development and exploration wells in Thailand and seven Indonesian high impact exploration wells

Thailand L53 Concession

L53-D Exploration Well (100% WI and operator)

The L53-D exploration well, located approximately 8.4 kilometers west of the L53-A exploration well was drilled to a depth of 2,447 meters MD (1,893 meters TVD). Oil shows were observed while drilling over a gross interval of greater than 500 meters and approximately eight meters of very good quality sandstone net oil pay was identified on logs and confirmed with RFT pressure data. Testing over this interval through five meters of perforations flowed at restricted rates of 228 barrels of 19 degree API crude oil and 74 barrels of water per day. Analysis of the water samples indicate the well was still cleaning up at the termination of the test.

L53-D is currently being sidetracked to a subsurface target 220 meters northwest of the surface location and approximately 45 meters structurally higher to optimize the well for long term production. Sidetracking is anticipated to take approximately four days at which time the well will be production tested.

The L53-D structure is a highly faulted dome with at least three separate major fault compartments at the oil bearing reservoir level. Two additional fault compartments remain undrilled and will be targeted after a production license has been applied for and granted by the Government of Thailand. Production license approval is anticipated to take approximately 90 days from the date of application submission.

L53-A Exploration Well (100% WI and operator)

Subsequent to the last press release, where the L53-A exploration well was deepened to a depth of 1,738 meters in order to evaluate a secondary volcanic reservoir objective and had tested approximately 20 bopd and 160 barrels of water per day from a sandstones below the volcanic, testing of an approximately 20 meter thick volcanic objective indicated the zone to be tight with no fluid influx.

Testing operations over three sets of perforations in the structurally lowest K30-D sand resulted in a combined 97 barrels of 20 degree API oil and 707 barrels of water per day. Below is a summary of the test intervals in measured depth through the K30-D sand:

1,522 - 1,572m 18.3 bopd      342 barrels of water per day
1,587 - 1,596m 7.5 bopd      139 barrels of water per day
1,603 - 1,608m        combined with above
1,622 - 1,625m 71.6 bopd      226 barrels of water per day

The above test results are currently being analysed as a result of the unusual situation where the lowest water cuts were experience at the base of the sandstone sequences.

Upon the completion of testing of the K30-D sand, the K30-C sand was perforated over a seven meter interval from 1,349 -1.346m measured depth. Testing has been underway for 48 hours with flow rates averaging approximately 220 barrels of 20 degree API crude oil and 192 barrels of water per day (47% water cut), with the most recent water cuts down to 32% and decreasing further on an hourly basis as the well continues to clean up. Testing of the K30-C sand will continue for at least another 72 hours to allow the well to clean up, at which time testing of the K30-A sand will commence.

Concession L53 Summary

The first two exploration wells on Concession L53 have both resulted in the discovery of hydrocarbons at commercial rates, highlighting the remaining undrilled potential identified through 3D seismic on the remainder of this concession. Work is currently proceeding towards the completion of production license applications over each of the two oil discoveries. It is anticipated that these applications will be ready for submission in approximately 30 days with Government of Thailand approval anticipated within an additional 90 day period after submission. In the intervening period, the wells will be produced and oil trucked to the approximate 12,000 barrels of storage capacity available on Concession L44, until the granting of the production licenses after which production will be trucked directly to the refinery.

The impact of production from Concession L53 to Pan Orient's cash flow is significant as the SRB tax is levied on a per concession basis, and production of up to approximately 2,500 bopd per concession under current oil prices results in negligible SRB owing. Production from Concession L53 should be Pan Orient's highest net back production in Thailand.

Thailand L44 Concession - Bo Rang "B" Field

BR-2ST2 Horizontal Appraisal Well (60% WI and operator)

The BR-2ST2 horizontal appraisal well drilled approximately 350 meters of horizontal section within the main volcanic Bo Rang "B" reservoir objective. The well is currently on production at a rate of 866 barrels of oil per day with a water cut of 0.05%. This marks the third development well into the Bo Rang "B" reservoir which has produced a combined 123,000 barrels of oil with negligible water since the field came on commercial production from the first well in early November 2009, highlighting the excellent early production performance of the Bo Rang "B" reservoir.

Thailand L44 Concession – NSE Central Field

NSE-G2 Exploration Well (60% WI and operator)

The NSE-G2 exploration well is located near the northern boundary of the NSE Central fault compartment targeting a 100 meter thick volcanic that sits approximately 400 meters below the main producing volcanic reservoir at NSE. This target zone had been penetrated by the NSE-G1 exploration well and encountered oil shows throughout the entire 100 meter section but produced only formation water from a highly fractured zone at the very base of the volcanic. NSE-G2 was targeting this same 100 meter thick volcanic in a position approximately 200 meters structurally higher than in the NSE-G1 well.

While drilling through the upper portion of the main NSE volcanic the drill string became stuck. The decision was then made to complete the well as an NSE central producer and skid the rig over to the adjacent cellar and drill another exploration well (NSE-G3). NSE-G2 is currently on production at a stabilised rate of 130 barrels of oil per day with a water cut of 80%. This is considered a good result given

the down flank position of this well on the structure and provides confidence in future planned NSE central horizontal development locations.

NSE-G3 Exploration Well (60% WI and operator)

The NSE-G3 exploration well is currently setting casing at a depth of 901 meters measured depth after drilling through the main NSE central producing volcanic interval. Drilling ahead towards the same deep volcanic objective that was targeted at NSE-G2, but never reached due to drilling difficulties experienced through the shallower NSE central main reservoir zone, is expected to commence in the next 24 hours. Drilling is anticipated to take approximately five days to completion.

Thailand L44 Concession – Si Thep Field

ST-2 Exploration Well (60% WI and operator)

As reported earlier, the ST-2 exploration well was perforated over a deep sandstone reservoir resulting in flow rates of approximately 14 barrels of 27 degree API oil and six barrels of formation water per day. Additional shallower sandstone reservoirs will be perforated and commingled once equipment is available over the next eight days.

Thailand Summary

Pan Orient exited 2009 producing approximately 5,200 bopd (net). Production for the first 24 days of January 2010 averaged 4,575 bopd (net), and is currently 3,969 bopd (net). Production declines from early to late January 2010 are mainly due to the NSE-G2 exploration well that came on at a flush production rate of over 600 bopd (net) and is currently producing at 78 bopd (net). Production gains of approximately 600 bopd (net) are anticipated within the next seven days from Concession L53, but will not be realized in sales until the granting of two production licenses in early Q2/10. Additional volume increases are anticipated in the short term from development of the NSE-F1, Bo Rang "A" & "B", NSE Central and Na Sanun fields and any exploration drilling success such as the NSE-G2 deep volcanic prospect where the well is currently setting casing just above target. The corporation has set a production target in Thailand of 6,000 barrels of oil per day average for 2010, an approximately 30% increase above 2009 average production of 4,495 bopd (net).

In 2009 Pan Orient utilised two drilling rigs for Thailand operations and experienced significant downtime and three to five day rig moves over the course of the year. In late December 2009, Pan Orient signed a six month contract for a rig with superior equipment and performance that had been operating in Thailand with another operator. It is anticipated that the new rig will be capable of drilling approximately three wells per month, matching last year's performance using two rigs and with an estimated cost savings of approximately 25%. One of the rigs utilised in 2009 has been released with the second to be released at the completion of the L53-D sidetrack.

The 2010 Thailand capital budget has been set at CDN$38 million and includes the drilling of 34 wells (gross) on Concessions L44, L33 and L53. Locations are currently under construction for development wells on the NSE-F1 and Bo Rang "B" fields in Concession L44. First drilling in these fields with the new rig is anticipated to commence in February 2010. Additional drilling in the 100% POE owned and operated Concession L53 is not anticipated until mid year, after the granting of two production licenses.

Exploration drilling in 2010 will continue to target volcanic reservoirs and will also evaluate shallow conventional sandstone reservoirs within and to the north of the producing Wichian Buri field. Success in the volcanic targets three years ago had resulted in the postponement of these potentially large reserve sandstone targets due to their lower rates of production.

Pan Orient continues to target growth in reserves and production with a keen focus on profitability. 2010 will see optimisation of the Thailand operations with a target of further decreasing per unit of production expenses and overhead costs.

Citarum PSC, Onshore Java (POE 69% WI and operator)

Acquisition of more than 1,100 line kilometres of 2D seismic data continues on the Citarum PSC with completion anticipated in late Q2/10. Seismic data processing and mapping of the first third of the program has been completed with the identification of three prospects in the region of the block directly adjacent to the Pasar Jadi and Subang gas fields. Target depths are shallow, ranging between 800 to 1,800 meters and mapped structural closures are up to 25 square kilometres in maximum areal extent.

The 2010 Indonesian high impact drilling program will start with three wells at Citarum commencing in the last half of 2010, the exact timing largely a function of Ministry of Forestry approvals for proposed well locations.

Batu Gajah PSC, Onshore Sumatra (POE 90% WI and operator)

The acquisition of 500 line kilometres of 2D seismic continues with completion anticipated in Q2/10. Up to nine well locations have been submitted for approval to the Ministry of Forestry and the drilling of the first four well locations is anticipated to commence immediately after the three well program on the Citarum PSC.

Indonesia Summary

Indonesian capital expenditures for 2010 are estimated at CDN$29 million and will include the drilling of seven exploration wells and the completion of both 2D seismic programs currently underway. The Corporation continues to seek out and is committed to new venture opportunities in Indonesia.

Pan Orient is a Calgary, Alberta based oil and gas exploration and production company with operations currently located onshore Thailand, Indonesia and in Western Canada.

This news release contains forward-looking information. Forward-looking information is generally identifiable by the terminology used, such as "expect", "believe", "estimate", "should", "anticipate" and "potential" or other similar wording. Forward-looking information in this news release includes, but is not limited to, references to: well drilling programs and drilling plans, estimates of reserves and potentially recoverable resources, and information on future production and project start-ups. By their very nature, the forward-looking statements contained in this news release require Pan Orient and its management to make assumptions that may not materialize or that may not be accurate. The forward-looking information contained in this news release is subject to known and unknown risks and uncertainties and other factors, which could cause actual results, expectations, achievements or performance to differ materially, including without limitation: imprecision of reserve estimates and estimates of recoverable quantities of oil, changes in project schedules, operating and reservoir performance, the effects of weather and climate change, the results of exploration and development drilling and related activities, demand for oil and gas, commercial negotiations, other technical and economic factors or revisions and other factors, many of which are beyond the control of Pan Orient. Although Pan Orient believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurances that the expectations of any forward-looking statements will prove to be correct.

Contact Information

  • Pan Orient Energy Corp.
    Jeff Chisholm
    President and CEO
    (403) 294-1770
    Pan Orient Energy Corp.
    Bill Ostlund
    Vice President Finance and CFO
    (403) 294-1770