Pantheon Resources Share Discussion Threads

[johnswan193] 02/2/2022 23:27

Forwood it could be argued that drill results to date were Texas and the Kuparuk, so maybe best people don't look at the history of the those and the optimism being shown prior to them being released.

As for planning, as Mike Tyson once said, "everybody has a plan until they get punched in the mouth".

[forwood] 02/2/2022 22:09

Thanks Scot. I want people to read those notes carefully to judge for themselves how confident those closest to the projects are of success. Is that confidence realistic and evidence based? Looking at the history of the drill results to date, the research on cuttings and seismic, the plans in place to take the projects forward, what do you think the chances of success (cos) and failure are? For me, cos is above 90%, and the 10% is mostly down to uncertainty on the Theta West drill outcome. I've very little doubt on the Talitha & Alkaid outcomes. Am I being optimistic? Yes, I am, but in my view not overly so. The company has managed expectations to the low side. I think we will be very pleasantly surprised when actual results emerge.

[the priest] 02/2/2022 20:59

Thanks again scot126 - accurate, thorough and objective as ever.

Roll on testing results…

[winner66] 02/2/2022 18:58

Scot . Thank you so much for posting this . It would of taken much time to assimilate. Greatly appreciated.

[scot126] 02/2/2022 18:04

Dear All – please find below my notes from the PANR webinar dated 24/1/22. My comments are contained within [….]. The notes pretty much follow the order of the presentation. I’ve tried to be as accurate as possible. I do not *think* I have changed or amended the intention or message relayed by any single sentence? Enjoy. Oh, and the usual suspects who moderate and disseminate PANR comments out to the other digital forums are welcome to copy’n’paste this post in whole, or in part, where they see fit.

The following quotations are from Jay Cheatham (JC):

“We’ll have over 300 people working on our projects this winter.”

“Location, location, location. The location [of PANR’s acreage] is almost ideal. It’s where the oil is, about 25 miles south of Prudhoe Bay.

“TAPS (Trans Alaska Pipeline System) capacity is 2 million bopd, currently running at 500k bopd. The acreage is either adjacent or underneath the 414 mile long Dalton Highway.”

“Good oilfields get bigger and better over time. For example, when Prudhoe Bay was discovered, it was thought to contain 10bbo OIP with 3bbo recoverable. It is now assessed to have contained 33bbo OIP and >16bbo recoverable barrels.”

“The founders of eSeis are credited with the discovery of the Alpine oil field in Alaska (the third largest oilfield in Alaska after Prudhoe Bay and Kuparuk River). When discovered Alpine was thought to contain 400-500mmbo. It is now assessed to contain >1bbo recoverable.” [I believe c.1.2bbo is the latest recoverable figure for Alpine]

“PANR owns 154k leased acres in the Alaska North Slope. We do not have any significant environmental issues…..located in a stable environment….with one royalty owner, the State of Alaska…..which makes everything so much easier dealing with one royalty owner/stakeholder. The average royalty is 15%.”

“We’re operating in an under-explored area, as PANR has proven.”

“Published management estimates are for 17bbo OIP with 2.2bbo recoverable resource. We anticipate doing more with these figures using independent experts later this year and next year.”

“The 67k acres which constitute the Alkaid and Talitha Units, PANR has permanent tenure over these two Units providing we continue with the work programme negotiated with the SoA. We have completed the majority of that work. The >80k acres outside of the two Units [Theta West = TW] have 8 or 9 years tenure.”

“200mmbo is recoverable from drilling pads along the Dalton Highway which means we can drill all year round. This reduces infrastructure costs greatly and allows us to be onstream more readily than other companies in the area. We’re not saddled with the long distance infrastructure that others will be saddled with.”

“PANR’s market cap is around $800m. Oil Search paid $3.10 per contingent resource barrel [in the ground]. On an equivalent basis to PANR’s contingent resources, PANR is valued at about US$0.40 per contingent barrel in the ground. We know Oil Search spent a huge amount of additional funds [in Alaska] before merging with Santos.”

“How to increase the size of existing oilfields? Well, you can add bolt-ons like Tarn [at Kuparuk River]. You can increase Recovery Factors (RF). PANR’s RF is in the low teens, about 13% overall. If we just go up to a normal RF [for the region] of, say, 25%, we will have doubled our recoverable resource to 4.4bbo. So we have huge upside, I believe, in our acreage without any bolt-on fields.” [scot126 – this is now the second webinar in a row where Jay has given a specific steer for shareholders to expect the ultra-conservative 13% RF to grow. Once again he specifically mentions a future RF of 25%. PANR’s geology may not permit the RFs seen at Prudhoe Bay which can reach the 50-60% range in certain locations. However, with increased data retrieval from this winter season, I wonder/suspect Jay is trailing the possibility of an upgrade to the RF if the data confirms PANR’s internal geological model? If a 25% RF is achieved from primary recovery, it would surely not be outside the bounds of possibility to see that figure rise into the 30s per cent when secondary and tertiary recovery techniques are employed? I’d suggest it’s worth bearing this in mind when mulling over the possible implications of PANR’s plan to reinject produced gas together with exhaust gas.]

“2021 was a year of extraordinary achievement for PANR….acquired the remaining Working Interest (W.I.) in our Talitha Unit so we now have 100% W.I……we raised $96m in December….we spudded the Theta West well last Friday [21/1/22].”

“PANR has very, very, very deep management experience in Alaska and worldwide. Phillip Gobe ran the ARCO part of the BP/ARCO joint venture at Prudhoe Bay. PANR has a huge amount of relevant experience.”

“Around a year ago we raised money with Brent at $40, now it’s at $80. The price of oil has increased fourfold since the low of April ‘20. The CEO of Schlumberger was quoted stating he expects oil demand to exceed pre-pandemic levels before the end of 2022 and to strengthen further in 2023.”

“We’re going to have some tailwinds in terms of the POO and headwinds in terms of available capital for the industry.”

“The US has exhibited extremely high decline rates recently in all its major plays, especially the unconventional oilfields. Thus, a high volume of wells needs to be drilled to maintain current production levels.”


Justin Hondris (JH):

“eSeis forfeited revenue of $3m in return for a small royalty before PANR drilled the Talitha well last year, which shows eSeis’ belief in the story.”

“We have three of the four Great Bear founders involved in PANR, providing a deep body of knowledge.”

“Internally, we probably never envisaged we’d own a 100% W.I. at this stage, and we feel lucky to be where we are.”

“Average royalty rate in Alaska is 15% v’s 25% in Texas.”

“This is not a new project. There’s been 12 years and $300m of investment into this asset. We’re at the point where the results from these wells will reveal the true potential of these assets.”

“Our location is on the doorstep of existing infrastructure which is critical in Alaska. This gives us much more rapid development time horizons which in turn moves us to higher NPVs.”

“There are no significant environmental or social impediments on our acreage.”

“Raising $96m is really important because it has allowed for portfolio diversification. We have three wells with multiple independent targets.”

“Oil Search paid $3.10 per contingent barrel [in the ground] when the POO was [scot126 “$55”]. On an equivalent basis, PANR is valued at 40c per contingent barrel [in the ground]. This leaves plenty of leverage there…..and of course if we have success, plenty more to come.”

“Alkaid likely to be drilled in Spring/early Summer. Alkaid-2 will be an appraisal/production well. At Talitha we’ve had logs from the well….and VAS data from AHS Baker Hughes points to an oil column of 3700ft in length.”

“Theta West may come in higher than the $16.7m budget depending on the extent of testing undertaken.”

“….be sure to recognise we’re drilling vertical wells here [Talitha and Theta West]. These wells are designed not to maximise flow rates but to prove the moveability of the oil and to determine the quality of the oil. The production wells will be drilled horizontally in the future where flow rates will be significantly higher.”


Jay Cheatham (JC):

“The Alkaid Shallow [SMD-B] and Alkaid Deep [Brookian ZOI] together contain 3.5bbo OIP and 480mmbo recoverable resource. Talitha contains 1.4bbo OIP and 340mmbo recoverable resource. There are five independent zones at Talitha. We’ve plugged off the Kuparuk, and we’ll target that in a future well. We’re going to test the Basin Floor Fan Lower [BFF Lower], two zones in the Slope Fan System [SFS] and then the Shelf Margin Deltaic [SMD]. The SMD was the primary target of the Talitha #A well.”

“Theta West is The Big Kahuna! 12bbo OIP and 1.4bbo recoverable resource. The Theta West structure is 17 miles in length, so it’s huge, it’s really, really big.”

“Looking at the current conceptual development plan drawn up by Lee Keeling & Assoc [independent expert firm] for Alkaid Deep, we’ve used something very similar for the SMD-B. The Alkaid Shallow (SMD-B), looking at it a year ago, it wouldn’t have been that exciting at $40 POO…but look at it today at $80 POO. The NPV10 has moved from $175m to c.$5bn. Per barrel NPV has moved from 42c at $40 POO to >$10 at $80 POO in the Alkaid Shallow.”

“At Alkaid Deep (Brookian ZOI) $40 POO saw an NPV of $68m. At $80 POO that’s increased to >$1bn.”
“So these developments in our two Units could, combined, have $6bn of NPV to PANR at today’s prices. Simply astounding.”

“What did we learn from the Talitha well where we got an incredible amount of data? The size of the SMD-B was extended and now results in a 2.6bbo OIP and 404mmbo recoverable resource. A good portion of that resource is recoverable from drill pads at the roadside. Location, location, location.”

“We took away samples from above the regional K10 top seal – no oil. Below the seal? Every single sample [>400 samples taken in total] contained oil [over an interval of] 3700ft. Look how thick the oil column is!”

“At Alkaid, we perforated a 6ft interval and saw an average flow rate of 108bopd in the Alkaid Deep.”

“These are the two zones we’d develop from the Dalton Highway [SMD-B and Brookian ZOI = Alkaid Shallow and Alkaid Deep]. Our Spring/Summer well will target the Alkaid Deep horizon from a position in the northern part of our Alkaid Unit, drilled horizontally to the southwest. And we’ll drill it deeper because the Alkaid-1 well was terminated early due to a weather event while we were still in the oil zone.”


Bob Rosenthal (BR):

“….testing Talitha, drilling and testing Theta West, drilling the first production well at Alkaid…that is a huge programme, a massive programme. Each one of these operations has separate objectives. At Alkaid we’re looking to move from resources to reserves – that’s a major step forward for the company. First production at Alkaid will be a massive step forward.”

“This is probably one of the largest, most impactful programmes anywhere in the world this year. If there’s something bigger than this happening for any company anywhere, then I don’t know about it.”

“Every zone at Talitha that we predicted to have oil proved to contain oil. It’s now sitting behind pipe and we will be testing multiple zones this winter. As a result of last year’s Talitha drill the project has been significantly de-risked.”

“VAS [Volatiles Analysis System study by AHS Baker Hughes] is an independent validation that we have a significant oil column through this well.”

“Theta West is 8.5 miles to the west of Talitha…..the BFF is 1500ft shallower updip at Theta West v’s Talitha. The BFF zone is 600ft in length at Talitha with a 50% net to gross, all light oil bearing. SFS is made up of two zones, also light oil bearing. SMD has multiple zones and we’ll be testing the SMD-B zone this winter. The oil is high 30s – low 40s API throughout.”

“VAS samples, taken every 10-20ft below the regional K10 seal…all 416 samples, every single one, contained oil over the length of the 3700ft oil column. VAS work was undertaken completely independent of any work PANR was doing.”

“Each of the zones analysed by AHS Baker Hughes as being the most prospective was either anticipated by PANR pre-drill and/or confirmed by log analysis data afterwards.”

“Our Theta West location is 1500ft shallower and because of that shallower depth of burial we are going to have superior reservoir qualities.”

“From Talitha #A to the furthest northwest updip location of the BFF is 17 miles.”

“Theta West is c.85k acres, has 12bbo OIP, 1.4bbo recoverable resource…and we’re only using a range of 11%-20% for Recovery Factor.”

“We have 85%-90% of the BFF on our acreage. We only obtained 60k of the 85k Theta West acres in January 2021.”

“We’re expecting 1300ft in the BFF Lower at Theta West, with better reservoir qualities. We’re not testing the BFF Upper at Talitha because the sands were very thin there. But we’re expecting 100-200ft of BFF Upper zone at the Theta West-1 location.”


Michael Duncan (MD) & Jay Cheatham (JC):

“Talitha is about 30 miles south of the Artic Ocean. At this time in the year, we’re experiencing around 2.5 hours of daylight but the time grows by around 20 minutes each day.”

“Talking about the personnel out here…..we̵7;re fortunate to be surrounded by some of the best on the planet. Leading the drilling at Theta West we have two directional drillers with amazing reputations here in Alaska and over 50 years’ experience between them. On the Talitha #A location we have two of the best completion engineers on the planet. They’ve worked in multiple continents and have Arctic experience here in Alaska, plus Siberia. Around 80 people are working across the two sites today [24/1/22].”

“The Alaskan winter operating window generally runs from January to mid-April.”

“Talitha BFF Lower test…..we plan to perforate in three locales, three fracture stimulation stages, drill out the plugs and then co-mingle and flow back. We’ll be testing the BFF Lower as one zone. We will be reporting on this as we go forward in due time. All necessary gear is on location and work will be going on imminently.”

“Then we’ll go up the hole to the SFS where we will independently perforate and frack and test two zones. These were bonus zones encountered last year…we had an inkling they were there….showed up very well on the logs and in the AHS Baker Hughes VAS work.”

“The primary Zone of Interest when we drilled Talitha #A was the SMD. We will perforate…perform one single fracture stimulation using 150k lbs of sand in total (scot126 – equivalent to c.68 tonnes?). This is a relatively small fracture stimulation but we’re not opening up a lot of the zone. We are trying to prove moveability of the oil. We want to get data on the actual reservoir characteristics more than flow rates. So these vertical wells will give us that data. Ultimately, when developing any of these reservoirs, we will drill horizontally with multi-stage fractures.”

“At the SMD we intend to hit the sweet spot at this location. I’m really excited to see what it does. It’ll be a nice production test and we’re looking for good flow rates.”

“When you’re 1.5 – 2 miles below ground, rock is surprisingly squishy so it doesn’t break as you might envision…..it splits. The shape of the stimulated fractures looks like wings. We expect about 200ft of vertical conductivity from the [three] fracks of the BFF at Talitha. Each wing, we believe, will reach out [from the wellbore] about 200ft also. So, about 200ft vertically, 200ft in distance outwards and we’ll open up a crack about a ¼ inch thick. We will fill that split with a sand proppant, providing a medium for the fluid to flow back through.”

“As we move up the hole to the SFS the reservoirs are thinner so we’ll pump a smaller amount in each of the two fracks planned in this formation. We will need less stimulation in the SFS.”

“In the SMD we’re targeting 100ft of nice pay so we’re expecting one fracture to make good contact with the reservoir from top to bottom. That’ll be a wonderful flow test opportunity.”

“What are the expectations? What are the benchmarks for success? What are we looking to accomplish? The BFF…..in this [Talitha] location the benchmark we’re looking for is moveability and quality of the oil. We expect an API of 35-42 degree crude oil, which is classed as light, sweet crude….with viscosity < water. It’s a very thin oil which makes for amazing mobility. So, for the BFF at Talitha – does the oil move and how good is it?”

“SFS – we expect the oil quality to be the same as the BFF. It’s from the same source and at a reasonably similar depth. So, a nice light, sweet crude is expected. We’re using moveable oil as the benchmark but we’re looking to learn a great deal more about these sands.”

“SMD – for this zone we do have some analogues to compare with. It’s similar to Alkaid-1 which we tested in the past [scot126 – March/April ‘19]. As such we’re looking for a flow rate from this zone in this well. If we stimulate this [zone] properly we’re looking for a flow rate of between 50-80 bopd of IP [Initial Production] from this vertical completion and single stage stimulation. Very much looking forward to the flow rate from this formation.”

“If there’s one point I want to make in this presentation it’s this….we have time in the season to undertake one fractured stimulation in the SMD. But in a development scenario, where we’ll be operating from gravel pads which won’t melt out from under us, we’ll have time to drill a well appropriate to the location and formation. In this case we plan 10,000ft or 2 mile horizontals. That’s a very commonplace well design in Alaska. In the test we’ll look for a 50-80 bopd flow rate…..but for a development well with 30-40 completion stages we’ll be looking for amazing reservoir contact. So the scalability of this project [SMD] is very, very exciting. When we look at our development model, where we’re using very conservative numbers, we’re expecting 1350 bopd from this 2 mile horizontal. That level of production delivers the amazingly robust economics discussed by Jay earlier.”

“Scalability is something I wanted to highlight today. The upside of this [SMD] development using horizontal wells is truly extraordinary.”;

“There’s not just scalability at Talitha by going from vertical to horizontal, and from one fracked stage to 40, there’s also the amazing aerial extent. Examining the potential size of the prize, we’re looking at >400 wells, just in the SMD zone.”

“Looking at Theta West where the pay zone is updip, bigger, thicker [around 1300ft] and with better reservoir characteristics you’ll see the image [slide no. 31] suggests four separate fracture stimulations in the BFF Lower? We’ll see when we get there [Theta West] what the logs suggest and we’ll design our testing programme using the logs and the data we collect from the BFF at Talitha.”

“What does one stage mean and what does the future look like? At Alkaid-1, again from a single fracked stage, it flowed 108 bopd of 35 degree API light, sweet crude. For development wells at Alkaid, once again we’ll use these 30-40 multi-stage horizontal production wells with stages placed 250ft apart [in the horizontal].”

“In the summer, when drilling Alkaid-2, we’ll be working from a gravel pad and won’t be time-limited. It’ll be our first horizontal well……so drilling parameters will decide the length of the horizontal on that one. We want to make sure we drill it appropriately and reliably. We’ll stimulate it and test the concept.”

“The BFF at Theta West is updip, bigger, thicker and has better reservoir characteristics.R21;

“So, for a benchmark for Alkaid-2, we seek to get 100-150 bopd for every thousand feet of lateral. We showcased the ability of this reservoir in 2019. By using a single fracked stimulation, we managed to get 108 bopd flow rate. [Extrapolated] that would be enough to provide really robust project economics.”


Michael Duncan on PANR’s Green Energy Alaska initiative:

“We’ve looked at what’s happening in Alaska currently and want to move it one step further. There’s no natural gas takeaway capacity in Alaska, unlike for oil. Currently, natural gas produced with oil is used for power generation [within the oilfields]. There’s always been an excess of gas on the ANS in the order of trillions of cubic feet of gas.”

“So there’s an amazing source of natural gas…..in fact for the purposes of development, an inexhaustible source of energy. On the ANS the gas is burned to generate electricity and then the gas is put right back in the formation. We intend to go one step further. We intend to duplicate the common methods of the North Slope where the gas is brought to surface, used for power generation…..and we can run a lot of our facilities on electricity…..but the step further is to take the exhaust from the power generation and combine it with the excess natural gas and put it right back in the formation.”

“It’s an elegant solution towards carbon capture, carbon mitigation. We’re able to do this because of Alaska’s unique situation – an abundant source of energy but with no gas takeaway - and because we’re starting from scratch today with new facilities. Other operators on the North Slope would have to retrofit the necessary equipment.”


Q&A

Naturally, Justin Hondris begins with a big shout out to Mr Darcon expressing thanks for curating the shareholder questions.

Q. Looking forward, what are the biggest risks to the project and to the company?
A. From the technical side, we’re looking to prove reservoir deliverability, how do these reservoirs perform? In terms of commerciality, we’re affected by the POO. Proving up the reservoirs and showing we can produce the oil commercially. (BR)

Q. Many private shareholders appear fixated on the flow rates achieved during testing. What would you say to them?
A. When we test a vertical well we’re not just looking at the flow rate. We’re looking for the data to show the underlying characteristics of the reservoir. For example, when we inject into the reservoir we’ll be assessing the relative permeability….and then we’ll use that data to assist in drawing up our development plan. Also, the testing carried out at Talitha we will use to inform our testing plan at Theta West. And from there we’ll move on to modelling the likely effect when we drill horizontally. (BR)
Also, when we move from resources to reserves, you do have to show the actual production results when using a horizontal well….which we will be doing in the Spring/Summer at Alkaid. We’re in a unique position to move from resources to reserves because we can drill a horizontal well from the roadside. Say we manage to drill a 3,000ft horizontal to start with…..engineering firms will work on the design, scale it up and move it to reserves. We’re the only ones who can do that. The companies to the west of us who are talking about building huge infrastructure out in the NPRA, eg. Willow. They have to build the infrastructure, have to put a well on to long term production before they can move to reserves. We can do all that this Summer. (BR)

Q. What difference has the fundraise on 7/12/21 meant to your assessment of the equity risk of PANR?
A. The difference from 30/11/21 to 30/12/21 is massive, they’re a world apart. Nothing has changed geologically in that period but our risk profile in terms of risk of execution has been improved tremendously…because we can do the work at Talitha, then Theta West, then Alkaid….all in the one season. In real time, we’re testing Talitha, then taking that data and applying it to operations at Theta West. Plus, we now have the funds to drill the first horizontal production well and move from resources to reserves. Doing this from the flow test at Alkaid in 2019 to first production in 2022……there are huge companies to the west of us – Conoco, Repsol, Oil Search/Santos….we’ll be on our first production well this year…..the ability to conduct multiple operations in one year significantly reduces the risk of the project ….(JH) and reduces the risk of share price volatility too. (BR)

Q. Farm out. We were actively in discussions with a number of parties, particularly one. The whole BoD would have suspected, in November ’21, that a farm out would have been the way we were going to move forward….we were running a dual strategy and ultimately opted for the self-financing strategy. Are we still open to a farm out in the future? If we are, will the terms have changed?

A. We’re still in discussions with the management group [of the main potential partner]. I firmly believe, had we chosen to, we could have signed a Heads of Terms similar to the terms of [early] November prior to when the financing people amended the terms at the last minute. We are still considering a farm out, these terms are still on the table [from the potential farm in partner]. Obviously if we have success the terms would move in our favour.

We’ll continue to examine a farm out for several reasons: (i) a partner can bring in technical personnel to help our team (ii) the Talitha development requires +/-400 wells and if we aren’t bought out, we must be prepared to advance the project. That will take a huge, huge amount of capital and a farm out would help us move forward (iii) one of the strategies of the potential farm in partner was that they were going to publicly list which would give us an opportunity to merge with a company which was a mirror image of us – regardless of the different percentage ownership – which would give us a listing on one of the other international exchanges. We’d be excited about that. (JC)

A. How to move forward? Drill first, collect data, analyse the data…..which will take some time to do by the way. If we are to negotiate a new farm out deal or someone comes in to buy the asset, we have to be prepared to execute the work programme ourselves….drill, test, even start to develop the project ourselves…..to get the best terms possible. The terms of a farm out now are going to be totally different once we’ve drilled these wells. We must be prepared to execute ourselves. (BR)

Q. We’d been in discussions since June/July [2021] with this one particular farm in group, all the way through to the recent fundraise. Size and scale [of the farm in package] was a very significant number…….it was a structured farm in where they would invest to earn an initial stake…and then they would spend additional funds to move to a larger stake…then the third phase would see them move to a larger stake by investing further. It would still have been a minority stake relative to PANR but the numbers were very significant and larger than our market cap is today. (JH)

A. Many shareholders take great comfort from an industry brand name, a major’s involvement. But it’s like a marriage, you’ve got to think of the long-term future with that partner, to find a partner with similar aspirations. Signing up with a major could, on success this season, see PANR squeezed or diluted out of a project if the major proposed an immediate and very active drilling schedule. Similarly, we may not wish to be exposed to portfolio risk within another company’s portfolio. For example, the ESG movement sees that [partner] company pulling back from commitments, elects to mothball the project because they don’t wish to finance their share of the project. We need a partner who wished to move at the same pace as us…..so it’s more than just the financial terms. The terms were very, very attractive. (JH)

A.….with a major, the first thing they want is control, so 51% which means you’d immediately lose control by partnering with a major. (JC)

Q. External verification and validation. Does PANR plan to retain a well-known name in the industry to prepare an Independent Experts Report (IER), some sort of third-party engineering report? If so, when will that occur?
A. ..….got to collect the data and analyse it first ourselves. First pass analysis will probably be finished some time in the Summer. For Alkaid, an outside firm will want the data from the Long Term Production Test (LTPT)….so starting this year and finishing in 2023. We’re definitely going to commission an IER on each reservoir but it will take time. (BR)

Q. For Roger Young of eSeis, a key architect in the discovery of the Alpine oilfield. Alpine is the third largest oilfield in Alaska. How has the PANR project evolved since you last presented to investors when you stated “the project was getting better and better”? Do you have any feedback for the audience?
A. Well, it does keep on getting better. Exploring for oil and gas is like hunting for treasure, using science as your tool. In this project we look to connect the different bits of data to solve the puzzle. Rather than finding a negative piece of the puzzle which sets us back, I’m seeing more and more positive pieces of this puzzle. The bits’n’pieces, as they come together, are making the project look better and better as the months progress….so the trend is still continuing in that direction, [laughs]…..it keeps me up at night because it is so exciting. (RY)

Q. Bob, you’ve told us previously that due to an adverse weather event you didn’t reach o/w contact (oil/water contact) when you drilled Alkaid-1. What are the implications of this? What does that mean and does it mean there is potential upside deeper down at Alkaid?
A. When we TD’d the well [Alkaid-1] we were in oil. We have another 400-500ft of section below the 2015 base there which, when we drill Alikaid-2 (which is designed primarily as a horizontal production well) …..we intend to drill vertically initially and try to drill and log the section below the 2015 base here….so drill another 400ft or so deeper. So, there’s huge potential remaining below our current understanding of Alkaid Deep. The scale can increase, eg. we know the SMD at Alkaid extends to Talitha. Another thing at Alkaid…..the section between the SMD and Alkaid Deep is all oil-bearing…..just that the reservoir has a lower net to gross through that middle zone so there’s real potential for the scale of the Alkaid project to go up significantly. (BR)

Q. Returning to describing the farm out process....we were working on a structure where the party would earn a very small percentage Working Interest and they would have the opportunity, by spending significantly larger amounts, to gross that up over three stages to what would have been a 10 digit investment in our company for quite a modest percentage. (JH)
A. These terms will likely no longer be relevant. There have been changes in the macro backdrop where underinvestment in the sector through the cycle…..looks like it may lead to supportive oil prices…..but we’ll see. (JC)

Q. How does flow testing work sequentially? Why do we always test from deepest point in the well to the shallowest?
A. You always start from the bottom and then move upwards……;so you have good, clean pipe connecting the tested interval to the surface. (MD)

Q. Exit strategy. We’ve always been upfront in saying we’ll be happy to prove up the asset and sell it on to a larger company. It’s been likened to a private equity story which happens to be listed in the public markets. Provided the valuation is right we will consider offers from a larger group……with access to the capital to move the project forward whilst earning a suitable rate of return. But we’re prepared to press ahead and develop the project if no such offer transpires, or if the terms aren’t acceptable. (JH)

JC comment on macro backdrop and M&A in the sector:

From afar, potential interested parties may look at Conoco’s problems with Willow and may think “too hard.” On closer inspection they’ll see we’re on state land….not on terribly sensitive environmental areas…..weR17;re pretty far away from native hunting areas…..so we pass those hurdles. The ability and intention to be carbon neutral from the very beginning is positive and gives us two thumbs up for many companies. (JC)

Looking at history, energy transitions have taken approx. 100 years. Previous transitions happened because a more efficient method was found to provide energy. Now we’re being asked to move to a less efficient method of providing energy…..not over a century but over a small number of decades. That ought to provide us with a tailwind in terms of the POO. That said, we’ve got to be prepared to develop this ourselves and move the project forward. (JC)

I’ve been involved in both sides of buying and selling O&G assets. The best way of securing a sale is to show you can execute the project yourself. You have to have all the data to ensure a good valuation…R30;and to get the data you have to show you can execute and develop the project yourself. (BR)

Q. If we enjoy even moderate success this winter, what does drilling look like in 2023? How do we fund it? How active will we be? We want to keep moving forward at pace…..our debt provider has indicated a desire to invest further should we experience success….the equity markets will open up for us further…..moving into production will open up a far larger community of institutional support [scot126 – larger addressable market of financial institutions which require cash generation *prior* to making an investment]…&#8230;.plus the consideration of a listing on a US market? (JH)
A. First of all, we don’t plan to not be drilling next year [next winter season 22/23]. Our plan is to be drilling next winter….of course a Theta West well, which would be an appraisal well…….drilling another Alkaid well. Possibly drilling a LTPT well in the SMD, so another busy season. At the same time, if we have success at Alkaid, we want to put together a development plan for Alkaid. So, very active. (BR)

Q. Would engaging an independent expert assist in the process of attracting potential farm in partners?
A. The large to medium sized companies I’ve been involved with tend to place an IER on the shelf and do their own evaluation work. Which is why it’s so important the seller has the work done and has as much data as possible…..because that’s what you need when you come in to assess a project. For smaller companies or financial funds an IER is hugely important. But again, we have to have all the work done, collected all the data. So we won’t have an IER in our hands until 2023. (BR)

Q. Would we consider a US listing in order to access different pools of capital over there?
A. Yes, we would. We’ve observed other companies on the OTC [scot126 – I pressed JH on this and we both agreed the OTC is probably not the ideal market for a dual listing and to improve access to institutional capital in North America]. We’ll have a look at it, and analyse if it’s the right decision for our company. The institutional market has bifurcated with its attitude to the sector, between producers and pre-production companies. Bringing Alkaid on to production opens up a much larger universe of institutional investors. In a meeting with a household name financial institution, the fund manager stated they were watching us closely but they had to see us in production before making the final decision to invest. (JH)

Q. How does it work with the crew working on the two sites?
A. For each job here on the project there’s four people to fill that role. There’s a day person, a night person….and then after two weeks we’ll rotate out and bring in a new day person and new night person. So most people are working two weeks on and two weeks off. We set up a small city out here. At Talitha there’s a small camp with 11 beds. At Theta West we have the main camp with full catering….we eat well out here. For some services we can commute to Deadhorse. We’re fortunate with our location…̷0;it’s only 1 – 1.5 hours drive to Deadhorse. But for critical personnel and equipment it’s all on location. (MD)

Q. Why are we not testing the Kuparuk this season and why have we decided to make it the focus of a future well?
A. We had problems with the Kuparuk. We think we understand what they were. To try to address them in this wellbore would be very difficult. We’ve got four other zones to test this winter and to try to address the Kuparuk also would be very difficult. We would have to drop one or two of the other zones we’re testing……;.and it’s a decision, a very simple decision, that we plug this zone [the Kuparuk] and get on and test the other zones. We’ll focus on the Kuparuk in another well. We’ve got 2bbo above the Kuparuk sitting there [at Talitha] ready to be tested. To compromise that testing this winter would be a management failure. (BR)

Q. ….some questions on one of our major shareholders….we can’t answer for their future strategy…̷0;but in brackets I’d note most of their stock appears to have gone.

Round the table sweep of final comments:

BR: “This is a massive programme. What we’re trying to achieve this winter and summer is huge. We’re a tiny company, with a 100% W.I. in a world class resource with reserves potential. Because we have 100% W.I. all options are open to us. Between where we were in November ’21 and today, we’re in a totally, totally different world.”

MD: “Just gratitude. Good to be part of this. This is a wonderful opportunity and the personnel on location are top notch. I’m out here with some of the best operators on the planet….the best leaders…..the best workers. Thanks to everyone for coming together. It’s a wonderful privilege to be up here working with such great people on such a cool project.”

JH: “The company has had some great feedback from shareholders about the photos and videos from location. Please keep them coming.”

RY: “It’s all going according to plan. I feel privileged to be part of the team. It’s a tremendous opportunity.”

JH: “I want to talk about the concept of invisibility. We’re asked frequently if the opportunity is so great then why is PANR’s mkt cap so low? A couple of years ago we had an acreage position which was far less powerful than it is today. We had the 3D seismic, we had 10 years of work on the asset…..but we didn’t have the acreage tied up and we didn’t have all the data. We’ve progressively been able to get all that. We picked up the final piece of acreage [in the SoA auction] which was incredibly important to us. That purchase [of state leases] at Theta West closed in March of ’21, I think. We bought the remaining 11% of Talitha to bring us to 100% W.I. of all of these projects. But to do that we had to remain reasonably invisible. We couldn’t give too much away to the market because that would mean giving data away to competitors in these lease sales. We had to remain invisible but we don’t anymore. Coming into this programme we’re being measured, we’re being a bit British, being a bit understated. But when we get the data, and if we’re fortunate enough to have the results come in as we hope, then we’ll move very much on to the front foot in telling that message and delivering value through to the share price We are concerned about being bid for……so having a solid, stable, strong shareholder base is incredibly important to us……because we don’t want to be vulnerable to an industry which may understand the valuation [of the asset] better than the equity market.”

JC: “It’s a pleasure working with this team. We got here with 9 employees, a handful of consultants and eSeis. We have done enormous things with a very small team. That’s why we have 100% W.I. and were able to raise $96m. We intend to drill two production wells this year…..have them onstream…..puts us where we need to be to attract institutions to invest in us. We’ve opened up the debt market [to PANR] so if we had to execute the plan ourselves, and we chose to do so, we can raise the capital necessary to do that. We would all enjoy having multiple rigs working simultaneously with the drill turning to the right. It’s exciting.”

Q. How will newsflow be delivered?
A. AIM rules state that material, price sensitive information must be delivered without delay. So that means we’ll be delivering news as it comes, good or bad…..no point delaying…̷0;there’s no benefit in delaying news or trying to hide bad news….none of that stuff. It’ll come as it comes and will be delivered to the market as clearly and cleanly as we can. We’ll do more of these webinars. They’ve been effective for us in explaining the project to an audience. Although please understand we’ll be very busy in the next few months and it’s tricky to run webinars during price sensitive periods. The next opportunity we have to host one, and we have something to say, we’ll certainly be doing that. (JH) /ends

[forwood] 02/2/2022 17:38

Seems to me many have been 'de-risking', keeping the share price low. What's the estimated recoverable resource from Talitha, 420m barrels? What's the post cost value per barrel at today's price? Must be in the region of $60, if not more. That's $25bn. Or c 36 times our current market cap. And some are thinking that a success case here will mean a paltry 40p on the SP? I'd be substantially disappointed if it doesn't exceed £2 in short order, if not more.

[johnswan193] 02/2/2022 17:35

Thanks Jonny and apologies, I have edited to remove that comment.

[references] 02/2/2022 17:30

Thanks for the link. A fun video. I sure wish I knew how that rig is getting on……R30;!!

[ngms27] 02/2/2022 17:17

johnswan193, for the record no I won't exit on the BFF failing at Talitha, nor would I increase my stake.

I'm all in with the shares I currently own through the current drilling at Theta West and testing at Talitha. The SMD should be a shoe in at Talitha and the BFF at Theta West should be much better than at Talitha. Famous last words...

[cezuan] 02/2/2022 16:52

Thanks for the input.

[johnswan193] 02/2/2022 16:50

"-50% upon failure and 100% upon success is very risky".

That depends on what COS you are applying and whether you are going to stick it out until end of operations. For those using 60-70% per zone, independent of each others outcomes, then the failure case by the time operations end becomes extremely unlikely.

I'm not quite in that camp, more of the view that there's a 60-70% chance that the share price is higher than it is currently by the end of operations.

Of course a failure with the first test could bring the -50% failure case immediately. I for one would be likely to ride it out and hope something else comes good (and perhaps even increase my holding).

[cezuan] 02/2/2022 16:43

I think most get irritated by the topic and fear that any speculation might spark negativity and put off potential new investors xD

I personally am only thinking about it, because I invested quite a lot and since I adapted my share price expectations, I wonder whether the risk is still worth it. Say, "-50% upon failure and +100% upon success" does not fit how much I invested.

I thought the success could be much more, but my investment alternatives have also since passed. And I am relatively convinced of the PANR/mid term oil investment "thesis". The market just doesn't seem to back it up.

Sounds good then @johnswan, re 180p.

[johnswan193] 02/2/2022 16:43

Cezuan, there is no way 180p-210p is unrealistic for 2022, assuming success, and particularly if that success occurs with the BFF. I expect 120p would be achievable with positive news from Talitha BFF (being meaningful flow rates, not just moveable oil). If Theta West validates that result and further derisks then 180p-210p is also achievable, even before we get to the SMD.

[ngms27] 02/2/2022 16:40

Guild and balanced view are mutually exclusive!

[winner66] 02/2/2022 16:39

Maybe someone on the guild could give a balanced view as to the unusually unresponsive share price given the all that’s going on .

[cezuan] 02/2/2022 16:30

@John Because the share price is not increasing, showing expectation or excitement. That 3 areas would be drilled was news that should have been a large/r share price event, but wasn't, after it was released in Nov. Instead we have been selling. Where is the "lead up" to a "big" value unlocking event of the drilling?
If anything comparable to the circulating valuations was anticipated by investors, they would buy to get in(?). I cannot anticipate a strong buying of good news if I cannot see any anticipation. Especially given how undervalued we assume we are and how well the oil market performs atm.

Ofc, "strong" is relative. My avg. entry is between 50 and 60p, so reaching 120p means far less to me than to those with 30-40. As I said some time ago, I expected (hoped for) a range between 180 and 210p after drilling success (= in 2022) which was still far below the "90% of 3.1$...". That seemed possible at 95p in November, but seems totally unrealistic to me now.

[johnswan193] 02/2/2022 16:11

I already gave the reason multiple times, it's the 78p effect.

Cezuan said that he feels the share price does not suggest a strong re-rating on success. How can that be the case? I could understand if he was alluding to other shares that didn't move as much as expected on success (such as CHAR, or TXP), and we might see similar here if any proclaimed success is not backed up with meaningful flow test data. I don't see why somebody would conclude that the share price alone does not suggest a strong re-rating on success.

If the assets can be proven to the point where they can be compared similarly to the assets in the Oil Search deal, then the share price should reflect that.

[ottoman1453] 02/2/2022 16:08

But equally, Winner66 and johnswan1, we are fully funded for a diverse and extensive drilling programme, with relatively little share dilution. Although the share price is yet to dramatically lunge upwards it is but 10% shy of its annual high, with all that lies ahead for the company and its fortunes!

[winner66] 02/2/2022 15:52

Johnswan not so much a complaint as a surprise . There’s always reasons for everything. It’s the reason I’m not really understanding. But sure your right we shall find out soon enough .

[johnswan193] 02/2/2022 15:45

"Potential" transformation. Let's stop complaining about the current share price, not long to wait to find out whether the transformation will be happening or not. If the assets are what we hope then the share price will be just fine.

[winner66] 02/2/2022 15:41

Cezuan , moveable vs flow rate over my head also . My investment is based on the perceived asset value and the actual value , the discrepancy is obviously huge. It’s why is so dramatic when we are closer than ever before. The share price behavioural aspect is not what I would of expected. But this could jump dramatically as aspects are proven and more visibility is apparent. We shall see . I’m hopeful the market will start to act positively, but something feels like it’s missing .

[cezuan] 02/2/2022 15:34

I feel the same @winner. The share price does not suggest a strong re-rating upon success to me either. If one ignores how strong the leaving of Covid etc. should have impacted PANR, one might find relief in that post-drilling in 2015 we did re-rate ~100%, at least, and had a stagnant share price going into it, too.
That said, if it's due to the "movable oil" vs. flow rates, that's over my head.

[winner66] 02/2/2022 15:18

I have to say , my one surprise is our share price . How far short of what is deemed fair value is frankly a real conundrum. Our asset base , location , funding , ownership , all absolutely fantastic . The level of on site activity, drilling testing , with more to come as the months of this year unfold . We are today closer than ever before in terms of potential transformation. Yet our share price drags as if failure is priced in. Share price approx the same as 4 weeks ago .Someone is missing something, perhaps it’s me .

[johnswan193] 02/2/2022 10:25

Just published:

A Trip Down the Ice Road From Talitha A to Theta West #1