Pantheon Resources plc: Operational Update

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Comment: Here is London Oil analyst Zac Phillip on the latest Pantheon update. I concur with his observations but remain confident that the questions he raises will be answered in due course.

“Pantheon Resources (63p) – Confused Operational Update: Today’s operational update still does little to clear up the confusion surrounding exactly what stage the Company’s assets are at. While the commentary surrounding the gas plant reads like a development programme, the well results are still being reported in the manner of an appraisal programme.

While we can appreciate that the management are applying “rule of thumb” metrics in assessing an individual well’s commerciality, which we don’t necessarily disagree with, but a rule of thumb doesn’t qualify under SPE’s PRMS guidance for commerciality and reserves classification, which demands technical rigour and a concerted development plan. To our mind the markets are no different.

Consequently, management owes the Company’s owners and the wider market: (i) more guidance about their forward programme, with milestones, delineating what the well results will demonstrate; and (ii) what it means for recoverable volumes and all-important declaration of commerciality and reclassification of what at best is Contingent Resources in to Reserves.

To our mind, these were urgent things to address some time ago, but with each new confused announcement, it becomes more pressing.”

11 October 2017

Pantheon Resources plc (“Pantheon” or “the Company”), the AIM-quoted oil and gas
exploration company with a working interest in several conventional projects in Tyler and Polk Counties, onshore East Texas, provides the following update:

VOBM#3, Polk County – successful flow testing operations

The Company is pleased to announce that the operator has utilized the testing equipment booked for the VOBM#2H well to retest the VOBM#3 well ahead of connection to the gas processing facility. At the end of the test period, the VOBM#3 well flowed at a stabilized rate of c.1,900 mcfpd and 130 bopd at a flowing tubing pressure of 4,000 psi on a 10/64ths choke. This equates to 446 boepd which is in the middle of the 270-740 boepd range reported last November.

VOBM#2H, Polk County – flow testing operations

The workover rig has arrived on location and the packer and tubing have been set prior to testing operations being undertaken this week. Given the previously disclosed issues with the suboptimal VOBM#2H well bore configuration, an extended test may be conducted in order to optimise production. Results will be provided on conclusion of testing.

VOBM#4, Tyler County – wellbore sidetrack

The Company is pleased to confirm that the rig remains on schedule for arrival on location on or about 24 October 2017 for the planned sidetrack procedure. Once underway, operations are expected to take around 30 to 40 days on a trouble free basis with testing to occur thereafter. Results will be reported at the conclusion of testing.

Gas processing facilities, Polk County

All necessary components for the Kinder Morgan gas processing facility are now on
location and assembly is progressing well. First gas sales remain on track to commence in early November 2017, with receipt of first production revenues to follow in December 2017. Images showing construction of the facility can be found in the image gallery on the Company’s website at http://www.pantheonresources.com.

Jay Cheatham, CEO, said: “I am very pleased with the flow rates from the VOBM#3 well in Polk County, particularly because they remained steady across the production test, unlike during testing in November last year when they were highly variable. This is a positive sign.

“Most wells in the Double A Wells Field were produced on a much larger choke size than 10/64ths, and I would expect to see higher production rates from the VOBM#3 well once the gas processing facility is operational. Construction of the Kinder Morgan gas processing facility is on schedule for anticipated first production in early November. The commencement of first production and the receipt of production revenues shortly thereafter will be a major milestone for Pantheon.

“We know that the bends and curves in the VOBM#2H well bore, arising from horizontal drilling issues, are sub optimal for completions and production. However, the well logs are exceptional and the well location, between VOBM#1 and VOBM#3, both of which will be producers, give us confidence that the well location has great potential. Our challenge now is to optimise flow rates given these factors. We will likely complete an extended test and I look forward to providing an update once testing has completed.”

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