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NEWS RELEASE TRANSMITTED BY Marketwire

FOR: PAN ORIENT ENERGY CORP.

TSX VENTURE SYMBOL: POE - | View Quote |  View Chart |  View Financials | 

Pan Orient Agrees to Acquire Additional Sawn Lake Interest via Andora Energy Corporation

Jun 29, 2006 - 08:00 ET

CALGARY, ALBERTA--(CCNMatthews - June 29, 2006) -

NOT FOR DISSEMINATION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

Pan Orient Energy Corp. ("Pan Orient")(TSX VENTURE:POE) is pleased to announce that it has executed an agreement with Andora Energy Corporation ("Andora") pursuant to which Pan Orient will, subject to certain conditions, acquire a minimum 51% interest in Andora pursuant to a series of transactions, as described below.

Andora is a private oil and gas company with a 100% working interest in petroleum licenses and related assets covering 16 sections of land located immediately south of, and adjacent to, Pan Orient's Sawn Lake property. Four of the Andora sixteen sections of oil sands leases have been assigned net probable and possible recoverable reserves of 98 million barrels (25.9 million probable and 72 million barrels possible) based on an independent third party NI 51-101 compliant reserves report completed by DeGolyer and McNaughten (D&M) in September of 2005.

Asset Sale

Pan Orient has agreed to cause its wholly-owned subsidiary Pan Orient Energy Ltd. to transfer its 10% working interest in oil sands leases in the Sawn Lake area of Alberta to Andora in consideration for the issuance by Andora to Pan Orient of 10,000,000 common shares of Andora ("Andora Shares") representing approximately 26% of the then issued and outstanding Andora Shares on a fully diluted basis.

Share Subscription

Pan Orient has agreed to subscribe for an additional 4,500,000 Andora Shares for an aggregate subscription price of $5,625,000, being $1.25 per Andora Share, which, together with the 10,000,000 Andora Shares to be issued pursuant to the asset sale described above, will give Pan Orient approximately 34% of the issued and outstanding Andora Shares. In consideration of the subscription, Pan Orient will also receive warrants to purchase up to 2,250,000 Shares at a price of $1.60 per Share, exercisable at any time up to one year after the closing of the subscription.

Share Acquisition

Pan Orient has agreed to acquire a minimum of 7,100,000 Andora Shares from existing shareholders of Andora for a minimum aggregate acquisition price of $9,585,000, being $1.35 per Andora Share, which, together with the shares to be acquired by Pan Orient pursuant to the transactions described above, will give Pan Orient approximately 51% of the issued and outstanding Andora Shares. Pan Orient will satisfy the acquisition price either (at the option of the Andora shareholders) (i) by the issuance of common shares of Pan Orient at a deemed price of $3.75 per share, or (ii) in cash, provided that Pan Orient will not be obligated to pay for more than 25% of the Andora Shares in cash. In the event that shareholders of Andora wish to sell more than 7,100,000 Andora Shares, Pan Orient will purchase up to an additional 6,751,600 Andora Shares from such shareholders, under the same maximum 25% cash terms. In the event that Pan Orient acquires the additional 6,751,600 Andora Shares, then, together with the Andora Shares acquired by Pan Orient as described above, Pan Orient will hold approximately 67% of the issued and outstanding Andora Shares. The share acquisition may be effected through an amalgamation or other form of corporate reorganization to be agreed upon by Pan Orient and Andora.

Total Pan Orient Consideration

In addition to the asset transfer, the total consideration paid by Pan Orient to Andora for the share subscription (pre-exercise of warrants) and to Andora shareholders, assuming the purchase of 7,100,000 Andora Shares under maximum 25% cash terms, would be approximately $15.2 million comprised of approximately $8 million cash and approximately 1.9 million Pan Orient shares. Under this scenario, post transaction (including the acquisition of 10 million Andora Shares pursuant to the above-mentioned asset sale), Pan Orient would then have approximately 37.7 million shares outstanding, approximately $22.5 million of remaining cash deposits and a 51% interest in Andora in addition to its producing Thai assets. Andora would have approximately $4.6 million of cash deposits with neither company having any debt.

Other Conditions

Under the terms of the agreement, three of the five Andora directors and the Andora CEO will be nominees of Pan Orient. Andora's current Board of Directors has agreed to pay Pan Orient a break fee if the transaction is not completed under certain circumstances. Andora has agreed not to solicit, initiate or encourage any inquiry, proposal or offer with any third party with respect to any of its assets or securities or any other business combination. Pan Orient also has the option, in addition to a right of first refusal on future Andora financings, to complete the above mentioned Share Subscription regardless of the completion or timing of the other proposed transactions.

The boards of directors of both Andora and Pan Orient have unanimously approved the above transactions and the board of directors of Andora has agreed to recommend the share acquisition to its shareholders. Certain shareholders of Andora have committed that at least 7,100,000 Andora Shares will be sold to Pan Orient.

Closing

Closing of the above transactions, other than the share acquisition which will be subject to Andora shareholder approval, is expected to take place on or before July 28, 2006. The share acquisition is expected to close as soon as reasonably practicable following July 28, 2006. Completion of the transactions is subject to satisfactory completion of due diligence investigations on or before July 7, 2006 and certain other conditions, including the approval of the TSX Venture Exchange.

Orion Securities Inc. has acted as advisor to Pan Orient in connection with the above noted transactions.

In commenting on the transactions, Jeff Chisholm, President and CEO of Pan Orient said "The combined Andora/Pan Orient heavy oil assets form a private corporate vehicle that has an operated, core position of critical mass in the Sawn Lake heavy oil project area. These transactions allow Pan Orient shareholders to leverage their 10% interest in Sawn Lake into what we believe to be more than 400 million barrels (net) of defined oil in place in a under explored area of 85.5 square miles. Andora's 25.9 million barrels of probable recoverable reserves alone are significantly accretive to Pan Orient's net asset value."

"The agreement with Pan Orient is a major milestone for Andora which was created solely to develop the Sawn Lake reservoir" states Tyler Cran, President and CEO of Andora. "It places Andora as the only company with an interest in the entire Sawn Lake property, strengthens its financial and managerial capacity and allows its private shareholders a degree of liquidity. A win-win for both Andora and Pan Orient."

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

The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release. The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release. This news release may contain forward-looking information. Actual future results may differ materially from those contemplated.

(Listed on the TSX Venture Exchange - Symbol "POE" - 35,799,620 common shares issued)
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Pan Orient Energy Corp.
Jeff Chisholm
President and CEO
(403) 294-1770

or

Pan Orient Energy Corp.
Jason Bednar
Vice President Finance and CFO
(403) 294-1770
Email: jason@panorient.ca