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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 Energy Corp.: 2011 Year End Financial & Operating Results

Apr 25, 2012 - 08:00 ET

CALGARY, ALBERTA--(Marketwire - April 25, 2012) - Pan Orient Energy Corp. ("Pan Orient") (TSX VENTURE:POE) reports 2011 year-end and fourth quarter consolidated financial and operating results. Please note that all amounts are in Canadian dollars unless otherwise stated and BOPD refers to barrels of oil per day net to Pan Orient.

The Corporation is today filing its audited consolidated financial statements as at and for the year ended December 31, 2011 and related management's discussion and analysis with Canadian securities regulatory authorities. Copies of these documents may be obtained online at www.sedar.com or the Corporation's website, www.panorient.ca.

2011 OPERATING RESULTS
  • Pan Orient had total corporate funds flow from operations of $45.9 million ($0.83 per share) in 2011 compared to $59.0 million ($1.22 per share) in 2010. The $13.1 million decrease in funds flow from operations from the prior year is primarily due to an $11.0 million reduction in funds flow from Thailand operations resulting from lower oil production volumes partially offset by higher oil prices, and a $1.4 million decrease in funds flow from Canada.

    Funds flow from operations for the fourth quarter of 2011 was $7.1 million ($0.12 per share) compared to $13.2 million ($0.23 per share) for the third quarter of 2011 and $17.8 million ($0.37 per share) for the fourth quarter of 2010. The reduction in funds flow from operations in the fourth quarter of 2011 compared to the third quarter of 2011 is largely due to current Thailand income taxes of $4.1 million and increased operating expenses and general & administrative expenses in Thailand. The reduction from the fourth quarter of 2010 is primarily due to a reduction in oil production levels since the fourth quarter of 2010 included flush production at the Wichian Buri Extension field.
  • Net income attributable to common shareholders was $24.0 million ($0.43 per share) for 2011 compared to $23.5 million ($0.49 per share) for 2010. Net income attributable to common shareholders was $11.6 million ($0.21 per share) for the fourth quarter of 2011 compared to net income attributable to common shareholders of $3.9 million ($0.07 per share), for the third quarter of 2011 and $9.8 million ($0.20 per share) for the fourth quarter of 2010. The increase in net income attributable to common shareholders during the fourth quarter of 2011 reflects a $10.2 million reduction in future tax expense partially offset by higher depletion.
  • Total 2011 capital programs were $70.9 million, with $48.3 million in Thailand primarily for the drilling of 28 gross wells, $22.2 million in Indonesia for exploration activities relating to the four Production Sharing Contracts ("PSC's") including the commencement of drilling at the Batu Gajah and Citarum PSC's, and $0.4 million in Canada. Capital expenditures in Thailand were funded 98% by Thailand funds flow from operations, and the remaining capital programs were funded from working capital.

    Capital expenditures were $13.1 million in the fourth quarter of 2011 with $10.2 million in Thailand for a drilling program of eight wells and $2.7 million in Indonesia with site preparation and road access for the Citarum PSC drilling program that commenced on December 31, 2011 plus costs related to Pan Orient being awarded the new East Jabung PSC.
  • At December 31, 2011 Pan Orient had $51.6 million of working capital and non-current deposits, and no long-term debt. In addition, at December 31, 2011 Pan Orient had $11.7 million of equipment inventory to be utilized for future Thailand and Indonesia operations which is included in exploration and evaluation assets in the consolidated statement of financial position. As at December 31, 2011 estimated commitments in Indonesia to November 2014 were $45.1 million for the Batu Gajah, Citarum, South CPP and East Jabung PSC's. Estimated commitments in Thailand at December 31, 2011 were $0.5 million to January 2013; principally for the drilling of one additional well in Concession L53.
  • Thailand
    • Average 2011 oil sales volume in Thailand was 2,030 BOPD with 1,826 BOPD for the fourth quarter of 2011. Average oil sales in the first quarter of 2012 were 2,541 BOPD and 63% was being produced from sandstone reservoirs.
    • Thailand operations in 2011 generated $47.2 million in funds flow from operations after tax, or $63.69 per barrel in 2011 compared to $58.2 million or $41.05 per barrel in 2010. The Thailand operations in 2011 experienced a 35% increase in the realized crude oil price and a 48% decrease in oil sales volumes. For 2011, transportation expenses of $2.27 per barrel, operating expenses and other royalty of $13.42 per barrel, general and administrative expenses $5.61 per barrel and amounts to the Thailand government of $13.09 per barrel resulted in after tax funds flow from operations per barrel of $63.69. Operating expenses increased 2% during the year to $9.7 million or $13.16 per barrel in 2011 from $9.5 million or $6.73 per barrel in 2010. General and administrative expenses in Thailand decreased 4% in 2011 to $4.2 million or $5.61 per barrel in 2011 from $4.3 million or $3.06 per barrel in 2010. For 2011, Thailand crude oil revenue was allocated 22% to expenses for other royalties, transportation, operating, and general & administrative, 13% to the government of Thailand in the form of royalties and income tax, and 65% to Pan Orient.

      For the fourth quarter of 2011, Thailand generated $7.7 million in funds flow from operations, or $45.87 per barrel, compared to $13.1 million for the third quarter of 2011. Lower funds flow from operations in the fourth quarter of 2011 reflects the $4.1 million ($24.29 per barrel) recorded for current Thailand income taxes (including year-end adjustments) and increased year-end personnel expenses in Thailand impacting operating expenses and general & administrative expenses. A 9% decrease in oil sales volumes was largely offset by a 6% increase in the realized price for crude oil. For the quarter, transportation expenses of $2.43 per barrel, operating expenses and other royalty of $17.62 per barrel, general and administrative expenses of $9.02 per barrel and amounts to the Thailand government of $29.49 per barrel resulted in after tax funds flow from operations per barrel of $45.87. The Brent reference price for crude oil per barrel remained essentially unchanged during the quarter at CDN$112.30 compared to the third quarter of 2011, as the 4% decrease in the Brent reference price in United States dollars was offset by a decrease in the Canadian dollar. Operating expenses increased to $2.9 million or $17.26 per barrel in the fourth quarter from $2.3 million, or $12.58 per barrel, in the third quarter of 2011 as a result of the additional year-end personnel expenses. For the fourth quarter of 2011, Thailand crude oil revenue was allocated 28% to expenses for transportation, operating, and general & administrative, 28% to the government of Thailand in the form of royalties and income tax, and 44% to Pan Orient.
    • Capital expenditures in 2011 were $48.3 million in Thailand for ongoing drilling operations in all four concessions. A total of 28 gross wells (19.2 net) were drilled in Thailand during 2011 with 19 wells at Concession L44 (with four wells at the Wichian Buri Extension field, four wells at the NSE-F1 field, three wells at Bo Rang, three exploration wells on new geological structures, and five wells at other oil fields), two wells at Concession L33, one appraisal well at the SW1 Concession and six wells at Concession L53. Drilling during 2011 was directed 32% to development wells and 68% to exploration and appraisal wells.

      The nine development wells (three at Concession L53 in sandstone reservoirs, two at the Bo Rang field, two at the NSE-F1 field and one each in the sandstone reservoirs at the POE-6 and WBEXT fields) resulted in eight producing oil wells which produced 142,597 barrels of oil net to Pan Orient in 2011 and represented 620 BOPD in the fourth quarter of 2011.

      The 19 exploration and appraisal wells in 2011 had limited success although the L53-D2 exploration well drilled at the end of December 2011 resulted in a potentially significant sandstone reservoir discovery that is currently being tested. The drilling program resulted in five producing oil wells in the fourth quarter of 2011, an additional two wells (L53-D2 and L44V-D1ST2) which started production in 2012, produced 45,462 barrels of oil net to Pan Orient in 2011 and represented 196 BOPD in the fourth quarter of 2011.
    • Capital expenditures in the fourth quarter 2011 were $10.2 million with the drilling of eight gross (5.2 net) wells. Six wells were drilled in Concession L44, with three at the Bo Rang field and three at the NSE-F1 field resulting in four producing oil wells. One exploration well was drilled unsuccessfully at Concession L33 and the L53-D2 exploration well in Concession L53 resulted in the potentially significant sandstone reservoir discovery.
    • The independent reserves evaluation conducted by Gaffney, Cline & Associates (Consultants) Pte. Ltd. of Singapore ("Gaffney Cline") for the Thailand assets at December 31, 2011 assigned proved plus probable reserves of 19.0 million barrels at December 31, 2011, a 40% decrease from 31.9 million barrels at December 31, 2010. The 12.6 million barrel downward revision related to previously assigned reserves at volcanic oil fields in Concessions L44 and L33. Note that for the determination of crude oil reserves at December 31, 2011, no reserves were assigned to the new oilfield discovery with the L53-D2 well in Concession L53, which started drilling in December 2011 and started producing oil in January 2012 under a 90 day test period but has not yet been granted a production license. The net present value of proved and probable reserves after tax (using forecast prices and discounted at 10%) was Cdn$349 million, representing $6.15 per Pan Orient share based on the 56.7 million shares outstanding.
  • Indonesia
    • At the Batu Gajah PSC on-shore Sumatra (Pan Orient operator and 97% ownership), Pan Orient commenced the exploration drilling program in late March 2011.
      • Capital expenditures of $15.5 million at the Batu Gajah PSC in 2011 were $11.9 million for well-site preparation, road access and the drilling of two wells, $2.0 million for equipment inventory and $1.6 million for capitalized exploration overhead and other costs. Capital expenditures in the fourth quarter of 2011 were $0.8 million.
      • The Tuba Obi Utara-1 (NTO-1) exploration well drilled at the end of the first quarter and into the second quarter encountered 10.5 feet of gas pay within good-quality sand near the top of the Lower Talang Akar Formation ("LTAF"). The follow-up NTO-1ST side track well encountered the same LTAF gas sand formation identified at the NTO-1 well, but of lower reservoir quality. Initial drilling results at North Tuba Obi are encouraging with proven gas in the LTAF and oil shows in the Upper Talang Akar sand. The first Appraisal of the North Tuba Obi gas discovery, NTO-2 is planned to be drilled in 2012 to target natural gas in the LTAF and oil in the overlying Upper Talang Akar and Air Benakat sandstone zones.
      • The SE Tiung-1 exploration well drilled in June and into July encountered oil shows and good quality sands within the primary Lower Talang Akar target horizon but wire line logging indicated the zone to be water bearing. The secondary objective of the Gumai and Upper Talang Akar formation sands were also present, but interpreted as being water bearing.
      • The 2012 capital program includes the drilling of two wells at the Batu Gajah PSC with the Shinta-1 exploration well and the NTO-2 appraisal well. Discussions continue towards a comprehensive road and land access agreement with the Indonesian forestry company which holds the surface rights associated with two prospects planned to be drilled in Batu Gajah in 2012.
    • At the Citarum PSC on-shore Java (Pan Orient operator and 77% ownership), Pan Orient commenced the three well exploration drilling program at the end of December.
      • Capital expenditures of $4.5 million at the Citarum PSC in 2011 were $2.9 million for well-site preparation, road access for the Cataka-1, Jatayu-1 and Geulis-1 exploration wells and the start of drilling of the Cataka-1 well, $0.2 million for equipment inventory and $1.4 million for capitalized exploration overhead and other costs. Capital expenditures in the fourth quarter of 2011 were $1.8 million.
      • The Cataka-1 exploration well started drilling on December 31, 2011. The well encountered severe drilling difficulties and the decision was made in February 2012 to junk and abandon the well at a depth of approximately 400 meters TVD, 1,500 meters above the primary reservoir objective. The primary reservoir objective of the well, at approximately 1,900 meters depth, had not been penetrated. Upon the completion of the Jatayu-1 well which is currently drilling, drilling will commence on the re-drill of the Cataka prospect (with Cataka-1A well) incorporating a redesigned well plan incorporating the information gathered from the original well
      • After drilling of the Cataka 1A exploration well, the rig will mobilize to the Geulis exploration prospect.
    • At the South CPP PSC on-shore Sumatra (Pan Orient operator and 97% ownership), Pan Orient had capital expenditures of $0.6 million in 2011 relating to seismic interpretation, environmental study, and overhead.
    • The East Jabung PSC was formally granted on a 100% basis to Pan Orient on November 21, 2011. The 6,228 square kilometer East Jabung PSC is located on and offshore south Sumatra Indonesia, and directly east and adjacent to the company's 97% working interest and operated Batu Gajah PSC. Costs in 2011 of $1.5 million are for the signature bonus to the Government of Indonesia.
    • In the first quarter of 2011, Pan Orient completed transactions which increased our interest in the Batu Gajah PSC to 97%, interest in the Citarum PSC to 77% and interest in the South CPP PSC to 97% through the repurchase of carried interests. The cost to repurchase the carried interests in the three PSC's was $1.8 million, including the issuance of 50,677 shares in Pan Orient at a deemed value of $0.3 million.
  • Canada - Andora Energy Corporation
    • Andora Energy Corporation, a private oil company in which Pan Orient has 53% ownership, has an oil sands project in the Sawn Lake area of Northern Alberta. Andora received Commercial Scheme Approval for a Steam Assisted Gravity Drainage (SAGD) recovery process under the Oil Sands Conservation Act from the Energy Resources Conservation Board (ERCB) and approval from the Government of Alberta under the Environmental Protection and Enhancement Act (EPEA) in 2009. The pilot project location is on Andora 100% owned acreage within the South Block of its Sawn Lake Property in the Peace River Oil Sands Region.
    • The oil sands project at Sawn Lake Alberta as at December 31, 2011 was evaluated by Sproule Associates Ltd. ("Sproule"). The contingent resource volumes estimated in the Sproule report are considered contingent until such time as commercial recovery has been demonstrated, regulatory approvals have been obtained and the company has committed to proceed with commercial development. Contingent Resources are further classified as "High", "Best" and "Low" in accordance with the level of certainty.

      Sawn Lake "Best Case" contingent resources of 114.4 million barrels attributed to the 53.4% ownership interest of Pan Orient in Andora have been assigned largely in the South and Central Blocks of Sawn Lake. Andora is the operator of these lands and holds a 100% working interest in the 16 sections of the South Block and holds a 50% working interest plus an additional 3% gross overriding royalty ("GORR") on non-owned 40% working interest in the 12 sections of the Central Block. Net present value of the "Best Case" (discounted at 10% after income tax using forecast prices) attributed to Sawn Lake contingent resources is $327 million to the 53.4% ownership interest of Pan Orient in Andora.
    • There is no change from the estimate of contingent resource volumes as at December 31, 2010 prepared by Sproule. The December 31, 2011 contingent resource report by Sproule represents a mechanical update incorporating new forecasted prices for natural gas and crude oil, and revised estimates of operating expenses and capital expenditures. The most significant changes are a reduction in natural gas prices and an increase in crude oil prices.
    • Andora Energy Corporation initiated a process in the first quarter of 2011 to identity and consider strategic alternatives. No binding proposal has been received to date and Andora is considering various alternatives for moving ahead with the pilot program.

OUTLOOK FOR 2012

2012 Budget and Work Program

Production guidance for corporate planning purposes in 2012 has been set at an average of 2,500 BOPD net to Pan Orient for the year. Results from Concession L53 (100% Pan Orient owned) will likely have the largest potential positive impact on Thailand production in 2012 and the work program is subject to the timing of the granting of a production license and the environmental approval the drilling of up to 12 wells.

The capital budget for 2012 is estimated at $77.5 million with $40 million for Indonesia that includes six exploration wells (Cataka-1 & 1A, Jatayu-1 & Geulis-1 in the Citarum PSC, two wells in Batu Gajah PSC and one well in East Jabung PSC), a 2D seismic program in South CPP, and a 3D seismic program in Batu Gajah, and $37 million in Thailand including 33 wells (with approximately 20% exploration wells) and a 3D seismic program in Concession L53. The exact well breakdown between concessions in Thailand will be heavily influenced by Concession L53 exploration drilling results and timing of regulatory approvals

Canadian operations are allocated an additional $0.5 million. Cash flow, under current oil price and production assumptions, is anticipated to fund approximately $55 million of the 2012 budget with the remaining $22.4 million funded through working capital and deposits which totaled $51.6 million at December 31, 2011.

  • Thailand
    • Robust economics as evidenced by after tax netbacks in 2011 of $63.69 per barrel, and a strong organization.
    • Focus on drilling of sandstone reservoirs in Concessions L53, L44 and SW1 which have more predictable production and longer reserve life. Currently, the Company is waiting on regulatory approval for 16 sandstone wells in Concession L44 which is expected sometime between late May and August 2012, and for the approval of additional sandstone drilling locations at Concession L53.
    • Continued application of the ICD technology with planned horizontal infill pilots within the NSE South and Central fields of Concession L44, targeting 90-120 BOPD per well (net).
    • Focus on the development, appraisal and exploration of conventional sandstone reservoirs within Concession L53. This will include an additional appraisal well that is planned to commence drilling within the next 5 days into an unproven fault compartment of the L53-D East oil discovery and up to 12 development and appraisal wells that are currently under application for an environmental permit. A production license application for the L53-D East discovery will be submitted by the end of April with approval anticipated by the end of July.
    • As part of the production license application for L53-D East, a third party contingent resource estimate for the one proven fault compartment will be completed prior to the end of April. Initial test data suggests that the multiple sandstone reservoirs encountered in the two wells drilled to date are in close proximity to oil/water contacts as suggested by the varying water cuts observed at the end of each test. The negative aspect of this suggests the approximately 1.5 square kilometer fault compartment is not filled out to the limit of structural closure; the positive aspect is that recovery factors are expected to be high, in the order of 20%-30% due to the active water drive. Pre-drill estimates of between 4 to 12 million barrels of recoverable oil for the entire structural closure encompassing 3 separate fault compartments are now expected to be in the maximum range of 4 million barrels recoverable for one of the three fault compartments with the hydrocarbon potential of the additional two undrilled fault compartments yet to be defined by drilling.
  • Indonesia
    • Batu Gajah - Two wells are planned on Batu Gajah in 2012 with the NTO-2 appraisal well targeting the updip potential of the NTO-1 gas discovery made in 2011 and the Shinta-1 exploration well, at a prospect located north of NTO-2. Both wells are being drilled on the basis of 3D seismic data. The exact timing of drilling is dependent on the success ongoing negotiations with the forestry company that holds the surface access rights over both of these locations, and for which have been ongoing for some time now.
    • Citarum -The Jatayu-1 well is currently setting casing at a depth of approximately 1,424 meters TVD. The well will be drilled to the primary Parigi limestone reservoir objective estimated at approximately 2,300 meters TVD. Once drilling is completed at Jatyau-1, the rig will move to Cataka-1A, followed by Geulis-1.
    • South CPP - 2D seismic is planned in 2012 with the drilling of 1 exploration well scheduled for 2013.
    • East Jabung - A 2D seismic program is planned for 2012 with the drilling of up to two exploration wells planned to commence drilling in late 2012 or early 2013. Initially drilling was scheduled for mid-2012 but original survey monuments for the seismic program conducted over 20 years ago could not be located. Because the data was acquired prior to the introduction of the GPS survey system, the exact positioning of the earlier acquired 2D data is subject to a large degree of uncertainty.
  • Pan Orient is well funded for the 2012 capital program, and possesses an acreage and prospect inventory that has been more than four years in the making to reach the point of drilling that we are at now. The portfolio of prospects is diverse across a number of reservoir types, basins and countries and in many cases, of a potential size whereby any one success has the potential to transform the production and reserves base of the Company.

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.

Financial and Operating Summary Three Months Ended
December 31
, Year Ended
December 31
,
(thousands of Canadian dollars except where indicated) 2011 2010 2011 2010 Change
FINANCIAL
Oil revenue, before royalties and transportation expense 17,523 28,495 72,576 103,019 -30 %
Funds flow from operations (Note 1) 7,061 17,803 45,870 59,014 -22 %
Per share - basic $ 0.12 $ 0.37 $ 0.83 $ 1.22 -32 %
Funds flow from operations by region (Note 1)
Canada (301 ) (97 ) (686 ) 718
Thailand 7,708 17,709 47,184 58,198 -19 %
Indonesia (346 ) 191 (628 ) 98
Total 7,061 17,803 45,870 59,014 -22 %
Net income attributable to common shareholders 11,573 9,833 23,991 23,524 2 %
Per share - basic $ 0.21 $ 0.20 $ 0.43 $ 0.49 11 %
Per share - diluted $ 0.21 $ 0.20 $ 0.43 $ 0.48 10 %
Working capital 48,651 26,768 48,651 26,768 82 %
Working capital & non-current deposits 51,632 31,396 51,632 31,396 64 %
Long-term debt - - - -
Capital expenditures (Note 2) 13,065 13,638 70,896 61,328 16 %
Disposition - Canada (308 ) - (308 ) -
Acquisitions - Indonesia (Note 3) - - 1,761 -
Acquisitions - Sawn Lake, Canada (Note 3) (3,192 ) - - -
Shares outstanding (thousands) 56,685 48,741 56,685 48,741 16 %
Funds Flow from Operations per Barrel (Note 1)
Canada operations $ (1.79 ) $ (0.26 ) $ (0.93 ) $ 0.51
Thailand operations 45.87 47.46 63.69 41.05 55 %
Indonesia operations (2.06 ) 0.51 (0.85 ) 0.07
$ 42.02 $ 47.71 $ 61.90 $ 41.63 49 %
Capital Expenditures (Note 2)
Canada 142 268 378 863 -56 %
Thailand 10,230 11,746 48,299 43,441 11 %
Indonesia 2,693 1,624 22,219 17,024 31 %
Total 13,065 13,638 70,896 61,328 16 %
Working Capital and Non-current Deposits
Working capital & non-current deposits - beginning 58,016 27,746 31,396 32,738 -4 %
Funds flow from operations (Note 1) 7,061 17,803 45,870 59,014 -22 %
Capital expenditures (Note 2) (13,065 ) (13,638 ) (70,896 ) (61,328 ) 16 %
Acquisitions - Indonesia (Note 4) - - (1,417 ) -
Non-cash settlement of Andora receivable - - - (600 )
Foreign exchange impact on working capital (380 ) (847 ) (937 ) (2,097 ) -55 %
Net proceeds on share transactions - 332 47,616 3,669 1198 %
Working capital & non-current deposits - end of period 51,632 31,396 51,632 31,396 64 %
Canada Operations
Interest income 93 21 362 50 623 %
General and administrative (expense) recovery (Note 5) (347 ) 38 (810 ) 708
Realized foreign exchange loss (47 ) (212 ) (238 ) (40 ) 509 %
Foreign new ventures expenditures - 57 - -
Funds flow from operations (Note 1) (301 ) (97 ) (686 ) 718
Funds flow from operations per barrel
Interest income $ 0.55 $ 0.06 $ 0.49 $ 0.04 1120 %
General and administrative expense (Note 5) (2.07 ) 0.10 (1.09 ) 0.50
Realized foreign exchange loss (0.28 ) (0.57 ) (0.32 ) (0.03 ) 969 %
Foreign new ventures expenditures - 0.15 - -
$ (1.79 ) $ (0.26 ) $ (0.93 ) $ 0.51
Indonesia Operations
General and administrative (expense) recovery (Note 5) (163 ) 191 (445 ) 98
Foreign new ventures expenditures (183 ) - (183 ) -
Wells drilled Gross 1.00 - 3 -
Net 0.80 - 2.8 -
Three Months Ended
December 31
, Year Ended
December 31
,
(thousands of Canadian dollars except where indicated) 2011 2010 2011 2010 Change
THAILAND OPERATIONS
Oil sales (bbls) 168,022 373,147 740,889 1,417,750 -48 %
Average daily oil sales (bbls/d) by Concession
L44 1,162 3,572 1,282 3,575 -64 %
SW1 200 124 156 161 -3 %
L33 69 272 137 69 99 %
L53 396 88 454 79 475 %
Total 1,826 4,056 2,030 3,884 -48 %
Average oil sales price, before transportation (CDN$/bbl) $ 104.29 $ 76.36 $ 97.96 $ 72.66 35 %
Reference Price (volume weighted) and differential
Exchange Rate $US/$Cdn 1.03 1.01 1.00 1.04 -4 %
Crude oil (WTI $US/bbl) $ 94.08 $ 84.70 $ 95.26 $ 79.36 20 %
Crude oil (WTI $Cdn/bbl) $ 96.66 $ 85.83 $ 94.96 $ 82.17 16 %
Sales price / WTI $Cdn reference price 108 % 89 % 103 % 88 % 15 %
Crude oil (Brent $US/bbl) $ 109.29 $ 86.01 $ 111.35 $ 79.63 40 %
Crude oil (Brent $Cdn/bbl) $ 112.30 $ 87.16 $ 110.99 $ 82.45 35 %
Sale price / Brent $Cdn reference price 93 % 88 % 88 % 88 % 0 %
Funds flow from operations (Note 1)
Crude oil sales 17,523 28,495 72,576 103,019 -30 %
Government royalty (874 ) (1,826 ) (3,651 ) (6,498 ) -44 %
Other royalty (60 ) (37 ) (196 ) (110 ) 78 %
Transportation expense (409 ) (1,017 ) (1,683 ) (3,653 ) -54 %
Operating expense (2,900 ) (2,886 ) (9,748 ) (9,535 ) 2 %
13,280 22,729 57,298 83,224 -31 %
General and administrative expense (Note 5) (1,516 ) (974 ) (4,153 ) (4,345 ) -4 %
Interest income 25 11 89 68 31 %
Special Remuneratory Benefit tax (SRB) - (1,549 ) - (6,413 ) -100 %
Current income tax (4,081 ) (2,508 ) (6,050 ) (14,336 ) -58 %
Funds flow from operations 7,708 17,709 47,184 58,198 -19 %
Funds flow from operations / barrel (CDN$/bbl) (Note 1)
Crude oil sales $ 104.29 $ 76.36 $ 97.96 $ 72.66 35 %
Government royalty (5.20 ) (4.89 ) (4.93 ) (4.58 ) 8 %
Other royalty (0.36 ) (0.10 ) (0.26 ) (0.08 ) 231 %
Transportation expense (2.43 ) (2.73 ) (2.27 ) (2.58 ) -12 %
Operating expense (17.26 ) (7.73 ) (13.16 ) (6.73 ) 96 %
79.04 60.91 77.34 58.70 32 %
General and administrative expense (Note 5) (9.02 ) (2.61 ) (5.61 ) (3.06 ) 83 %
Interest Income 0.15 0.03 0.12 0.05 141 %
Special Remuneratory Benefit (SRB) - (4.15 ) - (4.52 ) -100 %
Current income tax (24.29 ) (6.72 ) (8.17 ) (10.11 ) -19 %
Thailand - Funds flow from operations $ 45.87 $ 47.46 $ 63.69 $ 41.05 55 %
Government royalty as percentage of crude oil sales 5.0 % 6.4 % 5.0 % 6.3 % -1.3 %
SRB as percentage of crude oil sales 0.0 % 5.4 % 0.0 % 6.2 % -6.2 %
Income tax as percentage of crude oil sales 23.3 % 8.8 % 8.3 % 13.9 % -5.6 %
As percentage of crude oil sales
Expenses - transportation, operating, G&A and other 28 % 17 % 22 % 17 % 5 %
Government royalty, SRB and income tax 28 % 21 % 13 % 27 % -14 %
Funds flow from operations, before interest income and realized foreign exchange gain 44 % 62 % 65 % 56 % 9 %
Wells drilled
Gross 8 6 28 25 12 %
Net 5.2 4.0 19.2 15.4 25 %
Year Ended
December 31
,
(thousands of Canadian dollars except where indicated) 2011 2010 Change
RESERVES AND CONTINGENT RESOURCES
Onshore Thailand (reserves assigned to Concessions L44/43, L33/43 and SW1 where Pan Orient is the operator with a 60% interest, and Concession L53/48 where Pan Orient is the operator with a 100% interest) (Note 6)
Proved oil reserves (thousands of barrels) 5,993 7,363 -19 %
Proved plus probable oil reserves (thousands of barrels) 18,998 31,935 -41 %
Net present value of proved + probable reserves, after tax discounted at 10% 349,000 509,000 -31 %
Per Pan Orient share - basic (Note 7) $ 6.15 $ 10.44 -41 %
Net present value of proved + probable reserves, after tax discounted at 15% 283,000 413,000 -31 %
Per Pan Orient share - basic (Note 7) $ 4.99 $ 8.47 -41 %
Canada (share of the oil sands leases of Andora at Sawn Lake, Alberta)
Contingent Oil Resources - Best Estimate "2C" (thousands of barrels) (Note 8) 114,400 103,900 10 %
Net Present value, before tax discounted at 10% 327,000 222,000 47 %
Per Pan Orient share - basic (Note 7) $ 5.77 $ 4.55 27 %
Net present value, before tax discounted at 15% 103,000 45,000 129 %
Per Pan Orient share - basic (Note 7) $ 1.82 $ 0.92 98 %
INTERNATIONAL INTERESTS
All amounts reflect Pan Orient's interest Status Net Square Kilometers December 31, 2011
Financial Commitments
(CDN thousands)
2011 Avg. Production (BOPD ) P+P Reserves (Mstb )
Onshore Thailand Concessions
SW1A (60% working interest & operator) Developed 9 - - 156 526
L44/43 (60% working interest & operator) (Note 9) Partially developed 556 $ 18 to July 2012 1,282 15,718
L33/43 (60% working interest & operator) (Note 10) Partially developed 557 $ 49 to July 2012 137 1,959
L53/48 (100% working interest & operator) Partially developed 1,959 $ 407 to January 2013 454 795
3,081 $ 474 2,030 18,998
Onshore Indonesia PSC's
Citarum PSC, West Java (77% working interest & operator) (Note 11) Undeveloped 684 $14,198 to October 2012
Batu Gajah PSC, South Sumatra (97% working interest & operator) (Note 11) Undeveloped 2,505 $14,514 to January 2013
CPP South PSC, Central Sumatra (97% working interest & operator) (Note 11) Undeveloped 2,603 $ 5,212 to November 2013
Onshore & Offshore Indonesia PSC
East Jabung PSC, South Sumatra (100% working interest & operator) (Note 11) Undeveloped 4,339 $11,208 to November 2014
10,131 $45,132
Consolidated Total 13,212 $45,606
(1) Funds flow from operations ("funds flow" before changes in non-cash working capital and reclamation costs) is used by management to analyze operating performance and leverage. Funds flow as presented does not have any standardized meaning prescribed by IFRS and therefore it may not be comparable with the calculation of similar measures of other entities. Funds flow is not intended to represent operating cash flow or operating profits for the period nor should it be viewed as an alternative to cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS.
(2) Cost of capital expenditures, excluding any asset retirement obligation and excluding the impact of changes in foreign exchange rates.
(3) Cost of acquisitions, including deemed value of equity issued in the transaction.
(4) Cost of acquisitions, excluding deemed value of equity issued in the transaction.
(5) General & administrative expenses, excluding non-cash accretion on decommissioning provision.
(6) Thailand reserves as at December 31, 2011 and December 31, 2010 as evaluated by Gaffney Cline & Associates (Consultants) Pte. Ltd. of Singapore assessed at forecast crude oil reference prices and costs. The reference price for crude oil per barrel (US$ Brent per barrel) for the December 31, 2011 evaluation is $105.61 for 2012, $101.36 for 2013, $97.23 for 2014, $97.41 for 2015, $101.42 for 2016, $103.37 for 2017 and prices increase at 2.0% per year thereafter. The engineered values disclosed may not represent fair market value.
(7) Per share values calculated based on 56,685,307 Pan Orient Shares outstanding at December 31, 2011 and 48,740,866 Pan Orient Shares outstanding at December 31, 2010.
(8) Pan Orient's 53.4% share as at December 31, 2011 and December 31, 2010 of the reserves of Andora Energy Corporation, a private company as evaluated by Sproule Associates Ltd. assessed at forecast crude oil reference prices and costs. The reference price for crude oil per barrel (Western Canada Select WCS 20.5 API adjusted for quality and transportation in Canadian dollars) is $82.34 for 2012, $79.69 for 2013, $77.25 for 2014, $81.80 for 2015, $83.44 for 2016 and prices increasing at 2% thereafter. Future capital expenditures estimated at $1,055 million. The engineered values disclosed may not represent fair market value.
(9) Concession L44/43 in Thailand consists of 47 net square kilometers of lands held through production licenses (with a 20 year primary term plus an additional 10 year renewal period that can be applied for) and 509 net square kilometers of exploration lands. The exploration lands expire in July 2012 and the Company has applied to reserve 294 net square kilometers of exploration lands for an additional 5 year period.
(10) Concession L33/43 in Thailand consists of 7 net square kilometers of lands held through production licenses (with a 20 year primary term plus an additional 10 year renewal period that can be applied for) and 550 net square kilometers of exploration lands. The exploration lands expire in July 2012 and the Company has applied to reserve 295 net square kilometers of exploration lands for an additional 5 year period.
(11) Share of commitments in Indonesia reflect amounts to be paid by Pan Orient, including carried interest partners (3% for Citarum, Batu Gajah and South CPP). Commitments for a Production Sharing Contract ("PSC") in Indonesia include the completion of a work program as well as the Company's estimated amount of the expenditure. Financial commitments as provided above represent the work program required under the initial 3-year firm commitment exploration period of the PSC. The work program commitment is based on the original contract and timing is subject to government approval. With respect to Citarum, Batu Gajah and South CPP PSC's, extension of this initial exploration period has been agreed to with the Government of Indonesia (GOI) to the dates indicated above. If Pan Orient exercises its options to continue beyond the initial exploration period, additional commitments will be determined on a year-by-year basis through submission of a work program and approval from the GOI. Although extension of the exploration period is a departure from the original contract, it is considered standard practice in Indonesia.
(12) Tables may not add due to rounding.

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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