Jerry / Pan East Petroleum
Could be drilling activity. However, there are strong fundamentals behind the company. Here's some general background.
First, they are a dominant natural gas producer with top quality high impact acreage. Pan East's current production is concentrated in the Kaybob/Edson and Strachan Deep Basin areas in northwest Alberta and Midwinter in northeast British Columbia. Pan East operates the majority of its production consisting entirely of natural gas, associated liquids and sulphur. Another major reason I like the company in 1998 is the price of natural gas which stands to benefit the company a great deal. They only realized an average price of $1.47 in 1997. Financially, there's automatic growth built into 1998.
At December 31, 1997, Pan East's reserves totaled 161.2 BcfE on a gas equivalent basis (liquids and sulphur converted at 1:10) as compared with reserves of 129.1 BcfE at the end of 1996. Pan East's reserves were assessed by independent reservoir engineers, Sproule Associates Limited and 1997 additions were 42.4 BcfE, replacing 1997 production of 10.2 BcfE by over 400 percent. Proven reserves (108.3 BcfE) represent 67 percent of total reserve volumes with 87 percent of the reserves being natural gas. Pan East's finding and development costs for 1997 were $0.55 per McfE for established reserves (Proven plus 50 percent probable) and $0.56 per McfE for proven reserves only.
This was drilling status as of 35 days ago. An update from the company should be requested.
ALBERTA
GREATER KAYBOB
At Karr, installation of wellsite facilities and tie in of an existing well (Pan East - 90 percent) is underway with an expectedsales rate of 7.5 MmcfE per day (Pan East - 7.0 MmcfE per day) to commence in April. An exploratory well (Pan East - 66 percent) is presently drilling at 3,850 meters (12,700 feet) and should reach total depth of 4,150 meters (13,700 feet) within two weeks. At Kaybob South, an exploratory well (Pan East - 50 percent) spudded this week and should reach total depth within three weeks. At Gregg Lakes, an exploratory re-entry of a 5,200 meter (17,000 feet) well (Pan East - 20 percent) has commenced with Pan East earning 9,000 acres of undeveloped land on this farmout.
STRACHAN DEEP BASIN
At Sunchild/Ferrier, a gas well drilled last year (Pan East - 45 percent) commenced production in February at 4.5 MmcfE per day (Pan East - 2.0 MmcfE per day). Another exploratory well (Pan East - 40 percent) has been cased and test rates will be availablenext week. At Nordegg, a development well (Pan East - 67 percent)should spud in the third week of March.
BRITISH COLUMBIA
Midwinter (Located 300 miles North of Fort St. John)
Pan East, as operator, has recently drilled, completed and tested the first of a three well horizontal drilling program. The first well flow tested at rates up to 17 Mmcf per day during drilling of a 700 meter (2,300 feet) horizontal section in the Jean Marie Formation. Production is expected to commence within the next two weeks at between 5 to 6 Mmcf per day. The second well is cased with the horizontal section being drilled next week, using under-balanced technology, and the third well is currently drilling and will be completed by mid March. Pan East has a 50 percent working interest in the wells with the remaining 50 percent held by its joint venture partner, Chesapeake Energy Corporation (NYSE:CHK). Ohio Resources Corporation (VSE-OHO) will hold a 25 percent working interest in the wells after payout.
Bullmoose/Sukunka (Located 85 miles Southwest of Fort St. John)
Pan East, as operator, spudded a significant exploration well at Windfall a-5-G/93-P-4 on March 2. This well will test a large structure and should reach total depth of 2,400 meters (8,000 feet) by Mid-June. Pan East has a 25 percent cost interest in this well and will earn a 35 percent working interest, before payout and 24.5 percent working interest after payout, in the well and 10,375 acres of surrounding lands. Pan East's partners in the well include Fina Resources Inc. and Chesapeake Energy Corporation with Poco Petroleums Ltd. (TSE-POC) holding an after payout interest. Pan East's existing well at West Bullmoose d-96-G/93-P-4 (Pan East - 53 percent), which was completed last fall, has been tested with several completion and tie-in options awaiting the results of the Windfall well.
Pan East's Vice President of Operations, David L. Summers, stated, "British Columbia is an emerging key area for the company. Our operations are orientated to natural gas targets and include high potential exploration at Bullmoose/Sukunka and activities at Midwinter which are more development in nature."
PRODUCTION INCREASES
The Company anticipates that reserve additions combined with successful drilling over the winter drilling season will result inproduction increases of 15 MmcfE per day during the second quarter. Increases at Karr, Kaybob, Nordegg and Sunchild in Alberta and Midwinter in British Columbia will bring Pan East's daily production to approximately 40 MmcfE.
Pan East's Vice President of Finance and CFO, Robert A. Maitland, stated, "The combination of existing cash on hand, 1998 cash flow and available bank lines will allow Pan East to undertake the largest drilling program in the Company's history."
1998 OUTLOOK
At December 31, 1997, Pan East had cash and working capital of $14.8 million. These funds combined with cash flow and available credit lines will finance a 1998 capital program budgeted at $50 million. Pan East anticipates drilling 30 to 35 wells in 1998 with an average working interest of 40 percent. To date in 1998, Pan East has participated in the drilling of 13 (5.1 net) wells resulting in 7 (2.6 net) gas wells, one (.6 net) oil well and 2 (0.7 net) dry holes for an 80 percent success rate to date with 3 (1.2 net) wells currently drilling. The Company anticipates production increases of 15 MmcfE per day during the second quarter bringing Pan East's daily production to approximately 40 MmcfE.
Pan East's Exploration Manager, Andrew Boland, commented "this years drilling inventory is our strongest yet. We will be drilling some exciting prospects with promising upside."
The following agreement appeared exciting to me. Cheasapeake Energy is a major independent player in the U.S. The association with them should not be taken lightly. Chesapeake paid a healthy amount per share for interest in this transaction. They are not a foolish company. I listed and purchased shares for my portfolio when price dropped below $2.00. Here's the background for this agreement.
Pan East Petroleum Corp. ("Pan East") announced that it has closed its previously announced Joint Venture and Strategic Alliance transaction with Chesapeake Energy Corporation of Oklahoma City, Oklahoma ("Chesapeake"). As part of the transaction, Pan East has issued to Chesapeake 11,900,000 treasury common shares at $2.50 per share, for total proceeds to Pan East of $29,750,000. Chesapeake now holds 12,000,000, or approximately 19.9 percent of the total issued and outstanding shares of Pan East. Also in connection with the transaction, Mr. Aubrey McClendon, Chairman and Chief Executive Officer of Chesapeake, has joined the Pan East board of directors. Mr. McClendon replaces Mr. Robert L. Hagerman, who has resigned from the board to facilitate this aspect of the transaction. The term of the Joint Venture between Pan East and Chesapeake is from November 13, 1997 to December 31, 1999. The Joint Venture will pursue oil and gas exploration and development and property acquisitions in Western Canada.
Go here for info on Chesapeake Energy search.main.yahoo.com
NOTICE:
If someone in the Calgary area can update the past 30-40 days of drilling activity with a phone call to the company - I'm sure we would all appreciate the effort.
|
