Pantheon Resources – Oversubscribed Raise Incoming

Last Tuesday evening, the £134m capitalised Pantheon Resources (LON:PANR) announced that it intended to raise a minimum of $10.5m by way of a placing and conditional subscriptions of new shares at 17p each.

The next morning, the company reported that its issue was massively oversubscribed and several existing and new institutional investors have participated to raise some $22m in total, by way of a Placing of 104,179,027 new shares in the company.

Interests

The AIM-quoted oil and gas company has 100% working interests in certain projects located adjacent to transportation and pipeline infrastructure on the Alaska North Slope.

Its primary assets are the Greater Alkaid project that covers 22,804 acres located in Alaska; and the Talitha project covering an area of approximately 44,463 acres located in North America. 

The company has drilled and tested a number of wells which have confirmed the presence of large volumes of light oil close to available export infrastructure.

In Alaska, Pantheon has discovered resources in conventional reservoirs with multi-billion-barrels of resource potential.

These discoveries are in multiple accumulations in a unique geographic location adjoining the export and transport infrastructure significantly enhancing commercial potential with minimal impact on the environment.

Pantheon’s primary assets include two major oil appraisal and development projects named Greater Alkaid and Talitha which have both been drilled and proven oil bearing. 

All projects are beneficially located immediately underneath and adjacent to the major Trans Alaska Pipeline System and the Dalton Highway, the major transportation artery for the Alaskan North Slope oil and gas activities with almost immediate evacuation possibilities for any discovered oil.

This infrastructure provides a major competitive advantage, both financial and operational, over all newly discovered oil fields on the North Slope, which is important for a small company like Pantheon.

Use Of Funds

The proceeds will be used to support significant, independent value drivers in the near term, which could be material for Pantheon.

The next few months are expected to be exciting for the company.

The low cost of some $3.3m Shelf Margin Deltaic test in the shallow section of the Alkaid #2 well is a significant event, which will seek to prove the productive potential of the discovered oil within this zone, and which the group believes has superior reservoir qualities than the deeper, Alkaid zone recently tested.

Proving oil in a structure capable of holding over 400m barrels of recoverable oil adjacent to the Dalton Highway and Trans-Alaska Pipeline could have significant commercial implications.

This will not be a long-term production test, as was the deeper Alkaid zone, but is designed to gather reservoir data and test the SMD reservoir oil quality and productivity so this data can be used for planning future commercial operations.

Management Comment

CEO Jay Cheatham stated that:

“I’m pleased the market has rewarded our efforts in maturing this significant asset on the North Slope.

The offering was materially oversubscribed, allowing Pantheon to raise approximately $22m in a difficult market at a small discount to yesterday’s close.

In particular, we are delighted to welcome to our shareholder list some well-known investing institutions; some for the first time and some as they return.

The funds raised will be applied to a number of catalysts over the short to medium-term which we will discuss in detail in a webinar planned for June.

We will also update the market on the recent reservoir analysis of the Alkaid #2 horizontal production test, preliminary work on the updip Theta West acreage awarded in last year’s State lease sale and the ongoing work by SLB and NSAI.”

Additional Use Of Funds

The fresh funds will also be used to finance two separate Independent Expert Reports from Netherland Sewell and Associates on the company’s Theta West and the Alkaid projects.

It will also pay for the preparation of dynamic models and field development modelling by SLB (formerly Schlumberger).

The new funds will also enable the group to complete the purchase of an additional 40,000 acres of the Alaskan North Slope acreage adjacent to its current holding at Theta West.

The balance will be used in providing general working capital for the group.

The Equity

Prior to the 104.18m new shares to be issued by way of the Placing, the group had 787,855,052 shares in issue.

The larger holders include Chons LLC (4.83%), Charles Schwab Investment Management (3.53%), Investec Wealth & Investment (3.33%), IPGL Ltd (3.29%), Sanjay Motwani (2.93%), Jarvis Investment Management (1.74%), Jupiter Asset Management (1.36%), Barclays Bank Private Banking (1.30%), Hargreaves Lansdown Asset Management (1.18%) and BlackRock Fund Advisors (1.10%).

Broker’s Views – Ranging 92p To 155p For ‘Fair Value’

Before this raise analyst Brendan Long at WH Ireland had put a 92p ‘fair value’ estimate on the group’s shares.

After the fund-raising, Charlie Sharp, analyst at Canaccord Genuity Capital Markets, rates the group’s shares as a Buy, with a price objective of 155p a share, which is its ‘risked’ value. The ‘unrisked’ valuation is computed by Canaccord Genuity at 387p per share.

He is now awaiting the external reports to come in over the next few months, which he considers could well be significant share price catalysts.

My View – The Money Is Always There For Good Situations

This fund raise is a wonderful pat on the back for the Pantheon Resources team and reflect the City’s support for its endeavours in Alaska, especially so at a time defined by many brokers as being extremely difficult to raise funds.

The group’s shares touched a massive 143.90p in late August last year, since when they have fallen to as low as 16.50p.

They closed on Friday night at 17.07p.

This week’s substantial oversubscription by the City signifies to me that there is still money around for good investment situations, like Pantheon Resources, and its 17p Placing price should mark the base from which it can now rise.

Accordingly, I am now setting a very conservative 22.5p Target Price, which could well be easily beaten on early news of corporate progress coming over the next few months.