Pantheon Resources– Ready To Advance Back Over 40p And Then Higher

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Pantheon Resources– Ready To Advance Back Over 40p And Then Higher

This company has an objective to demonstrate sustainable market recognition of a value of $5-$10/bbl of recoverable resources by the end of 2028.

Pantheon Resources (LON:PANR),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 Alkaid project that covers 40,000 acres located in Alaska; and the Kodiak project covering an area of approximately 124,000 acres located in Alaska. 

The Alaska North Slope

The Alaska North Slope is a prolific oil province, now regarded as a ‘Super Basin’, which is experiencing an exploration and development revival.

Pantheon and its wholly owned subsidiary, Great Bear Petroleum, has been operating in Alaska for over a decade and it has invested over $350m in building and appraising its portfolio, which includes several major discoveries.

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.

It 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. 

Infrastructure Advantages

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.

Strategy Going Forward

The company will focus on developing the resources which are the lowest development cost and closest to commercial production.

Focussing on nearer term development assets adjoining the existing export infrastructure will allow the company to finance its business more conservatively, to enable future funding to be sourced from a position of greater strength whilst minimising expected value dilution over the period up to cashflow breakeven point.

It owns 100% working interest in some 193,000 acres.

In December last year, the company was successful in bidding for an additional 66,240 acres with very significant resource potential to the west, reflected in NSAI’s Kodiak IER and prospective resources to the east, contiguous with the Ahpun project.

Following the issue of the new leases, which are expected to be formally awarded this summer upon payment of the balance of the application monies, the company will have a 100% working interest in around 259,000 acres.

Major Differentiators

A major differentiator to other Alaska North Slope projects is the close proximity to existing roads and pipelines which offers a significant competitive advantage to Pantheon, allowing for materially lower infrastructure costs and the ability to support the development with a significantly lower pre-cashflow funding requirement than is typical in Alaska.

Furthermore, the low CO2 content of the associated gas allows export into the planned natural gas pipeline from the North Slope to Southcentral Alaska without significant pre-treatment.

Management Comment

Executive Chairman David Hobbs stated that:

A year ago, Pantheon embarked on a refreshed strategy to drive progress towards financial self-sufficiency as quickly as possible and at minimum possible value dilution to existing shareholders.

The progress of the past twelve months – independently certifying the contingent resource estimates and securing a significant agreement for the potential long term gas supply with the State of Alaska – have the potential to significantly de-risk the Company, and could at the same time, shrink the remaining funding requirement to manageable proportions.

The Equity

There were some 944m shares in issue, prior to the latest funding placements.

Larger holders include Charles Schwab Investment Management (7.37%), IPGL (5.54%), Hargreaves Lansdown Asset Management (1.58%), IG Markets (1.13%), KW Investment Management (1.09%), Barclays Bank Private (0.78%), Walker Crips Investment Management (0.69%), HSBC Global Asset Management (UK) (0.59%), and Eurizon Capital (0.50%).

Brokers’ Views

At WH Ireland, analyst Brendan Long commented positively on the company last Friday, stating that:

We note that the funding announced today is evidence that Pantheon Resources continues to benefit from supportive institutions that understand the greater vision and intentions of the company.

We also highlight the pace of Pantheon Resources’ developments to the extent that it was only on Tuesday (11 June 2024) that the company completed the quantification of its discovered/appraised resources and the company has immediately now shifted focus to funding and project development – impressive.

We share the company’s view that the funding options have increased with developments (notably the gas sales precedent agreement) and with the company’s progress.

We further highlight that Pantheon Resources, if viewed as an option on full scale development at the time of FID, will benefit from having the time of the exercise of that option coinciding with, we believe, the reduced growth/potential decline of oil production in the Lower 48 – which will, we believe, be supportive of the company’s fortunes.

We believe that the company is doing exactly the right thing by exploring all options that stand to maximise shareholder value.

We believe that shareholders should be comforted that the funding announcements were made in a context of a show of support by existing shareholders.”

Over at Canaccord Genuity Capital Markets, its analysts Charlie Sharp and Phil Hallam, rate the group’s shares as a Speculative Buy, looking for 90p as their Price Objective.

They state that:

We make a series of adjustments to our model, most notably the updated resource estimates and projected liquids pricing.

The result is no change to our risked NPV10 target price of 90p (unrisked 263p), which excludes any potential gas value.

We note though the better valuation underpinning due to the independent resource assessments and, perhaps even more compelling, is our unrisked valuation.

The story has improved in all key areas over the last 12+ months, and though there is more to do, the trajectory is, in our view, positive.”

My View

On the face of it, Pantheon Resources is really beginning to make some useful strides in its corporate development.

The Private Placing of 9.23m new shares @ around 29p to two of the group’s existing long-term shareholders was an interesting pointer to the growing confidence in the company’s strategy.

The new funds will provide extra working capital and increase its flexibility in advancing funding discussions.

Funding options could include a suite of alternatives including a farm-out, equity, debt, hybrid and a US listing targeted for 2025, the latter which could provide greater access to the US institutional investment community, and by doing so thereby enhancing market depth and liquidity.

The group is planning to hold a webinar to update shareholders later this month.

The shares, which more than doubled my TP on 9th April this year touching 45.50p, closed the week at 29.50p.

I feel that another price move above 40p could happen within the very near-term.

(Profile 22.05.23 @ 17.07p set a Target Price of 22.5p*)

(Asterisk * denotes that Target Price has been achieved since Profile publication)

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