Cash Flow Coming - (PANR)
Cash Flow Coming
In just a few days gas will start flowing into the Kinder Morgan processing facility in Polk County, and there will be a week or two of a chemical wash to sort everything out properly. Then the first cash from operations will start flowing towards Pantheon Resources (PANR). Excellent on-track news.
The money will not reach the company until December, but once it starts coming in, it should build up pretty quickly. The plant ought soon to come close to full capacity, and sales could be generating the best part of $1.5m a month to Pantheon fairly early in the New Year.
The gas will come from wells one and three in Polk County, plus VOBM#2H, where the attempt to drill horizontally ground to a halt against the hard and abrasive Eagle Ford sandstone, and sent the wellbore twisting and turning into a troublesome well. Instead of spending more time and money shunting resources around to improve and test the flow from number 2 in just a two week window, the company has decided to settle for what it can get out of number 2 without further ado, letting the well flow directly into the processing facility, selling rather than flaring the gas.
While it has proved a costly effort so far, the logs on number 2 well look so good that Pantheon is likely to come back at some stage and re-drill, starting with a vertical well, moving to an angle, and then resuming vertically. Pantheon’s share of that could cost maybe $2m, but by then there will be cash flowing into the business.
Drilling is under way on the sidetrack of VOBM#4 well in Tyler County, targeting the Wilcox formation which Pantheon came across while drilling the original VOBM#4 well. The company will have 75% of this, and after the results will decide on taking up the option to extend to a 75% interest in other acreage at a cost of up to $1.5m. The Wilcox formation has been a prolific producer for others close by, and the prospect for Pantheon is exciting. Operations are expected to take 30 days, all going well, with testing thereafter.
Pantheon shares dipped after the latest update, but that seems to make little sense. Oil exploration is a difficult business, and Pantheon has hit a remarkable five out of five in wells, and has actually discovered more prospects on the way down than it was originally seeking. Operational delays have been frustrating, but they are secondary by comparison with the remarkable success in finding oil and gas.
At 52.5p, Pantheon has cash in the bank, and significant cash flow from operations about to come on stream. Rising gas and oil prices are making quite an impact, and if the current sidetrack into the Wilcox reservoir proves successful it could bring a significant addition to Pantheon’s already substantial potential assets.
I have a holding in Pantheon.