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East Jabung PSC Farmout Approved for Pan Orient

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Pan Orient Energy Corp. has reported its 2015 first 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.

President and CEO Jeff Chisholm stated: "These financial results and the announcement of the Government of Indonesia's approval of the East Jabung PSC farmout clearly demonstrate the progress achieved over the past year in the corporate initiative to reduce our future capital exposure and strengthen our balance sheet."

Highlights

• Completed the sale on February 2, 2015 of a 50% equity interest in Thailand subsidiary for estimated net proceeds to Pan Orient, after closing adjustments and costs, of $52.0 million, including a working capital adjustment of $3.1 million.
• Bitumen production continues at the Sawn Lake, Alberta steam assisted gravity drainage (SAGD) demonstration project of Andora Energy Corporation (Andora). After a three week delay due to repair of the electrical submersible pump, the steam chamber is approaching the top of the Bluesky formation sandstone reservoir and bitumen production has averaged 353 BOPD (177 BOPD net to Pan Orient) for the period of May 1 to May 20 with a steam to oil ratio (SOR) of 4.7.
• On May 15, 2015 the Government of Indonesia approved the transfer of a 51% participating interest and operatorship of the East Jabung Production Sharing Contract (PSC) to a subsidiary of Talisman Energy Inc. Pan Orient retains a 49% participating interest at the East Jabung PSC. The first well is planned to be drilled in approximately early to mid-2016 and the farminee will fund the first USD$5 million of Pan Orient's share of the exploration program and fund associated general and administrative expenses.
• Working capital and non-current deposits of $85.0 million at March 31, 2015 and an additional $9.4 million as initial consideration of the East Jabung farmout is expected in mid-June of 2015. Pan Orient has no long-term debt.

2015 Q1 Operating Results

• On February 2, 2015 the Company sold a 50% equity interest in its subsidiary Pan Orient Energy (Siam) Ltd. and retained a 50% equity interest. From February 2, 2015 forward the retained 50% equity interest is reclassified as a non-controlled Joint Venture and Pan Orient's 50% equity interest in the working capital, assets, capital expenditures, liabilities and operations of Pan Orient Energy (Siam) Ltd. are recorded as Investment in Thailand Joint Venture.
• At March 31, 2015 Pan Orient had $85.0 million of working capital and non-current deposits. Working capital and non-current deposits of $85.0 million were comprised of $70.7 million cash, $4.3 million of non-current deposits, $12.7 million of Canadian taxes receivable, other receivables & prepaid expenses of $2.0 million and less payables of $4.7 million. There is $1.8 million of equipment inventory at the Batu Gajah PSC in Indonesia to be utilized in future drilling operations. In addition, Pan Orient's Investment in Thailand Joint Venture includes $0.9 million of Thailand working capital and non-current deposits and $2.3 million of equipment inventory to be utilized for future Thailand Joint Venture operations.
• strong>Pan Orient reports capital expenditures of $1.9 million in the first quarter of 2015, with $0.4 million in Indonesia, $0.1 million in Thailand to February 1, 2015 and $1.4 million in Canada at the Sawn Lake SAGD demonstration project of Andora. In addition, Pan Orient's share of Thailand joint venture capital expenditures after February 1, 2015 was $2.5 million, which was recorded in Investment in Thailand Joint Venture.
• strong>Pan Orient had outstanding capital commitments as at March 31, 2015 of $10 million in Indonesia associated with the East Jabung PSC. In May 2015, the East Jabung farmout received Government of Indonesia approval and the commitment associated with the retained 49% participating interest, will now be reduced to $4.9 million and under terms of the East Jabung farmout, the farminee will fund the first USD$5 million of Pan Orient's share of the exploration program. In Canada, there is are capital commitments of $332,000 with respect to outstanding purchase orders and natural gas pipeline tie-in and tariff charges associated with the Sawn Lake SAGD demonstration project of Andora.

Thailand

• Pan Orient's Thailand interests in Concession L53, including the 50% interest in the Thailand Joint Venture from February 2, 2015 onwards, had average oil sales of 313 BOPD during the quarter and generated $0.8 million in after tax funds flow from operations, or $27.51 per barrel. Results for the first quarter of 2015 reflect the sale of a 50% equity interest in the Thailand subsidiary during the quarter and declining crude oil prices.
• Per barrel amounts during the first quarter of 2015, including the 50% interest in the Thailand Joint Venture from February 2, 2015 onwards, were a realized price for oil sales of $60.23, transportation expenses of $1.63, operating expenses of $16.86, general and administrative expenses of $11.14 and a royalty to the Thailand government of $2.87. Oil sales revenue during this period was allocated 49% to expenses for transportation, operating, and general & administrative, 5% to the government of Thailand for royalties, and 46% to Pan Orient. No Thailand petroleum income taxes or Special Remuneratory Benefit tax was recorded during the quarter.
• Oil sales in April 2015 at Concession L53 were 481 BOPD (241 BOPD net to Pan Orient's 50% interest in the Joint Venture).
• Pan Orient commenced a three well Thailand drilling program in late February. The L53-ANC1 exploration well failed to encounter commercial hydrocarbons but initial interpretations suggest that potential quality reservoir sands may be expected further east. The L53-DC1ST1 appraisal well encountered 52 meters of true vertical thickness of net oil pay in ten sandstone intervals and the L53-DEXT1ST1 appraisal well encountered 24 meters of true vertical thickness of net oil pay in nine sandstone intervals. Various zones are in the process of being tested. Current production from the two newly drilled wells is 278 BOPD (139 BOPD net to Pan Orient's 50% interest in the Joint Venture).
• Capital expenditures of $2.6 million in Thailand during the first quarter of 2015 in Concession L53, including the 50% interest in the Thailand Joint Venture from February 2, 2015 onwards, were comprised of $1.8 million for the L53A-Central exploration well, $0.3 million for equipment inventory, $0.1 million for capitalized general and administrative expenses and $0.4 million for other capital expenditures.

Indonesia

• Capital expenditures in Indonesia of $0.4 million for permits, fees and capitalized general and administrative expenses at the East Jabung and Batu Gajah PSC's.

Canada

• Andora is the operator and holds a 50% working interest the Sawn Lake, Alberta SAGD demonstration project. Andora is a 71.8% owned subsidiary of Pan Orient and is consolidated with Pan Orient for reporting purposes.
• Capital expenditures for the Sawn Lake demonstration project during the first quarter of 2015 were $1.4 million relating to final construction of the SAGD facility.
• The SAGD producing well is still in its ramp-up phase and the steam chamber is approaching the top of the Bluesky formation sandstone reservoir. During March, bitumen production averaged 320 BOPD (160 BOPD net to Pan Orient) with an SOR of 5.2. On April 11, 2015 the electrical submersible pump for the SAGD producing well experienced a problem and the well was shut-in to make the necessary repairs. As a result, bitumen production declined in April to an average of 125 BOPD (63 BOPD net to Pan Orient) with an SOR of 5.9. Production resumed on May 1st and has averaged 353 BOPD (177 BOPD net to Pan Orient) with an SOR of 4.7 for the first 20 days of May.
• Production results to date are not necessarily indicative of long-term performance or of ultimate recovery and the Sawn Lake demonstration project has not yet proven that it is commercially viable. All related costs and revenues are being capitalized as exploration and evaluation assets until commercial viability is achieved.

Outlook

Indonesia

• On May 15, 2015 the company received Government of Indonesia for approval for the transfer of a 51% participating interest and operatorship in the East Jabung PSC to a subsidiary of Talisman Energy Inc. The first well is currently planned to be drilled in the East Jabung PSC in approximately early to mid-2016.
• The Company plans to drill an exploration well at the Batu Gajah PSC in the second half of 2015 which would offset an existing oil discovery made by another operator in the adjacent Lemang PSC. Forestry approval for three surface locations was received in May 2015, and road and wellpad construction is expected to commence in June 2015.

Canada - Sawn Lake (Operated by Andora, in which Pan Orient has a 71.8% ownership)

• The Company expects the steam chamber to reach the top of the Bluesky formation sandstone reservoir in May or June 2015 and maximum production is anticipated to occur in approximately September 2015, corresponding to the end of the first year of production.
• The well is still in its ramp-up phase and Andora is now aiming for consistent bitumen production of 449 barrels of bitumen per day, with an associated SOR of 3.1, which corresponds to the High case estimate used by Sproule Unconventional Limited in the December 31, 2014 contingent resource evaluation for the 16- 30-91-12W5M well pair which was drilled in a 15 to 20 meter thick reservoir with no bottom or top water.

Thailand

• Pan Orient is continuing to test the multiple sandstone intervals in the L53-DC1ST1 and L53-DEXT1ST2 appraisal wells.
• No exploration drilling has been confirmed by the Concession L53 joint venture partners for 2015 at this time. Activities for the next half of 2015 will focus on workovers of existing wells to maximize production and further investigation all options towards reducing operating costs.