Exploration & Production | Oil Sands | Oil Sands Projects | SAGD

Pan Orient Evaluates Sawn Lake for SAGD Project

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Pan Orient Energy Corp., on behalf of its 71.8% owned subsidiary Andora Energy Corporation, has released the December 31, 2013 National Instrument 51-101 compliant resource evaluation for Andora's oil sands project at Sawn Lake Alberta, Canada, as evaluated by Sproule Unconventional Limited.

The evaluation included all of Andora's Oil Sands Leases in Sawn Lake based on exploitation using Steam Assisted Gravity Drainage.

Andora is focused on developing the bitumen resources at the Sawn Lake property in the Peace River Oil Sands Region using SAGD development. Andora received regulatory approval for a demonstration project at under the Oil Sands Conservation Act from the Energy Resources Conservation Board and approval from the Government of Alberta under the Environmental Protection and Enhancement Act prior to 2013.

The first step towards determining the commercial viability of the SAGD recovery process at Sawn Lake is completion of Phase 1 of our SAGD Demonstration Project to provide an indication of the productivity of the reservoir and the amount of steam injection required to produce the bitumen, which are key components in assessing the potential for SAGD development at Sawn Lake.

The demonstration project is located in the Central Block of Sawn Lake where Andora is the operator and holds a 50% working interest. Phase 1 of the SAGD demonstration project in 2013 / 2014 consists of drilling one SAGD well pair, construction of the SAGD facility for steam generation, water handling and oil treating, and installing water source and disposal facilities. The SAGD well pair was drilled in the fourth quarter of 2013 to a depth of 650 meters and have a horizontal length of 780 meters. Final construction of the SAGD facility is currently being completed and steam injection at the Sawn Lake SAGD demonstration project is scheduled for April 2014. After three months of steam injection, bitumen production is anticipated by the end of July 2014.

Summary and Highlights of Sawn Lake, Alberta Contingent Resources as at December 31, 2013

Sawn Lake "Best Case" contingent resources of 214 million barrels of bitumen attributed to Andora's working interests, or 154 million barrels attributed to the 71.8% ownership interest of Pan Orient in Andora, have been assigned almost entirely in the South and Central Blocks of Sawn Lake. Andora is the operator of these lands and holds a 100% working interest in the 16 sections of the South Block and currently holds a 50% working interest in the 12 sections of the Central Block. Contingent resource volumes are only assigned to working interests and are not assigned to GORR interests.
Net present value of the "Best Case" (discounted at 10% before income tax using forecast prices) attributed to Sawn Lake contingent resources for the working interests and the GORR interests is $557 million for Andora, with $481 million attributed to the working interests. The amount attributed to the 71.8% ownership interest of Pan Orient in Andora is $400 million for the working interests and the GORR interests, and $346 million to the working interests alone.

Net present value of the "Best Case" (discounted at 10% after income tax using forecast prices) attributed to Sawn Lake contingent resources for the working interests and the GORR interests is $364 million for Andora, with $307 million attributed to the working interests. The amount attributed to the 71.8% ownership interest of Pan Orient in Andora is $262 million for the working interests and the GORR interests, and $220 million to the working interests alone.

Subsequent Event - Sale of GORR Interest in March 2014

In March 2014, the 3% gross overriding royalty on a portion of the non-owned working interests in 12 sections of the Central Block and 24.5 sections of the North Block was repurchased by a joint venture partner with $2.7 million paid to Andora. This sale of the GORR by Andora was part of an agreement with joint venture partners that allowed the demonstration project to move forward and enabled the joint venture partners to fund their share 50% share of the demonstration project. The net present value of the "Best Case" (discounted at 10% after income tax using forecast prices) attributed to Pan Orient's 71.8% share of the Sawn Lake contingent resources for the GORR interests is $55 million on a before tax basis and $41 million on an after tax basis. The sale price of the GORR reflects that commercial viability of SAGD development at Sawn Lake has not yet been established, and that key economic parameters need to be determined with the demonstration project

The December 31, 2013 evaluation of Sawn Lake "Best Case" contingent resources attributed to the working interests of Andora is 214 million barrels of bitumen and an associated net present value (discounted at 10% before income tax using forecast prices) of $481 million. The amount attributed to the 71.8% ownership interest of Pan Orient in Andora is 154 million barrels of bitumen and an associated net present value (discounted at 10% using forecast prices) before income tax of $346 million, and $220 million on an after tax basis.