Canaccord update20 Nov 2020 15:42
Pantheon Resources has raised $30.2m (gross) through an equity raise at 31p/sh. The raise was upscaled and oversubscribed.
The new equity enables Pantheon to drill and test all four anticipated reservoir zones at Talitha-A, in the company's Talitha Production Unit (Pantheon, 89.2% interest) onshore Alaska. Importantly, the upscaling of the raise will allow the drilling of a horizontal section through the Shelf Margin Deltaic sequence, the uppermost reservoir of the four expected in Talitha, which has independently determined 304 mmbbls gross recoverable resources. The total projected recoverable resources in Talitha across all zones is estimated to be over 1 billion barrels.
The combination of extensive well logging, multi-zone testing, and a horizontally drilled section, will provide considerable information regarding potential commerciality and development metrics for Talitha.
We expect Pantheon to drill and test Talitha-A in Q1 21, and those results will provide the backbone of potential development plans, and ongoing work programmes across the company's acreage.
Talitha-A appraisal well
We anticipate that the Talitha-A well will be located about 4 miles from, and updip of, the Pipeline State-1 (PS-1) discovery well. PS-1 was drilled in 1988 by ARCO and it encountered oil in three zones. It was not tested due to hole problems. With the benefit of 3D seismic, extensive geological and geophysical evaluation, and considerable advances in drilling and completion techniques, the Talitha project is now much better defined and derisked. We expect Talitha-A to be drilled and tested in Q1 21.
Talitha development potential
Crucially, Talitha lies very close to oilfield services and infrastructure that would allow rapid conversion of resources to cashflow once a development green light is given. Talitha lies about 20 miles south of the giant Prudhoe Bay field where all required oilfield services are available. The project is also right by the Dalton Highway (easy access) and the Trans Alaska Pipeline (TAPS) through which Alaska North Slope crude is transported southwards. TAPS is currently operating at c.25% capacity.
Valuation and rating
We maintain our risked NPV10 based valuation target price of 76p (unrisked 171p) and our Speculative Buy rating following the equity raise.
Our target price includes a risked valuation of only the independently determined recoverable resources at Greater Alkaid (77 mmbbls gross, WI 100%) and Talitha (304 mmbbls gross, WI 89.2%). We assign 60% and 40% chance of success to these projects respectively - Greater Alkaid has already successfully tested oil; Talitha has not yet.
But our full valuation for Talitha alone, which includes only three of the four anticipated reservoir zones, is 139 p/sh (unrisked 434 p/sh). Given the close proximity of Talitha to TAPS, we would expect a successful appraisal in early 2021 to substantially derisk the overall project valuation and transform the compay's
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