By Doc Holiday
During the summer of 2015 this site covered Pantheon Resources at 19p with a recommendation to buy the shares, that call was an incredible one by Camkite. The rationale behind the piece was absolutely spot on, investors following the buy recommendation will have made significant advances however realising a profit is paramount to success. Having reviewed the current market conditions based on a reduction (although still forcasted profitable at $30 oil) in the oil price I now believe that Pantheon Resources is valued well ahead of its current developments.
The company announced on the 3rd of December that the VOS#1 Well had been completed:
Jay Cheatham, CEO of Pantheon, said
“These are very exciting times for Pantheon, with potential from three zones in the VOS#1 well in Tyler County, which follow on from recent successful flow test results from our VOBM#1 well in nearby Polk County. Whilst encouraged by the log data so far, we stress that until such time as flow testing has been completed on VOS#1, it is not possible to quantify the significance of this well for our company.”
We also note that the company specified its focus to deploy a lower cost workover rig to complete the well testing at its VOS#1 asset, I assume this is simply due to the high availability of rigs in a distressed oil environment. Jay was very specific in notifying the market that the company could not quantify its find until the results were announced.
On the 12th January the company announced it had encountered a 70% larger column of net pay than its VOB#1 well, however had encountered a down hole blockage:
Jay Cheatham, CEO, said
“From the V0S#1 well, the net pay encountered and initial flow rates are very encouraging. Although we are disappointed that we cannot report production numbers at this time, I am confident we will be able to remedy the downhole issue, which is most likely heavy mud blocking perforations. Similar blockages are known to have occurred in the analogous, nearby Double A Wells field and were subsequently successfully remedied. Even at the reduced flow rates after the blockage, the well is still flowing commercial quantities of hydrocarbons. Without the blockage, our data suggests that this has the potential to be an exceptional well.”
Whilst it is clear that the company has made an initial positive announcement however its far from being a gimme, based on the obvious delay from problematic downhole issues, coupled to the need for Pantheon to carry out a further workover to prove definitively what the company has found I feel that at 120p or £225m marketcap the company looks over heated. I commented about this at 131p on instagram at dds_doc_holiday this week, the price has since started to ease off but unless we see a significant increase in the OP (oil price) aligned to firmer information and analysis from VOS#1 well then I can see the heat coming out of the story quiet dramatically.
Projected numbers on barrels of oil in place and barrels of oil recoverable may have increased somewhat, yet the price of oil has nearly halved in the last 12 months, against the previous few years the OP has collapsed from excess of $100 leaving much of the known value data now in need of review. I wish to add that should the company release additional data or make significant progress then I reserve the right to review the company and my stance.
I must state that I rarely make short / sell calls and understand that Valuethemarkets are a site that offers detailed reviews on companies which often present a better investment case, however like LGO Energy or Petroceltic, Pantheon Resources now seems to offer the same proposition of loss. I would look to take profits.
SELL / SHORT
Keep your peckers up