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Pantheon Resources in talks to increase stake at major US project (PANR)

Investors in oil and gas firm Pantheon Resources (LSE:PANR) enjoyed a welcome change of pace today after the announcement of a strategic review sent shares 2.3pc higher to 18.5p. The firm said it is in discussions to acquire some or all of Vision Resources’ working interest positions in its jointly-leased Tyler and Polk Country project in East Texas. Today’s news comes after Pantheon’s shares were decimated in April after it reported operational failure. They have failed to recover since.

The discussions announced today follow the recent death of Vision Resources’ principal Bobby Gray and would see Pantheon become 100pc owner and operator of the project. Although the terms of the deal are not finalised, Pantheon said the move would give it increased freedom to conduct corporate and operational activities, which it expects to create value for shareholders. Rather than cash, the purchase is expected to take the form of equity premium priced warrants, a success-based royalty, or other non-equity considerations.

Once the transaction has completed, Pantheon said it expects to use a farm-out agreement to finance forward drilling operations at the project and is already in advanced discussions with a USA-based industry party.

After undertaking a review of Tyler and Polk’s acreage position as part of discussions, Pantheon found that the project currently stands at 17,145 net mineral acres, down from 20,576 in October 2014. As a result, it said the project’s standing 310MMboe prospective P50 resource will have reduced and require a revision once talks have concluded and a decision has been taken on what licences to renew. It said the purchase price agreed with Vision will reflect this.

Finally, the business said it has now agreed terms with a gas processing company for the distribution and processing of natural gas in Tyler Country from first production at its VOS#1 well based at the project. It has formally contracted surveyors, who have already commenced fieldwork for the routing and construction of the pipeline from VOS#1 well to the main trunk line.

Jay Cheatham, CEO of Pantheon, said: ‘The strategic decision to seek to acquire Vision’s working interests in our Tyler & Polk county project is something that we have wanted to do for a long time and makes absolute sense if successfully completed, delivering Pantheon both control and flexibility in extracting the value from our project.

‘Lease management is an ongoing process and is subject to inherent fluctuations as companies attempt to secure optimum terms and to continually high grade their lease positions. In Pantheon’s case, our project is represented by approximately 5,000 underlying leases which involves regular negotiation and management. The decision to seek to farm out part of our project also makes sense, and aims to deliver increased drilling activity funded by an industry partner.’

Author: Daniel Flynn

Disclosure: The author does not hold positions in any of the stocks mentioned above

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