Pantheon Resources Plc

Summary

Pantheon Resources Plc, through its subsidiaries, engages in the exploration and production of oil and gas in the United States. Its primary assets are the Greater Alkaid project that covers 22,804 acres located in Alaska; and the Talitha project covering an area of approximately 44,463 acres. The company was incorporated in 2005 and is headquartered in London, the United Kingdom.

Operations

Team

Phillip Gobe, Non Executive Chairman

Phillip Gobe has over 40 years’ experience in the oil and gas business both in the USA and internationally. He is also Chairman (and former CEO) of ProPetro, a Texas-based oil field services provider in the pressure pumping space, which includes hydraulic fracturing services and cementing, as well as completion services including wireline. Phillip has held senior positions in Energy Partners Ltd (President & COO), Nuevo Energy Co. (COO), Vastar Resources (COO) and several senior positions with Atlantic Richfield Company, including a role as Operations Manager of Prudhoe Bay in Alaska, the largest oilfield in the USA. Throughout his career Phillip has successfully overseen several corporate exits at substantial premiums to pre-deal valuations. Phillip also has a background in drilling, human resources and health and safety. He is currently a non-executive director of the S&P 500 company, Pioneer Natural Resources and was previously a director of Scientific Drilling International Inc, the USA’s fifth largest provider of directional drilling and measurement equipment and operational services. Phillip acts as Chairman of Pantheon’s Remuneration and Nominations Committee, Audit Committee and Conflicts Committee. Phillip is also a member of the Companies Anti-Corruption and Bribery Committee.

Jay Cheatham, Chief Executive Officer

Jay Cheatham has more than 50 years' experience in all aspects of the petroleum business. He has extensive international experience in both oil and natural gas, primarily for ARCO. At ARCO, Jay held a series of senior appointments. These include Senior Vice President and District Manager (ARCO eastern District) with direct responsibility for Gulf Coast US operations and exploration and President of ARCO International where he had responsibility for all exploration and production outside the US Jay's most recent appointment was as President and CEO of Rolls-Royce Power Ventures, where he had the key responsibility for restructuring the Company. 

Jay also has considerable financial skills in addition to his corporate and operational expertise. He has acted as Chief Financial Officer for ARCO's US oil and natural gas company (ARCO Oil & Gas). Moreover, he has an understanding of the capital markets through his past position as CEO to the Petrogen Fund, a private equity fund. 

Jay is a member of the Company’s Remuneration and Nominations Committee, Audit Committee, Conflicts Committee and Anti-Corruption and Bribery Committee.

Justin Hondris, Director, Finance and Corporate Development

Justin Hondris has over 15 years’ experience in public company management in the upstream oil and gas sector and has wide ranging experience in corporate finance, private equity and capital markets in the UK and abroad. Prior to Pantheon, Justin was involved in the private equity sector where he gained valuable experience in both investment and exit strategies for growth companies.

He is responsible for the financial, legal, administrative and corporate development functions of the company. 

Justin acts as Chairman of Pantheon’s Anti-Corruption and Bribery Committee and is a member of the Remuneration and Nominations Committee and the Conflicts Committee.

Robert (Bob) Rosenthal, Technical Director

Bob Rosenthal has over 40 years' experience in the oil and gas industry globally as an Exploration Geologist and Geophysicist. He has held various senior exploration positions and spent a large part of his career at Exxon and at BP, where he gained key relevant regional experience in the geology of North Slope of Alaska and of Texas. Since 1999, Bob has run his own successful consulting business and has led the exploration efforts of a number of private and public companies.

Jeremy Brest, Non-executive Director

Jeremy has more than 25 years’ experience in investment banking and financial advisory. Jeremy is the founder of Framework Capital Solutions, a boutique Singapore-based advisory firm specializing in structuring and execution of private transactions. Prior to founding Framework, Jeremy was the head of structuring for Indonesia at Credit Suisse and a derivatives trader at Goldman Sachs.

Jeremy is a member of the Company’s Audit Committee, Remuneration and Nominations Committee, Conflicts Committee and Anti-Corruption and Bribery Committee.

Financials

Profit and loss

Profit and loss

	2021	2022
	$	$
Continuing operations
Administration expenses	(5,034,361)	(7,430,653)
Share Based payments expense	(3,211,038)	(8,256,575)
Operating loss	(8,245,400)	(15,687,228)
Convertible Bond - Interest Expense	-	(4,640,537)
Convertible Bond - Revaluation of Derivative Liability	-	4,310,773
Interest receivable	4,234	42,674
Loss before taxation	(8,241,165)	(15,974,318)
Taxation	1,573,094	2,022,334
Loss for the year from Continuing Operations after Taxation	(6,668,071)	(13,951,984)
Loss for the year from discontinued operations	(54,415)	-
Loss for the year	(6,722,487)	(13,951,984)
Other comprehensive income for the year Exchange differences from translating foreign operations	1,503,199	(741,484)
Total comprehensive loss for the year	(5,219,288)	(14,693,468)
Loss per share from continuing operations:
Basic and diluted loss per share	(1.17)¢	(1.93)¢

Balance sheet

Balance sheet

	2021 $	2022 $
ASSETS
Non-current assets
Exploration & evaluation assets	188,954,719	237,722,294
Property, plant and equipment	30,308	91,691
	188,985,027	237,813,985
Current assets Trade and other receivables	109,876	2,498,447
Cash and cash equivalents	5,663,477	57,784,121
	5,773,353	60,282,568
Total assets	194,758,380	298,096,553
LIABILITIES Current liabilities
Convertible Bond – Debt	-	10,001,704
Trade and other payables	1,107,090	6,377,986
Provisions	1,250,000	5,285,440
Lease Liabilities	32,788	60,297
Other Liabilities	-	1,964,441
Deferred tax liability	3,705,737	1,683,403
	6,095,615	25,373,271
Non-current liabilities
Lease Liabilities	-	30,004
Convertible Bond – Debt	-	20,474,664
Convertible Bond – Derivative	-	12,816,226
	-	33,320,894
Total liabilities	6,095,615	58,694,166
Net assets	188,662,765	239,402,388
EQUITY
Capital and reserves
Share capital	9,739,203	10,720,459
Share premium	208,683,936	264,879,196
Retained losses	(36,331,398)	(48,466,591)
Currency reserve	1,234,562	493,078
Share based payment reserve	5,336,462	11,776,246
Shareholders’ equity	188,662,765	239,402,388

Cash flow

Cash flow

	2021 $	2022 $
Net outflow from operating activities	(3,098,495)	(941,506)
Cash flows from investing activities
Interest received	4,295	42,674
Funds used for drilling, exploration and leases	(24,973,399)	(45,267,175)
Advance for Performance Bond	-	(2,400,000)
Property, plant and equipment	-	(3,368)
Net cash outflow from investing activities	(24,969,105)	(47,627,869)
Cash flows from financing activities
Proceeds from share issues	30,181,084	46,739,796
Issue costs paid in cash	(1,197,275)	(994,694)
Proceeds from Convertible Bond	-	55,000,000
Repayment of borrowing and leasing liabilities	(55,698)	(55,083)
Net cash inflow from financing activities	28,928,111	100,690,020
Increase in cash & cash equivalents	860,511	52,120,645
Cash and cash equivalents at the beginning of the year	4,802,965	5,663,476
Cash and cash equivalents at the end of the year	5,663,476	57,784,121

Risks

The group may be unable to meet its lease obligations

In general, the group's properties are held under oil and gas leases. The terms of the group's leases often provide for yearly rental payments. Such yearly rentals may vary depending upon the particular lease and whether the group has commenced activities in the property. If the group defaults on its lease payments, its leases may be automatically terminated. If the group is unable to make these payments and its leases are terminated, there could be a material adverse effect on its business, financial condition and results of operations. Managing the lease position is of material importance for the group, and management devote considerable time to lease management, budgeting and planning, consulting with the State of Alaska where required. In 2020 Pantheon was awarded Units on the Alkaid and Talitha projects and has been an active participant in the annual lease sales over recent years, significantly strengthening Pantheon’s lease portfolio. The 40,000 leases successfully bid for in the November 2022 have a 10-year life, $10 per acre rentals and low royalties of between 12.5% – 16.7% to the State of Alaska.

The group may be unable to renew and/or extend its leases once they expire 

The group's lease agreements contain terms whereby the lease may be terminated if the group does not fulfil certain obligations. These obligations include conducting exploration and/or production activities. If the group is unable to satisfy these conditions on a timely basis, it may lose its rights in these properties. In addition, given that it may not be able to renew certain leases unless it begins exploration or production activities within specific timeframes, the group may be required to invest significant funds at timetables not optimal in order to meet the capital requirements as per the terms of the leases. If the group is unable to meet its obligations under the terms of its leases, there could be a material adverse effect on its business, financial condition and results of operations. To mitigate this risk the group has successfully applied for and been granted unitization for the leases that comprise its Talitha and Alkaid projects. Unitization recognizes that the group has established, to the State’s satisfaction, that all or part of multiple potential hydrocarbon accumulations are included in the unit areas to allow the leases to potentially be held beyond the initial lease term. Most of Pantheon’s lease position is now covered by these units or leases of between c.7 years or more of remaining life. Management has materially reduced the risk of lease expiry.

The group's operations require it to obtain licensing, planning permissions and other consents

The development of its current and future leases may be dependent upon the receipt of planning permission from the appropriate local authorities, as well as other necessary consents, such as environmental permits and regulatory consents. Obtaining the necessary consents and approvals may be costly, and they may not be granted, may be withdrawn or made subject to limitations and conditions. Certain permits and consents may also become contentious in the future, which may lead to these not being granted or withdrawn.  The failure to gain such permissions or gain such permissions on terms or at a cost acceptable to the group, may limit the group in its ability to develop and extract value from its leases and could have a material adverse effect on its business, results of operations, financial conditions and prospects. To manage the risk, the group employs experienced and qualified personnel who have successfully obtained licenses and permits in the past, and who maintain working relationships with regulatory agencies.

Political conditions and government regulations could change and have a material effect on the group's results of operations

Although political conditions in the Northern Slope Borough, the State of Alaska and the United States federal government are generally stable, changes may occur in their political, fiscal and/or legal systems, which might adversely affect the group's operations. The group's strategy has been formulated in the light of the current regulatory environment and probable future changes to the regulatory regime. In 2021 the federal government has adopted a more cautionary position with respect to operations on federal land, notably with respect to ConocoPhillips’ Willow project. Pantheon’s projects are all located on state, not federal land, and so has not been impacted by such politics.

Although the group believes that its activities are currently carried out in accordance with all applicable rules and regulations, no assurance can be given that new rules, laws and regulations will not be enacted, or that existing or future rules and regulations will not be applied in a manner which could serve to limit or curtail exploration or development of the group's business or have an otherwise negative impact on its activities. Amendments to existing rules, laws and regulations governing the group's operations and activities, or increases in or more stringent enforcement, implementation or interpretation thereof, could have a material adverse impact on the group's business, results of operations and financial condition.

Future legal proceedings could adversely affect the group's business, results of operations or financial condition

The group may face legal proceedings that may result in the group having to pay material damages and/or other remedies. While the group would assess the merits of each legal proceeding and defend the group accordingly, it may be required to incur significant expenses or devote significant resources to defend against such legal proceedings. In addition, legal proceedings are also difficult to predict, which may force the group to enter into settlement arrangements even in the absence of any culpability from its part. 

Furthermore, the adverse publicity surrounding legal proceedings may negatively affect the group's relation with local communities, government and non-government organizations, which could also impact the group's activities. As a result, legal proceedings could have a material adverse effect on the group's business, financial condition, results of operations and prospects. To manage this risk the group consults legal counsel when it faces potential legal proceedings. The board and management consult legal counsel when conducting activities or entering into agreements that are viewed to have the potential to give rise to material legal proceedings.

Failure to manage relationships with local communities, environmental groups and non-government organizations could adversely affect the group's future growth potential

The activities of oil and gas companies often face scrutiny from the public and receive negative publicity. Although the group's operations are not located in or near large communities, the group's ability to further expand its operation may be hindered by communities that may regard oil and gas activities as detrimental to their environmental, economic or social circumstances. Furthermore, oil and gas companies are also increasingly facing scrutiny by environmental groups regarding the effect operations may have on the animal life in the region. Negative reaction to its operations could have a material adverse impact on the cost, profitability, ability to finance or even the viability of an operation. Such events could give rise to material reputational damage. 

These disputes are not always predictable and may cause disruption to projects or operations. Failure to manage relationships with local communities, environmental groups and non-governmental organisations may adversely affect the group's reputation, as well as its ability to commence production projects in certain locations, which could in turn affect its long-term prospects and the group's business, financial condition and results of operations. The group’s current leased acreage is not in the immediate vicinity of any local community. To manage this risk the group ensures it conducts operations in a legal and responsible manner and complies with rules and regulations.

Any change to government regulation/administrative practices may have a negative impact on the group's ability to operate and its future profitability

The business of oil and gas exploration and development is subject to substantial regulation under federal, state, local laws relating to the exploration for and the development of upgrading, marketing, pricing, taxation, and transportation of oil and gas and related products and other matters. Amendments to current laws and regulations governing operations and activities of oil and gas exploration and development operations could have a material adverse impact on the group's business. In addition, there can be no assurance that tax laws, royalty regulations and government incentive programs related to the group's oil and gas properties and the oil and gas industry generally, will not be changed in a manner which may adversely affect the group's prospects and cause delays, inability to explore and develop or abandonment of these interests.

Furthermore, permits, leases, licenses and approvals are required from a variety of regulatory authorities at various stages of exploration and development. There can be no assurance that the various government permits, leases, licenses and approvals sought will be granted in respect of the group's activities or, if granted, will not be cancelled, or will be renewed upon expiry. There is no assurance that such permits, leases, licenses and approvals will not contain terms and provisions which may adversely affect the group's exploration and development activities. If any of the forgoing were to occur, it could have a material adverse effect on the group's business, financial condition and results of operations. To manage the risk, the group employs experienced personnel and contractors who have successfully obtained licenses and permits in the past, and who maintain working relationships with regulatory agencies and monitor changes that could impact the group. 

COVID, Supply chain and inflationary risk

The impact of the Covid-19 pandemic on global supply chains is a well-documented phenomenon which has affected many industries globally, including the oil and gas sector. This has been exacerbated by the Russia/Ukraine conflict and the high oil and gas prices which resulted in high demand for equipment, service providers and materials. Additionally, services and materials costs have experienced very high inflation. As a result, the lead times, availability and costs for the equipment and consumables required for drilling in Alaska have increased over the last 12 months. To manage this risk it is important that key equipment and materials are ordered on a timely basis so as to minimise the potential for supply chain disruption to drilling operations, and that well operations are carefully planned, to try to minimise cost inflation where possible.