Pantheon Resources Plc

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.

Assuming that Pantheon Resources increases its share of the global oil and gas exploration and production market by cccx to ccc% (from less than ccc%) and other assumptions, the expected return of an investment in the company over the next five years is ccc%, which equates to an annual return of ccc%. In other words, an £1,000 investment in the company is expected to return £ccc in five years time.

The degree of risk associated with an investment in Pantheon Resources is 'medium', with the shares having an adjusted beta that is 45% below the market (0.55 vs. 1).

Accordingly, if your desired annual rate of return is ccc% or less over the next five years and/or one of your goals is to xxx (i.e. you share in the mission of Pantheon Resources), and you are both willing and able to accept the possibility of losing your entire investment amount, then an investment in the company is considered to be a 'suitable' one.

Operations

Idea

Founded in 2005, Pantheon Resources plc began as a UK-based exploration company targeting onshore USA basins, especially East Texas. However, in 2019, recognising the vast potential of the Alaska North Slope, Pantheon strategically acquired Great Bear Petroleum's assets. This move prompted a shift from East Texas to concentrate solely on Alaska, given its proximity to key Alaskan oil infrastructure and the immense opportunities it presented.

Projects

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Greater Alkaid

In 2015, the Alkaid #1 well was drilled close to both the Dalton Highway and the Trans Alaska Pipeline System (TAPS) – the main transportation route and significant export pipeline on the Alaska North Slope, respectively. The drilling was halted before reaching its target depth due to environmental concerns: the nearby Sag River flooding led to the closing of the Dalton Highway. While Alkaid was meticulously documented, no production tests were carried out then. The well had shown promising signs, having encountered a 400-foot gross pay without an oil-water contact. Pantheon began activities again in 2019, successfully testing the Primary Zone of Interest. The recent oil discovery at Talitha #A enhanced the potential for oil in the Greater Alkaid structure.

Alkaid #1 Pay Intervals

Comprehensive data from Alkaid well revealed a 400-foot gross pay, with 240 feet of net oil pay. Expert consultations confirmed the potential of this project. Notably, only a small fraction of the well’s capacity was accessed during the tests. Pantheon projects that optimally designed horizontal development wells could significantly increase oil production. Advanced seismic imaging indicates even better reservoir potentials in the core. The company envisions using an early production unit (EPU) to facilitate early cash flow and obtain valuable data. A full-fledged Central Processing Unit (CPU) is in the pipeline for optimal resource utilisation. Pantheon is keen to use unconventional oil production technologies, which has become standard across the Alaska North Slope.

In 2020, an independent report on the Greater Alkaid oil accumulation cited 76.5 million barrels of recoverable reserves, valuing the project at $595m (considering a $55/Bbl oil price). The company plans to commission a pilot test producer in 2022, which could provide immediate cash flow. Alkaid’s strategic location offers year-round activity advantages.

Alkaid #1 Highlights

Pantheon secured a unit over Alkaid and outlined its proposed activities in a First Plan of Exploration (POE) in November 2020. The plan includes reprocessing 3D seismic data and studying potential 'hot-tap' integrations into the TAPS. Though there are no fixed drilling commitments, the POE proposes drilling two wells near the Dalton Highway for year-round operations. Depending on the Alkaid #2 well results, the Alkaid #3 well will follow.

GBP, a significant exploration leaseholder, controls over 250,000 acres, positioned south of North America's major oil fields, Prudhoe Bay and Kuparuk. The region, blanketed by 3D seismic data, hosts several discoveries and promising exploration prospects. Pantheon holds complete interest in all its ventures.

Talitha

The Talitha #A well, drilled in 2021, appraised an oil accumulation initially discovered by the Pipeline State #1 well in 1988. While the original well in 1988 showed significant oil potential, it was halted due to economic reasons and lack of advanced technology. However, high-resolution 3D seismic data acquired in 2013 reignited interest in the area. The Talitha #A well confirmed oil presence across several zones, and recent tests in 2022 further validated the well's promising prospects.

Key Findings

• The Talitha #A well, located eight miles west of the Dalton Highway and TAPS, identified movable light oil across multiple horizons, with over a billion barrels of recoverable oil potential.
• Its proximity to existing infrastructure offers economic advantages, potentially allowing for faster production ramp-up with minimised capital expenditure.
• The well reached a depth of c. 10,456 ft, revealing five potentially productive zones. Challenges arose during testing due to operational issues and inclement weather, but significant findings were still achieved.

Specific Zones and Results

1. Basin Floor Fan (BFF): Tests indicated quality oil with sustained production rates. Future developments would potentially be at structurally higher positions for better results.
2. Slope Fan System (SFS): Testing showed producible oil, with implications for resource and oil recovery estimates. The success here suggests potential for other areas of the North Slope.
3. Shelf Margin Deltaic (SMD): Testing faced challenges from blockages and weather, but earlier data and the success of the deeper zones have kept the company's optimism intact for the potential of this zone.
4. Kuparuk: As the deepest oil formation, the Kuparuk provided significant findings. It's a regional producer with an adjacent giant oilfield, the Kuparuk Field. The Talitha #A well showed promising signs, although testing encountered issues.

Conclusion

The data from Talitha #A has increased confidence in the commercial viability of these zones. Pantheon remains encouraged by the analysis and sees potential for further exploration and drilling. The discovery augments the prospectivity of adjacent potential oil-bearing structures, which will be explored in future programs.

Theta West

Pantheon has concluded drilling at Theta West#1, confirming a discovery of light sweet crude oil. This discovery is now set for extensive production testing. Theta West stands as Pantheon’s most significant appraisal project. The company projects its potential to rival the immense hydrocarbon pore volume plays outside the renowned Prudhoe Bay Oilfield in the ANS. This geological configuration, given its success and volume, can be likened to the deepwater offshore regions in the Gulf of Mexico, West Africa, and recent discoveries off Guyana's coast. In essence, Theta West is a giant Basin Floor Fan with the potential to hold multibillion barrels of oil.

Years ago, Pantheon identified this vast geological opportunity and utilised its unique 3D seismic and analytical methodologies to secure a strong position in the Theta West play. This was strategically done before drilling Talitha #A in 2021. The Talitha #A drilling confirmed the presence of oil in the Theta West structure. A follow-up drilling at Theta West #1 took place 10.5 miles from Talitha, in a geologically superior position. To date, three wells — Pipeline State #1, Talitha #1, and Theta West #1 — have successfully tapped into the Basin Floor Fan (BFF) complex.

The latest Theta West #1 drilling reached a depth of 8,450 feet, navigating through the Upper and Lower Basin Floor Fan target layers of Brookian age. The drilling revealed approximately 1,160 gross feet of oil reservoir across these horizons. Preliminary data indicates this reservoir's quality surpasses that of the downdip Talitha #A, with high-quality oil found throughout.

Key depths recorded are:

• UBFF: 6,800 - 7,000 ft
• LBFF: 7,450 - 8,410 ft

These depths exceed previous estimates, and due to external factors such as extreme cold, the company had to rely on Logging While Drilling (LWD) operations. However, this yielded invaluable data, hinting at hydrocarbon presence higher up from the Talitha #A well.

AHS/Baker Hughes, the company's partners, have verified the presence of light oil in the UBFF and LBFF's top section, aligning with the LWD data. The full analysis of LBFF's lower section is still underway. Initial estimates pegged Theta West #A's potential at 12.1 billion barrels of oil, with a most likely recoverable amount of 1.41 billion barrels on Pantheon's land. This figure will be re-evaluated after thorough testing and analysis.

Historically, the Theta West BFF was also successfully drilled in the 1988 Pipeline State #1 well. More insights were obtained from the Talitha #A well, where the LBFF's substantial thickness was established. Subsequent testing yielded high-quality oil averaging 73 barrels per day over three days.

The recent Theta West #1 drilling confirmed expectations of a thicker reservoir at the crest, with increased porosity and permeability. The site’s shallower depth offers a cost-effective drilling prospect for such a vast resource. The entire Theta West project spans an impressive 100,000 acres under Pantheon's control, representing a significant opportunity for the company. Pantheon management considers Theta West as a potentially world-class project in a prime location.

In broader geological terms, the Theta West BFF is a segment of the Brookian deepwater fan systems. This includes the Slope Fan system and is situated between the Shelf Margin Deltaic and the Kuparuk Formation in terms of depth. Both the Talitha #A and Pipeline State #1 wells confirmed these regions as oil-bearing. Initially thought to be distinct fan systems, recent analysis suggests they might be part of an expansive continuous section, possibly forming a “super trap.”

Strategy

Pantheon's primary strategy is to maximize shareholder value through the following means:

• High Working Interest Maintenance: Pantheon retains a 100% working interest through the evaluation process of its assets. This high stake allows the company to have significant control over its projects and potential returns.
• Strategic Drilling and Farm-outs: The company aims to prove up its assets through targeted drilling. Where appropriate, Pantheon may pursue farm-outs, partnering with other entities to share the costs and risks of exploration and development.
• Asset Monetisation: Pantheon's endgame is to monetize its assets, either through a sale or other means, at the opportune moment. This "prove up and sell" approach is designed to offer investors a chance to capitalize on high-impact, risk-managed drilling.

Team

Pantheon boasts a seasoned board and a robust advisory group, all of whom are shareholders with established track records in the oil and gas sector. They have a rich history of building profitable companies for acquisition. Additionally, Pantheon's board and management team have extensive experience with oil and gas operations in Alaska.

Phillip Gobe, Non-Executive Chairman

Phillip Gobe

• Experience: Over four decades in the oil and gas sector, both domestically and internationally.
• Current & Past Roles: Chairman and former CEO of ProPetro; Senior roles in Energy Partners Ltd, Nuevo Energy Co., Vastar Resources, and Atlantic Richfield Company. He notably managed operations at Prudhoe Bay, the USA's largest oilfield.
• Specialties: Drilling, HR, health and safety, and has overseen lucrative corporate exits.
• Board Affiliations: Non-executive director at Pioneer Natural Resources, former director of Scientific Drilling International Inc.
• Pantheon Committees: Chairs Remuneration and Nominations, Audit, and Conflicts Committees. Member of the Anti-Corruption and Bribery Committee.

Jay Cheatham, Chief Executive Officer

Jay Cheatham.

• Experience: Over five decades encompassing all aspects of the petroleum business.
• Prominent Roles: Senior Vice President and District Manager for ARCO's eastern District; President of ARCO International; President and CEO of Rolls-Royce Power Ventures.
• Specialties: Operational expertise with significant financial acumen; formerly served as CFO for ARCO's Oil & Gas, and CEO of Petrogen Fund.
• Pantheon Committees: Member of the Remuneration and Nominations, Audit, Conflicts, and Anti-Corruption and Bribery Committees.

Justin Hondris, Director of Finance and Corporate Development

• Experience: Over 15 years in public company management, specifically in the upstream oil and gas sector.
• Background: Corporate finance, private equity, and capital markets in the UK and internationally; previous private equity involvement.
• Responsibilities: Manages Pantheon's financial, legal, administrative, and corporate development functions.
• Pantheon Committees: Chairs the Anti-Corruption and Bribery Committee. Member of the Remuneration and Nominations and Conflicts Committees.

Robert (Bob) Rosenthal, Technical Director

Bob Rosenthal.

• Experience: Over 40 years globally as an Exploration Geologist and Geophysicist.
• Key Roles: Senior exploration roles at Exxon and BP, gaining expertise in the geology of North Slope of Alaska and Texas.
• Current Engagement: Since 1999, he has operated a successful consulting business, leading exploration initiatives for various private and public entities.

Jeremy Brest, Non-Executive Director

Jeremy Brest

• Experience: Over 25 years in investment banking and financial advisory.
• Current & Past Roles: Founder of Framework Capital Solutions, a boutique advisory firm; Former head of structuring for Indonesia at Credit Suisse and a derivatives trader at Goldman Sachs.
• Pantheon Committees: Member of the Audit, Remuneration and Nominations, Conflicts, and Anti-Corruption and Bribery Committees.

Market

Total Addressable Market

Here, the total addressable market (TAM) is defined as the global market for oil and gas exploration and production, which includes every potential consumer or business that could use or buy oil and gas, and based on a number of assumptions, it is estimated that the size of the market as of today (3rd September 2023), in terms of revenue, is $5.3 trillion.

Serviceable Available Market

Here, the serviceable available market (SAM) is defined as the oil and gas exploration and production market in the Alaskan North Slope, and based on a number of assumptions, it is estimated that the size of the market as of today (3rd September 2023) is 3.6 billion barrels of oil and 8.9 trillion cubic feet of natural gas conventional resources, which equates to around $242.7 billion in terms of revenue.

Serviceable Obtainable Market

Here, the serviceable obtainable market (SOM) is defined as the Alaskan North Slope oil and gas exploration and production market in which the company holds lease licenses, and based on a number of assumptions, it is estimated that the size of the market as of today (3rd September 2023), in terms of revenue, is $ccc billion.

Financials

Most recent

Cash flow

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Full-year results

Profit and loss

Profit and loss

Year	2018	2019	2020 (restated)	2021	2022
Currency	USD	USD	USD	USD	USD
Year since incorporation	13	14	15	16	17
Continuing operations
Revenue	1,009,570	724,589	-	-	-
Production royalties	(244,783)	(205,458)	-	-	-
Depletion of developed oil & gas assets	(88,293)	(148,485)	-	-	-
Cost of sales	(562,986)	(737,208)	-	-	-
Gross profit/(loss)	113,508	(366,562)	-	-	-
Administration expenses	(1,922,917)	(3,438,239)	(3,667,635)	(5,034,361)	(7,430,653)
General & Administrative expenses – Vision	-	(1,744,730)	-	-	-
Impairment of exploration & evaluation assets	(6,805,537)	(34,138,156)	(130,112)	-	-
Share Based payments expense	-	-	-	(3,211,038)	(8,256,575)
Impairment of developed oil & gas assets	-	(13,092,684)	-	-	-
Impairment of property plant and equipment	-	(1,397,950)	-	-	-
Impairment of Goodwill	-	(796,236)	-	-	-
Depreciation of production & pipeline facilities	(145,516)	(275,665)	-	-	-
Operating loss	(8,760,462)	(55,250,222)	(3,797,747)	(8,245,400)	(15,687,228)
Convertible Bond - Interest Expense	-	-	-	-	(4,640,537)
Convertible Bond - Revaluation of Derivative Liability	-	-	-	-	4,310,773
Gain on bargain purchase	-	100,757,286	-	-	-
Less: deferred tax thereon	-	(28,783,396)	-	-	-
Interest receivable	6,858	25,781	23,759	4,234	42,674
Loss before taxation	(8,753,604)	16,749,449	(3,773,988)	(8,241,165)	(15,974,318)
Taxation	-	18,757,633	965,681	1,573,094	2,022,334
Loss for the year from Continuing Operations after Taxation	-	-	(2,808,307)	(6,668,071)	(13,951,984)
Loss for the year from discontinued operations	-	-	(14,170,288)	(54,415)	-
Loss for the year	(8,753,604)	35,507,082	(16,978,595)	(6,722,487)	(13,951,984)
Other comprehensive income for the year Exchange differences from translating foreign operations	277,183	(179,284)	(47,800)	1,503,199	(741,484)
Total comprehensive loss for the year	(8,476,421)	35,327,798	(17,026,395)	(5,219,288)	(14,693,468)
Loss per share from continuing operations:
Basic and diluted loss per share	(3.72)¢	10.54¢	(0.56)¢	(1.17)¢	(1.93)¢
Loss per share from discontinued operations:
Basic and diluted loss per share	-	-	(2.83)¢	(0.01)¢	-

Balance sheet

Balance sheet

	2018	2019	2020	2021	2022
Currency	USD	USD	USD	USD	USD
Year since incorporation	13	14	15	16	17
Assets
Non-current assets
Exploration & evaluation assets	43,498,422	160,887,260	156,097,609	188,954,719	237,722,294
Developed oil & gas assets	13,736,007	6,961,445	-	-	-
Property, plant and equipment	2,237,698	2,494,464	658,898	30,308	91,691
Total non-current assets	59,472,127	170,343,169	156,756,507	188,985,027	237,813,985
Current assets
Trade and other receivables	700,939	1,843,649	74,167	109,876	2,498,447
Cash and cash equivalents	3,399,290	1,853,986	4,802,965	5,663,477	57,784,121
Total current assets	4,100,229	3,697,635	4,877,132	5,773,353	60,282,568
Total assets	63,572,356	174,040,804	161,633,639	194,758,380	298,096,553
Liabilities
Current liabilities
Convertible Bond – Debt	-	-	-	-	10,001,704
Trade and other payables	316,976	1,410,347	388,092	1,107,090	6,377,986
Provisions	-	1,335,863	1,335,863	1,250,000	5,285,440
Lease Liabilities	-	-	46,311	32,788	60,297
Other Liabilities	-	-	-	-	1,964,441
Deferred tax liability	-	10,025,763	5,293,296	3,705,737	1,683,403
Total current liabilities	316,976	12,771,973	7,063,562	6,095,615	25,373,271
Non-current liabilities
Lease Liabilities	-	-	27,914	-	30,004
Convertible Bond – Debt	-	-	-	-	20,474,664
Convertible Bond – Derivative	-	-	-	-	12,816,226
Total non-current liabilities	-	-	27,914	-	33,320,894
Total liabilities	316,976	12,771,973	7,091,476	6,095,615	58,694,166
Net assets	63,255,380	161,268,831	154,542,163	188,662,765	239,402,388
Equity
Capital and reserves
Share capital	3,852,673	7,966,075	8,568,721	9,739,203	10,720,459
Share premium	106,678,805	164,044,720	173,687,092	208,683,936	264,879,196
Retained losses	(48,137,398)	(12,630,316)	(29,608,911)	(36,331,398)	(48,466,591)
Currency reserve	(41,554)	(220,838)	(268,637)	1,234,562	493,078
Share based payment reserve	902,854	2,163,898	2,163,898	5,336,462	11,776,246
Non controlling interests	-	(54,708)	-	-	-
Shareholders’ equity	63,255,380	161,268,831	154,542,163	188,662,765	239,402,388

Cash flow

Cash flow

Year	2018	2019	2020	2021	2022
Currency	USD	USD	USD	USD	USD
Year since incorporation	13	14	15	16	17
Net outflow from operating activities	(2,082,803)	(5,513,085)	(5,707,802)	(3,098,495)	(941,506)
Cash flows from investing activities
Interest received	6,858	25,781	25,881	4,295	42,674
Funds used for drilling, exploration and leases	(10,679,594)	(10,579,750)	(1,591,591)	(24,973,399)	(45,267,175)
Developed oil & gas assets	(495,183)	(523,934)	-	-	-
Decommissioning Provision (Exploration & Evaluation)	-	676,464	-	-	-
Decommissioning Provision (Developed Oil & Gas Assets)	-	409,400	-	-	-
Advance for Performance Bond	-	-	-	-	(2,400,000)
Property, plant and equipment	208,682	(312,637)	-	-	(3,368)
Acquisition of a subsidiary (Great Bear), net of cash acquired	-	(6,098,215)	-	-	-
Acquisition of a subsidiary, (Vision Resources LLC) net of cash acquired	-	1,920	-	-	-
Disposal	-	-	(1,134)	-	-
Net cash outflow from investing activities	(10,959,237)	(16,400,971)	(1,566,844)	(24,969,105)	(47,627,869)
Cash flows from financing activities
Proceeds from share issues	12,596,484	21,259,057	10,816,383	30,181,084	46,739,796
Issue costs paid in cash	(537,360)	(890,304)	(571,364)	(1,197,275)	(994,694)
Proceeds from Convertible Bond	-	-	-	-	55,000,000
Repayment of borrowing and leasing liabilities	-	-	(21,394)	(55,698)	(55,083)
Net cash inflow from financing activities	12,059,124	20,368,753	10,223,625	28,928,111	100,690,020
Increase in cash & cash equivalents	(982,916)	(1,545,304)	2,948,979	860,511	52,120,645
Cash and cash equivalents at the beginning of the year	4,382,206	3,399,290	1,853,986	4,802,965	5,663,476
Cash and cash equivalents at the end of the year	3,399,290	1,853,986	4,802,965	5,663,476	57,784,121

Risks

As with any investment, investing in Pantheon Resources Plc carries a level of risk. Overall, based on the Pantheon Resources Plc's adjusted beta (i.e. 0.55), the degree of risk associated with an investment in Pantheon Resources Plc is 'medium'.

Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more/most accurately predicts a future beta. In addition, here, we have assumed that for an investment to be considered 'medium' risk, it must have a beta value of between 0.5 and 1.5. Further information about the beta ratings can be found in the appendix section of this report.

The key risks can be found below. For us, currently, the biggest risk to the valuation of the company relates to the lease obligations.

1. Lease Obligations: The group leases properties for oil and gas exploration, requiring annual payments. Any default can lead to lease termination, which would adversely impact business and financial operations. Pantheon has actively participated in annual lease sales and secured 40,000 leases in November 2022. These leases have a 10-year life and favorable terms.
2. Lease Renewal: Leases may be terminated if the group fails to meet specific obligations, like timely exploration. Not renewing these leases can significantly harm the business. However, the group has obtained unitisation for certain projects to possibly extend their initial lease term.
3. Licensing and Permissions: The group needs various approvals for developing their leases. Failure to obtain these permissions can hamper the group's ability to operate. To counter this, the group employs personnel experienced in navigating regulatory requirements.
4. Political and Regulatory Changes: Changes in the political environment, particularly in the Northern Slope Borough, Alaska, and the U.S., can adversely affect operations. New regulations or stricter enforcement of current ones can pose challenges. However, Pantheon's projects are on state lands, thus less affected by federal policy changes.
5. Legal Proceedings: The group might face legal challenges that can be costly and can damage its reputation. They engage with legal counsel proactively to mitigate potential risks.
6. Relationships with Stakeholders: The oil and gas sector often faces scrutiny. Failure to manage relationships with communities and environmental groups might adversely affect the group’s reputation and operations. The group endeavors to conduct operations responsibly and legally.
7. Regulatory Changes: Amendments to existing laws regarding oil and gas exploration could adversely affect the group's business. They continuously monitor potential regulatory shifts and maintain relationships with regulatory agencies.
8. Supply Chain Disruptions: Global events, like the Covid-19 pandemic and the Russia/Ukraine conflict, have affected the supply chain and caused inflation. The group plans its operations meticulously and orders equipment in advance to minimise disruptions.

Valuation

Absolute Valuation

What's the expected return of an investment in the company?

The Stockhub users estimate that the expected return of an investment in the company over the next five years is ccc%, which equates to an annual return of ccc%. In other words, an £1,000 investment in the company is expected to return £ccc in five years time. The assumptions used to estimate the return figure can be found in the table below.

Assuming that a suitable return level over five years is ccc% per year or less, and Pantheon Resources achieves its expected return level (of ccc%), then an investment in the company is considered to be an 'suitable' one.

What are the assumptions used to estimate the return?

ccc

Sensitivity analysis

The main inputs that result in the greatest change in the expected return of the Pantheon Resources investment are, in order of importance (from highest to lowest):

1. The size of the total addressable market (the default size is $ccc);
2. Pantheon Resources peak market share (the default share is ccc%); and
3. The discount rate (the default time-weighted average rate is ccc%).

The impact of a 50% change in those main inputs to the expected return of the Pantheon Resources investment is shown in the table below.

Pantheon Resources investment expected return sensitivity analysis

Main input	50% worse	Unchanged	50% better
The discount rate	ccc%	ccc%	ccc%
The size of the total addressable market	ccc%	ccc%	ccc%
Pantheon Resources peak market share	ccc%	ccc%	ccc%

Appendix

Cost of equity

Cost of equity

Input	Input value	Additional information
Risk-free rate (%)	4.297%	Here, the risk free rate is the US 30 year treasury bond, and is calculated as at 3rd September 2023. Research suggests that for the risk-free rate, it's best to use one that has the same or similar maturity to the estimated remaining lifespan of the company. Here, we have assumed that the estimated lifespan of the company is 30 years years or longer, so we have used the longest maturity, which is 30 years.
Beta	0.5508	Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more/most accurately predicts a future beta.
Equity risk premium (%)	7.98%	Research suggests that for the region of equity risk premium, it's best to use one that is the same or similar to the region of the beta market portfolio. Here, the region of the beta market portfolio is the world/global, so we have used the world/global region for the equity risk premium, and is calculated as at 5th January 2023.
Cost of equity (%)	8.69%	Cost of equity = Risk-free rate + Beta x Equity risk premium.

Relative valuation

As noted earlier in this report, research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach, so that's the approach that Stockhub suggests using to determine the estimated value of the company (the valuation based on the discounted cash flow approach can be found in the valuation section of this report); nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the relative valuation approach.

What's the expected return of an investment in Pantheon Resources using the relative valuation approach?

Stockhub estimates that the expected return of an investment in Pantheon Resources over the next five years is ccc%, which equates to an annual return of ccc%. In other words, an £1,000 investment in the company is expected to return £ccc in five years time. The assumptions used to estimate the return figure can be found in the table below.

What are the assumptions used to estimate the return figure?

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Key inputs

Description	Value	Commentary
Which type of multiple do you want to use?	EV/Proved + Probable Reserves	Mainly given the relatively low amount of fixed capital expenditure (as a proportion of revenue) of companies within the consultancy industry (for example, currently, Alpha's fixed capital expenditure as a proportion of revenue is around 0.5%), we suggest valuing the company using the price/earnings ratio. However, we feel that to take into account the different business lifecycle stages of its peers (and, therefore, the different growth stages of its peers), the most suitable valuation multiple to use is the price/earnings to (earnings) growth multiple (or the PEG multiple, for short), rather than the price/earnings multiple. Another multiple which we think it's worth looking at is the (sales) growth-adjusted EV/sales, mainly because the multiple takes into account the different leverage levels of the peers (whereas the PEG does not, at least not directly; one is able to argue that the leverage levels are reflected indirectly in the earnings growth rates).
In regards to the PEG multiple, for the earnings figure, which year to you want to use?	Year 1	Research suggests that when using the relative valuation approach, it's best to use a time period of 12 months or less. Accordingly, for the earnings figure, we suggest using Year 1, which is 22 pence per share.
In regards to the PEG multiple, for the earnings growth figure, which year(s) do you want to use?	Year 2 to 4, from now	We suggest that for the earnings growth figure, it's best to use Year 2 to 4, which equates to a compound annual growth rate (CAGR) of 30%.
In regards to the PEG multiple, what multiple figure do you want to use?	1.04x	Here, we suggest using a multiple of 1.04x, which we believe is in-line with the multiples of Alpha's peers.
Which financial forecasts to use?	Stockhub	The only available forecasts are the ones that are supplied by us (the forecasts can be found in the financials section of this report), so we suggest using those.
What's the current value of the company?	£197.46 million	As at 4th September 2023, the current value of Pantheon Resources Plc is £197.46 million).
Which time period do you want to use to estimate the expected return?	Between now and one year time	Research suggests that when using the relative valuation approach, it's best to estimate the expected return of the company between now and one year time.

Peers analysis

	Market capitalisation (local)	Cash	Debt	Enterprise value	Proved reserves	Probable reserves	Possible reserves	EV/Proved Reserves	EV/Proved + Probable Reserves	EV/Proved + Probable + Possible Reserves
Pantheon Resources Plc
88 Energy Limited
Brookside Energy Limited
Diversified Gas & Oil PLC
ConocoPhillips

Sensitivity analysis

The main inputs that result in the greatest change in the expected return of the Pantheon Resources investment are, in order of importance (from highest to lowest):

1. The growth-adjusted EV/sales multiple (the default multiple ccc);
2. Pantheon Resources Year 5 sales figure (the default figure is £ccc); and
3. Pantheon Resources Year 6 sales growth rate (the default rate is ccc%).

The impact of a 50% change in those main inputs to the expected return of the Pantheon Resources investment is shown in the table below.

Pantheon Resources investment expected return sensitivity analysis

Main input	50% worse	Unchanged	50% better
The growth-adjusted EV/sales multiple	ccc%	ccc%	ccc%
Pantheon Resources Year 5 sales figure	ccc%	ccc%	ccc%
Pantheon Resources Year 6 sales growth rate	ccc%	ccc%	ccc%

Significant holdings

Significant holdings as of 15th June 2023

	Number of Ordinary Shares	% of Share Capital
Vidacos Nominees Limited	100,084,318	11.34
Interactive Brokers LLC	80,121,067	9.08
Lynchwood Nominees Limited	67,134,041	7.60
Vidacos Nominees Limited	38,521,840	4.36
Vidacos Nominees Limited	34,549,659	3.91
Barnard Nominees Limited	29,352,283	3.32
Barnard Nominees Limited	27,714,204	3.14

Capital structure

The Company has 907,206,399 ordinary fully paid shares in issue.

The number of ordinary shares not in public hands amounts to 6,956,691 equivalent to 0.9% of the issued allotted and fully paid ordinary shares.

This is correct as of 21 June 2023.

Share options

Share options

Exercise price (£)	Number of share options exercisable into ordinary shares on issue	Expiry Date	Share options as a % of issued shares
0.30	4,825,000	30 September 2024	0.62%
0.27	7,000,000	6 July 2030	0.90%
0.33	12,430,000	27 January 2031	1.60%
0.671	21,705,000	18 January 2027	2.80%

Share warrants

Share warrants

Exercise price (£)	Number of share warrants exercisable into non-voting shares	Expiry date	Share options as a % of issued shares
0.30	4,803,921	30 September 2024	1.29%

Beta risk profile

Beta value	Risk rating
0 to 0.50	Low
0.50 to 1.50	Medium
1.50 to 3.00	High
3.00 and above	Extremely high

Pantheon Resources beta calculation

Pantheon Resources beta calculation

Date	iShares MSCI World ETF unit price (USD)	Pantheon Resources plc share price (GBP)	iShares MSCI World ETF unit price change (%)	Pantheon Resources plc share price change (%)
01/10/2018	85.25	16.24
01/11/2018	86.21	17.1	1%	5%
01/12/2018	78.87	16	-9%	-6%
01/01/2019	84.96	23.375	8%	46%
01/02/2019	87.49	24.75	3%	6%
01/03/2019	88.79	28.6	1%	16%
01/04/2019	92.09	21.425	4%	-25%
01/05/2019	86.76	21.25	-6%	-1%
01/06/2019	91.02	21.25	5%	0%
01/07/2019	91.86	18.68	1%	-12%
01/08/2019	89.84	17.9	-2%	-4%
01/09/2019	91.78	16.03	2%	-10%
01/10/2019	94.12	16.25	3%	1%
01/11/2019	96.76	16.5	3%	2%
01/12/2019	98.78	16.5	2%	0%
01/01/2020	97.73	16.5	-1%	0%
01/02/2020	89.67	11.95	-8%	-28%
01/03/2020	77.93	13	-13%	9%
01/04/2020	86.36	13.75	11%	6%
01/05/2020	90.7	15.95	5%	16%
01/06/2020	92.14	13.775	2%	-14%
01/07/2020	96.65	21.15	5%	54%
01/08/2020	102.96	22.35	7%	6%
01/09/2020	99.52	37.2	-3%	66%
01/10/2020	96.53	31	-3%	-17%
01/11/2020	108.94	37.4	13%	21%
01/12/2020	112.41	43.5	3%	16%
01/01/2021	111.49	36.3	-1%	-17%
01/02/2021	114.27	39.1	2%	8%
01/03/2021	118.49	35.7	4%	-9%
01/04/2021	123.61	34.25	4%	-4%
01/05/2021	125.6	29.4	2%	-14%
01/06/2021	126.57	41.25	1%	40%
01/07/2021	128.83	55.3	2%	34%
01/08/2021	132.02	59.7	2%	8%
01/09/2021	126.46	71.6	-4%	20%
01/10/2021	133.84	77.6	6%	8%
01/11/2021	131.1	69.6	-2%	-10%
01/12/2021	135.32	77.3	3%	11%
01/01/2022	128.32	79.6	-5%	3%
01/02/2022	124.58	142	-3%	78%
01/03/2022	128.16	117.6	3%	-17%
01/04/2022	117.42	123.2	-8%	5%
01/05/2022	117.94	100.6	0%	-18%
01/06/2022	106.88	89.4	-9%	-11%
01/07/2022	115.57	117	8%	31%
01/08/2022	110.28	133.7	-5%	14%
01/09/2022	99.95	104.1	-9%	-22%
01/10/2022	107.42	100.1	7%	-4%
01/11/2022	115.44	72.95	7%	-27%
01/12/2022	109.25	42.52	-5%	-42%
01/01/2023	117.01	50.15	7%	18%
01/02/2023	113.98	57.1	-3%	14%
01/03/2023	117.67	23.64	3%	-59%
01/04/2023	119.79	18.67	2%	-21%
01/05/2023	118.6	15.74	-1%	-16%
01/06/2023	124.52	12.71	5%	-19%
01/07/2023	128.54	10.8	3%	-15%
01/08/2023	125.7	25	-2%	131%
01/09/2023	125.91	22.42	0%	-10%

Pantheon Resources beta and adjusted beta

	Pantheon Resources
Beta	0.3262
Adjusted beta	0.5508

Glossary

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Glossary

Term	Definition
/Net pay	The net thickness of an oil reservoir which is capable of producing hydrocarbons.
AMI	Area of mutual interest.
Anticline	A structure in the subsurface in which rock layers have been folded to produce an arch or dome.
Appraisal well	A well drilled to evaluate the extent of a discovery made by a previous well drilled on the same trap.
Barrel (BBL)	A unit of measurement commonly used in quoting liquid hydrocarbon volumes. 1 barrel _ 42 U.S. gallons 35 imperial gallons (approx) 159 liters (approx)
Basin	A depression in the earth's surface containing relatively thick deposits of sedimentary rocks.
BCF	Billion cubic feet, or 28.317 cubic meters. A unit commonly used in quoting volumes of natural gas.
BCFG	Billion cubic feet of gas.
Behind pipe	A productive reservoir which is isolated from the well bore by the casing.
BHL	Bottom hole location.
BO	Barrel of oil.
BOE	Barrel of oil equivalent. Used when converting oil and gas into an equivalent unit of volume. Typically, a figure of 6000 CFG per BBLO is used.
BOPD	Barrels of oil per day, a unit commonly used to describe daily rates of liquids production from a flowing well.
BTU	British Thermal Unit. A unit index of energy content in gas.
Casing	Steel pipe which lines the well bore from surface. The casing isolates subsurface fluids from the well bore and prevents rock material from sloughing off the sides of the well bore.
CFG	Cubic feet of gas
Charge risk	A general term for risk that a source rock exists, that it has been is or still is generating hydrocarbons, that a trap was in place before generation , and that a conduit exists between the source rock and the reservoir.
Clastic	A modifier describing rocks that were deposited by the mechanical action of water, i.e., being carried in suspension and then dropped when the energy in the flow becomes too weak to support the material. Typically, sandstone and shale.
Closure	On an isolated structural high, the area enclosed by the lowest closing contour.
Condensate	A hydrocarbon phase which separates out from natural gas and condenses into liquids when the hydrocarbons are produced.
Cretaceous	Late Mesozoic time; roughly 140 to 65 million years ago.
Darcy	1000 millidarcies (see definition for mD below).
Deposition	The process of depositing unconsolidated sediments, usually in a basin.
DHC	Dry hole cost. The cost of an unsuccessful well.
Dip	The angle that a rock surface forms with respect to the horizontal. Can be referenced as degrees, in the case of depth, or, in the case of seismic reflection data, in time (e.g. milliseconds per km ).
Dipmeter	A tool used in logging a well which measures the dip of rock surfaces in the borehole of the well.
DMO	Dip Moveout . A correction applied to seismic trace processing to account for dip. (See dip above).
DOGGR	California Department of Conservation/Division of Oil, Gas, and Geothermal Resources
Dry hole	A well in which no commercial hydrocarbons were discovered.
Exploration well	A well drilled into a previously undrilled or noncommercial trap to test for the presence of a new hydrocarbon accumulation.
Facies	An association of rock types which share a common trait. In the case of sedimentary rocks, usually used with reference to the environment in which the sediments were deposited (for example, deltaic).
Fault	Any brittle failure of rock layers along which rocks are displaced on one side relative to the other.
Fault trap	A structural trap where at least one of the components of closure is formed by offset of rock layers across a fault.
Fold	Deformation of a rock surface.
Formation	A formal term used to reference a genetically related rock unit (e.g. the Monterey Formation).
Four way dip	A simple structure in which rock surfaces dip in all four directions, thus creating structural closure. Often forms a hydrocarbon trap.
Geology	The study of the earth and the processes affecting its crust.
Geophysics	The study of rock properties and stratigraphy through the use of analytical methods involving various types of data collection and interpretation.
GIP	Gas in place. The volume of natural gas stored in a subsurface accumulation . Differs from recoverable reserves in that some of this gas will not be recovered to the surface due to properties of the rock and/or gas, and in situ pressure.
GOR	Gas-oil ratio: the volume of dissolved gas per barrel of oil.
Horizon	A term describing a layer of rock, most typically associated with a seismic reflection.
Hydrocarbons	A compound of the elements hydrogen and carbon, in either liquid or gaseous form. Natural gas and petroleum are mixtures of hydrocarbons.
Lithology	The physical, sedimentary, or mineralogical characteristics of a rock.
Marine	Used as a modifier of sedimentary rock to denote deposition in the ocean.
Mature	Used in association with source rock. A description applied to organic rich rock which is capable, because of sufficient temperature and burial depth, of generating hydrocarbons.
mD	Millidarcy , a unit of measurement used to describe permeability, i.e., the tendency for liquids to flow through a rock unit. A high permeability indicates a good reservoir.
Migration	The movement of hydrocarbons from the source rock to the reservoir.
MMBLS	Million barrels.
MMBO	Million barrels of oil.
MMBTU	Million British Thermal Units.
MMCFD	Million cubic feet of gas per day. A measure of gas flow rates from a producing well.
Monte Carlo	A methodology for estimating a given quantity based on the statistical distribution of input values on which the quantity depends. Typically, the output quantity is calculated several thousand times (each calculation is called a trial), for each trial using input parameter values extracted randomly according to their statistical distributions. The result is a statistical distribution of output values.
MSCF	Thousand standard cubic feet at atmospheric conditions.
N/G	Net to gross ratio. The percentage of a gross thickness of reservoir with sufficient permeability such that it is capable of flowing hydrocarbons.
Oil	Liquid hydrocarbons, generally more viscous and darker in color than condensates.
oil field	A subsurface accumulation of hydrocarbons.
oil window	The depth interval in which source rock can actively generate mobile oil.
OIP	Oil in place. The volume of oil held in a reservoir in the subsurface . Not all of this oil can be recovered.
OWC	Oil-water contact, which marks the base of an oil accumulation.
P10	In a Monte Carlo simulation, a measure of the high end expectation of a particular parameter's occurrence. For example, a P10 net pay of 150 ft means that there is a 10 per cent. probability that at least 150 ft of net pay will be encountered in a given trial in the simulation.
P50	In a Monte Carlo simulation, the median value of a particular parameter's occurrence. For example, a P50 net pay of 50 ft means that half of the trials in the simulation encountered a value less than 50 ft.
P90	In a Monte Carlo simulation, a measure of the low end expectation of a particular parameter's occurrence. For example, a P90 net pay of 25 ft means that there is a 90 per cent. probability that at least 25 ft of net pay will be encountered in a given trial in the simulation.
Permeability	A measure of the ability of liquids to flow through a porous solid. (See mD ).
Petroleum	(See Hydrocarbons).
PINS	Padre Island National Seashore.
Pipeline	A pipe through which any hydrocarbon or its products is delivered to an end user.
Porosity	The percentage of open pore space in a rock.
POS	Probability of success (technical, as opposed to commercial).
Potentially Recoverable Hydrocarbons	The volume of hydrocarbons that are estimated to be producible from a given trap. Used in the context of a prospect or an undeveloped hydrocarbon accumulation.
Prospect	An undrilled or poorly understood, and therefore hypothetical, hydrocarbon trap.
PSDM	Pre-stack depth migration. A seismic processing technique which utilises rock velocity models to iteratively arrive at a depth converted seismic data volume.
PSTM	Pre-stack time migration. A seismic processing technique which approximates PSDM but does not build a depth model. The seismic data volume is in two way travel time.
Reflector	An event observed on a seismic section that usually corresponds to a buried rock surface.
Reserves	The volume of oil or gas that can be recovered from the subsurface. Generally used in the context of commerciality.
Reservoir	A porous rock unit in which hydrocarbons occur in an oil field.
Risk	A measure of uncertainty relating to the likelihood of finding hydrocarbons, or, the likelihood that any or all of the individual geological elements required for the accumulation of hydrocarbons is met.
Sandstone	A sedimentary rock composed primarily of sand sized grains, usually quartz. A common hydrocarbon reservoir rock.
SCF	Standard cubic feet. See MSCF
Seal	An impermeable rock unit that prevents hydrocarbons from escaping from the reservoir.
Sediment	Generally, water borne debris that settles out of suspension.
Sediment rock	A type of rock formed by aggregation of sediments.
Seismic reflection	An event observed on seismic data that corresponds to a given rock layer in the subsurface.
Seismic survey	A tool employing an energy source, such as dynamite, and recording devices used to measure the travel time from a rock layer to the surface. The primary tool used to detect hydrocarbon traps.
Shale	A very fine grained rock often thinly layered. An important seal rock.
Show	An indication while drilling that hydrocarbons are present in the well.
Silt/siltstone	A rock whose grain size is intermediate between sand and shale.
Source/source rock	An organic rich rock (typically shale) capable of generating hydrocarbons under certain conditions of temperature and pressure.
STB	Stock tank barrel, the volume of a barrel of oil at the earth's surface as opposed to the corresponding volume in the subsurface.
Stratigraphy	The study of the vertical and horizontal distribution of stratified rocks, with respect to their age, lateral equivalence, and environment of deposition.
Structural trap	Generally, a hydrocarbon trap formed by dipping rock layers and/or faults.
Structure	A geological feature usually higher in elevation than the surrounding rock, formed by local deformation of the rock layers.
TCF	Trillion cubic feet of gas.
Tertiary	A period of geological time from approximately 2 to 65 million years ago. Subdivided into the Pliocene, Miocene, Oligocene, Eocene, and Paleocene.
Total depth (TD)	The final depth reached when drilling a well.
Trap	A structure capable of retaining hydrocarbons.
Trend	A particular direction in which similar geological features are repeated.
TVD	True vertical depth. The vertical depth below a given datum.
Unconformity	A break in the succession of sedimentary deposition, commonly associated with erosion of underlying rock units. Often marked by rock surfaces which are non-parallel above and below the unconformity.
Unrisked	Associated with an estimate of possible hydrocarbons for which a discount attributable to risk has not been applied.
Updip	Toward a higher elevation on a rock surface.
Uplift	Elevation by means of geological activity of one surface or area relative to another.
Well log	A device which records rock physical parameters in the well bore during or after drilling, or, the data obtained by these devices.