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Pantheon Resources shares rise another 7% as optimism grows


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Pantheon Resources shares are hot commodities as the FTSE AIM oil exploration company enjoys significant initial success at its North Alaska projects.

oil pumpSource: Bloomberg
 
 Charles Archer | Financial Writer, London | Publication date: Tuesday 05 April 2022

Pantheon Resources (LON: PANR) shares rocketed by 82% from 78p on 3 February to 142p by 28 February.

After dipping slightly, the oil exploration stock has risen by 7% to 135p today and could see even bigger gains soon.

Pantheon Resources share price: oil exploration

Pantheon Resources is conducting initial exploratory tests on some of its 153,000 acres of projects in North Alaska, ‘part of a sophisticated free market economy in the USA where the rule of law and encouragement of free enterprise are both deeply ingrained.’

In December, Pantheon completed its largest-ever capital raise, ‘securing $96 million through a combination of US$41 million equity and US$55 million convertible debt.’ This brings total investment up to $200 million.

Investors are so keen on the company because of its key advantage: its 100% company-owned projects lie ‘immediately underneath and adjacent to the established and underutilized Trans Alaska Pipeline System (TAPS),’ which means it can ‘bring on stream any oil discoveries to market more quickly and cost-effectively than other projects on the North Slope of Alaska.’

Moreover, it believes they ‘have the potential to contain 7 billion barrels of oil in place and over 2.2 billion barrels of recoverable resource.’ Company directors believe the drilling will ‘be one of the most impactful oil operations in the world this year.’

On 7 February, Pantheon Resources announced the completion of flow testing at its Talitha A test site, averaging 73 barrels of oil a day for three days. CEO Jay Cheatham enthused the ‘confirmation that we had both movable and high quality light oil.’

Then on 24 March, the company publicised that its Theta West location ‘likely exceeds its pre-drill resource estimates of 1.2 billion barrels of oil (recoverable).’

It delivered ‘57 barrels of oil per day ("BOPD") with peak rates exceeding 100 BOPD over 2.5 days. …significantly, this rate meets the Company's pre-drill expectations, confirms the presence, quality, and mobility of light sweet crude oil.’

Cheatham is ‘very excited’ by the test results as it ‘confirms a vast oil resource and also confirms our geologic model.’

bidenSource: Bloomberg

Political importance

Brent Crude remains at a multi-year high, and the US has banned the import of Russian oil. To alleviate the economic pain, US President Biden is releasing 180 million barrels from strategic reserves, or 1 million barrels a day. There are just under 600 million barrels in the reserves.

However, Americans use around 20 million barrels a day, so this release only represents 5% of daily usage. And with gasoline up 47% over the past year to $4.23, the President’s prediction that it will come down by ‘anything from 10 cents to 35 cents a gallon’ is about as politically useful as Sunak’s 5p fuel duty cut.

With mid-terms coming in November, Biden could be shellacked by voters crumbling under record inflation underpinned by soaring oil prices. He has again criticised oil companies for not using 9,000 approved drilling permits, arguing Congress should pass a ‘use-it-or-lose-it policy’ to charge for ‘unused leases.’

There is going to be political impetus with Pantheon Resources, especially if it continues to deliver good news.

WH Ireland analyst Brandan Long believes it is a ‘potential means of decreasing reliance on Russian oil in a manner that conforms to the highest standards of ESG.’ Further, he notes the ‘large-scale assets held by Pantheon Resources, have potential to be of vital strategic importance,’ while recent tests are ‘unambiguously positive in our opinion – it substantially de-risks the potential of the resource.’

And in interim results released last week, Cheatham announced that ‘the period to 31 December 2021 and beyond has been one of great achievement for our Company. Against a backdrop of strong oil prices and geopolitical turbulence, there never has been a better time to prove up what has the potential to be a nationally significant oil resource in a safe jurisdiction onshore USA.’

While the company made a $4.4 billion loss, this is largely meaningless compared to the potential revenue, with the company planning to ‘monetize the assets by a sale or other means at the appropriate time.’

With spudding at a third project, Alkaid, due to begin later this year, the Pantheon Resources share price could be primed to explode.

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