By: Tomas Ronolski - AllPennyStocks.com News

Wednesday, November 5, 2014

As we have detailed in recent weekly updates and has been the topic of many articles on the web, the TSX Venture exchange has struggled, to say the least, particularly over the past two months. More than 400 companies make up the S&P TSX Venture Composite Index, which has lost more than 25 percent of its value since the start of December. The microcap-rich, resource-heavy index has languished with faltering metal prices and oil slumping below $80 per barrel, leaving investors searching for value plays. One of the constituents is Pan Orient Energy Corp. (TSX-Venture:POE), an Alberta-based oil and gas exploration and production company with onshore operations in Thailand, Indonesia and Western Canada. The company has crashed along with the broader index, falling from a high of $2.44 on the first trading day of September to a low of $1.47 on Tuesday for a top-to-bottom drop of 39.8 percent.

The company is making up some of the lost ground on Wednesday, getting a significant boost by reporting the sale of assets in Thailand. Pan Orient said it has signed an agreement to sell a 50 percent equity interest in its subsidiary Pan Orient Energy (Siam) Ltd. to a wholly owned subsidiary of Sea Oil Public Company Limited of Bangkok, Thailand for a cash price of CDN$48.3 million (US$42.5 million), including a working capital adjustment of CDN$2.7 million (US$2.4 million). Listed on the Stock Exchange of Thailand, Sea Oil’s majority shareholder is the Nathalin Group, a private conglomerate and one of the largest petroleum and chemical tanker operators in Thailand.

The primary asset in the sale of the stake is Concession L53/48 in Thailand, for which Pan Orient Energy (Siam) Ltd. owns a 100% interest. Pan Orient Energy (Siam) Ltd. is and will remain the operator of the project. A three-well drilling program is expected to start at the closing of the transaction.

Pending all customary approvals, the transaction is expected to close in January 2015. The Alberta-based parent company expects to receive net proceeds of approximately CDN$46.5 million (US$40.9 million). Should Sea Oil break the contract by failing to garner shareholder approval or securing financing for the deal, a CDN$4.57 million (US$4.0 million) fee is due to Pan Orient Energy Corp.

"Pan Orient continues to make significant progress towards the corporate initiative of strengthening the Company's balance sheet and de-risking its portfolio of assets, through partial sale or seeking partners,” commented Pan Orient President and CEO Jeff Chisholm in a statement today. “The final goal is to retain meaningful working interests with significant upside exposure and a strong balance sheet, facilitating growth and flexibility going forward.”

Chisholm noted that the company is also in exclusive negotiations for farmout agreements for projects in Indonesia and hopes some of those deals will be inked this month.

The proceeds of the Thailand transaction will bolster the company’s books. At the end of the second quarter (June 30), Pan Orient had $43.8 million in working capital and non-current deposits. $27.2 million of that was cash (and payables were $5.8 million).

Investors have cheered the probable cash infusion, with shares jumping as high as $2.10 in morning trading after closing yesterday at $1.56. Shares have pulled back a bit from the high of the day, but are still up by 21.8 percent at $1.90 around 11 AM ET.

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