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Pantheon Resources PLC (LON:PANR) shares are in the ascendant again and generating some benevolent momentum as the company confirms it has raised $41m through a significantly oversubscribed offering. The cash is going towards three wellbore operations in Alaska in the first half of next year.

Some 47.6m shares were issued at 65p at a 14% discount to yesterday’s closing price. Pantheon confirmed that it would be raising a total of $73m with $50m of unsecured convertible bonds going to a fund being advised by Heights Capital. The size of the equity and bond issue is being expanded to compensate for the demand. The principal amount of convertible bonds is being raised to $55m.

Pantheon Resources said additional funds will be used for further asset portfolio development.

Pantheon Resources shares are trading close to their ATH

Taking a look at the share price, the stock had recently come off its YTD peak of about 93p and was heading for the 60p marker, but the shares have since rallied. At the time of writing they were trading at 75.9p. Investors in the company are still looking at a six month gain of 154% and are up 84% over 12 months.

Pantheon Resources is a focused oil exploration play, with its main asset on the Alaskan North Slope. It holds a dominant working interest in projects there of between 89% and 100%. This means it could be sitting on some very large oil reserves indeed.

Pantheon Resources is very much a play on possible new North American oil resources. Its operating cash flow situation has been improving gradually in the last five years and it is in danger of going cash flow positive, which would also assist its shares. Pantheon’s current liquidity ratio (ability to cover liabilities with assets) is looking very healthy.

The shares are close to trading at an ATH today, but are still relatively cheaply priced, with a current PE of under 5, which looks attractive, especially when you factor in the momentum.

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Alaska’s North Slope:  the new great super basin?

Alaska’s North Slope remains a key part of the state’s strategic oil reserves; it has averaged over 496,000 barrels per day (FY 2019 figures). State forecasts anticipated a dip in production during 2020. Key to future productivity will be the amount of capital invested by companies like Pantheon in future exploration and development.

While overall Alaska oil production has been in decline since 1988, and most new resources are located offshore or on federal property, the North Slope is looking at something of a renaissance following the More Alaska Production Act. Following further reform of the tax regime for the oil industry in 2013, the state saw its first increase in production in 2016. Following new discoveries made by geologists in the Nanushuk formation, the western North Slope is being called the next big North American super basin.

Overall there is much to like here – the company’s exploration activities are obviously rated, and it enjoys good backing from the institutional investment market, evidenced by the recent placing. The share price gains in the last year have been very impressive. Yes, you can partly attribute this to the rise in the oil price, but there has not been the same correlation between Pantheon Resources stock and the oil price historically. The assets it owns in Alaska are a bigger part of the story here.

Related

Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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