CanAsia Energy Corp.
CanAsia Energy Corp. (CanAsia) is a Canadian publicly listed (TSX-V: CEC) junior oil and gas oil company based in Calgary, Alberta, Canada. CanAsia was incorporated on May 27, 2022 for the purposes of participating in the Arrangement which closed on August 25, 2022 (described below). CanAsia commenced trading on the TSX-V on August 29, 2022.
Plan of Arrangement Completed August 25, 2022
On June 5, 2022, Pan Orient Energy Corp. (“Pan Orient”) entered into an agreement to be acquired by a subsidiary of Dialog Group Berhad of Malaysia and for Pan Orient’s non-Thailand business to be transferred to CanAsia Energy Corp. (“CanAsia”). Pursuant to that agreement (the “Arrangement”), Dialog System (Asia) Pte Ltd., a wholly-owned subsidiary of Dialog Group Berhad, acquired, through a newly incorporated Alberta subsidiary (the “Purchaser”), all the outstanding shares of Pan Orient by way of a plan of arrangement under the Business Corporation Act (Alberta). A holder of a common share of Pan Orient received, for each such common share, cash consideration of USD $0.7888 and one common share of CanAsia.
Following the completion of the Arrangement Agreement on August 25, 2022, Pan Orient transferred to CanAsia all of Pan Orient’s non-Thailand assets, including Pan Orient’s 71.8% ownership of Andora Energy Corporation (“Andora”), convertible loans receivable from Andora, 100% ownership in Pan Orient Energy Holdings Ltd. with legacy subsidiaries which had held interests in Indonesia, and working capital and long-term deposits. CanAsia assumed all liabilities related to the non-Thailand business, consisting primarily of accounts payable and accrued liabilities included in working capital and the decommissioning provision.
Strategy and Business of CanAsia
CanAsia will be engaged in the exploration for, and the acquisition, development and production of, crude oil and natural gas reserves, primarily at Sawn Lake, Alberta, through CanAsia’s 71.8% ownership of Andora. CanAsia may also participate in potential exploration and development activities in Thailand through an anticipated future bid round for new oil concessions.
The strategy and business plan of CanAsia is to create sustainable and profitable per-share growth in the crude oil and natural gas industry. The initial focus will be in western Canada, specifically at Sawn Lake, Alberta, and to consider exploration opportunities in other countries, including Thailand. To accomplish this, CanAsia will pursue an integrated growth strategy including development and rationalization of its initial Sawn Lake project area, operated by Andora. Additionally, CanAsia may pursue strategic asset and corporate acquisitions of crude oil and natural gas properties when it believes that further exploitation, development and exploration opportunities exist, and where acquisition opportunities meet CanAsia’s business parameters.
Andora Energy Corporation
Andora is a private oil company, in which CanAsia has a 71.8% ownership, and is focused on developing the bitumen resources at the Sawn Lake property using steam assisted gravity drainage (“SAGD”) development.
Sawn Lake, Alberta
Andora has interests in 27 sections (24.25 net sections) of Sawn Lake Alberta Crown oil sands leases within the Alberta Peace River Oil Sands area. In the Sawn Lake Central area, Andora is the operator with a 75% working interest in two oil sands leases with 11 gross sections (8.25 net sections). In the Sawn Lake South area, Andora is the operator with a 100% working interest in three oil sands leases with 16 gross sections (16 net sections).
The Sawn Lake property is in a pre-commercial stage and the commercial viability of the SAGD recovery process at Sawn Lake has not yet been established. No proved or probable reserves were yet assigned.
Sawn Lake is a quality SAGD project that has regulatory approval, the right development plan based on Andora’s proprietary produced water boiler and an existing facility that can be expanded for commercial production. The development plan for the Sawn SAGD project is for development in stages with five standardized “battery scale” SAGD facilities where growth is primarily funded by after tax cash flow generated by the project.
A March 31, 2022 Contingent Bitumen Resources Report (“Resources Report”) by Sproule Associates Limited evaluated Andora’s oil sands interests at Sawn Lake Alberta, Canada using forecast prices at March 31, 2022. The Resources Report assigned unrisked “Best Estimate” contingent resources to Andora were 292.0 million barrels of bitumen recoverable (209.6 million barrels net to CanAsia’s 71.8% interest in Andora) assigned to the Sawn Lake Central and the Sawn Lake South blocks of Sawn Lake, both of which are operated by Andora.
Sawn Lake Central Area
A SAGD demonstration project at the Sawn Lake Central area commenced in 2013 and consisted of one SAGD wellpair drilled to a depth of 650 meters and a horizontal length of 780 meters and a SAGD facility for steam generation, water handling and bitumen treating. Steam injection commenced in May 2014 and produced bitumen from September 2014 to February 2016. The demonstration project reached a steady state production level in February 2016 of 620 BOPD with an instantaneous steam-oil ratio (“ISOR”) of 2.1.
The demonstration project successfully captured the key data associated with the objectives of the demonstration project and operations were suspended at the end of February 2016. The demonstration project proved that the SAGD process works in the Bluesky formation at Sawn Lake, established characteristics of ramp up through stabilization of SAGD performance, indicated the productive capability, ISOR, and provided critical information required for well and facility design associated with future commercial development. Results of the demonstration project were used to update the reservoir model and estimate of contingent bitumen resources. Production results to date are not necessarily indicative of long-term performance or of ultimate recovery and the Sawn Lake SAGD project has not yet proven that it is commercially viable.
The first phase of commercial expansion of the Sawn Lake SAGD project at Battery #1 to 3100 BOPD (where Andora is the operator with a 75% working interest) would be done in three stages. The first stage of commercial development is to reactivate the existing SAGD facility and wellpair and the second stage is for drilling an additional wellpair and associated facility work. On a 100% working interest basis, the estimated cost is approximately $11.4 million for the first two stages and forecast production is 1,240 BOPD. A further third stage expansion is for drilling of three additional wellpairs plus expansion of the facility, with an estimated capital cost of approximately $33.5 million (on a 100% working interest basis), to increase production to 3,100 BOPD. Regulatory approval was received in December 2017 for commercial expansion of the existing Sawn Lake Central project to 3200 BOPD using Andora’s Produced Water Boiler.
It is recognized that Western Canada Select reference prices and financing considerations will have a significant impact on any decision regarding the timing and extent of future development.