The Pantheon Resources (LSE:PANR) share price climbed by nearly 250% over the last 12 months. But earlier this week, the stock crashed and lost nearly half of its value!
What happened? And is this a potential opportunity to buy the shares at half price for my portfolio?
The Pantheon Resources (PANR) share price crash
Pantheon is a US oil exploration business. After receiving approval from the Alaska Department of Natural Resources, the firm began developing its Talitha #A project. It is expected to contain a volume of up to 1 billion barrels. Needless to say, that’s quite an opportunity.
Over the next few months, encouraging early indicators continued to be received. In fact, the management team was so confident in the project that Pantheon acquired 100% of the share capital to be the sole beneficiary.
Last week, after some delay due to poor weather conditions, the firm successfully completed its reservoir test for Kuparuk — the deepest and most promising point in the well. But despite early indicators, the results were quite disappointing. While Pantheon did find high-quality light oil, the flow rate was far too low due to unexpected levels of pressure, making extraction potentially unviable.
Given the high level of shareholder expectations surrounding these results, the collapsing PANR share price is not that surprising to me.
Is it all bad news?
This discovery is undoubtedly disappointing for both Pantheon and its investors. However, there are some reasons to be optimistic.
While Kuparuk was the company’s core focus, there are another four independent reservoirs that have yet to be extensively explored. The firm actually performed some initial tests on the shallower zones and discovered light oil at a much higher quality than expected. A more detailed investigation is set to commence at the start of next winter. And in the meantime, Pantheon has begun analysing the geological data acquired in the most recent testing.
It seems to me that the problems encountered, while frustrating, are ultimately a speed bump rather than a concrete wall. And so the Talitha #A project could still be the opportunity investors thought it was. Assuming that it is, then the PANR share price could very well recover over the long term.
The bottom line
Oil exploration companies are inherently risky. Complications and disappointing results can be pretty common and lead to significant share price volatility, as seen with Pantheon. However, I do believe the recent sell-off might be a bit of an overreaction by shareholders. Talitha #A could still very much be a viable project. And the potential extraction of 1 billion barrels worth of oil could push the PANR share price higher.
Having said that, there remain a lot of unknowns at this time. Therefore I’m keeping Pantheon on my watchlist for now. When there is more information available, I’ll certainly be taking another look.