The Pantheon Resources (LON:PANR) share price is tanking! I’m buying more

With a large amount of oil in place, does the recent sharp fall in the PANR share price present an attractive buying opportunity?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Entrepreneur on the phone.

Image source: Getty Images

Pantheon Resources (LSE:PANR) is an oil exploration firm. Listed on the AIM 100 index, the company operates in Alaska’s North Slope area. Its primary assets are Alkaid, measuring nearly 23,000 acres, and Talitha, which is about 44,000 acres. Since yesterday, the PANR share price is down 20% and currently trades at 105p. What’s the reason for this fall? And should I add to my current holding on this dip?

Why did the PANR share price fall?

Investment firm Peel Hunt initiated coverage of the business yesterday and immediately placed a ‘sell’ rating on the stock.

What’s more, it issued a price target of 50p. This is far below the current PANR share price and may be a reason for the large fall today and yesterday.

In the coverage, it cited recent flow rates and other, more historical factors. This includes the decision by a large oil firm to farm-in, that is to enter an agreement, with competitor 88 Energy in 2017, as opposed to Pantheon. 

It’s worth noting that 88 Energy has acreage and operations right next to Pantheon, in Alaska.

In terms of financial results, Pantheon did report widening losses of $4.4m for the six months to 31 December. However, its cash position has improved massively to $92.7m, up from $29.8m one year earlier.

I don’t think these financial results as a reason for the recent price fall.

Large oil discoveries and near-term production

When investing in oil exploration companies, however, I like to look beyond financial results and analyse the extent of their discoveries. Recently, investment bank Canaccord Genuity raised its target price to 280p. 

This followed the announcement by Pantheon that it may have 23.5bn barrels of oil in place. Even with a conservative estimate of 10% recoverability rates, this potentially amounts to well over 2bn barrels of oil for production. 

With this production set to commence in October, revenue from these discoveries may come sooner rather than later.

In addition, the firm had a successful winter drilling programme at its Talitha and Theta West wells, although bad weather halted operations on a few occasions. 

Summer drilling programme

The company announced this week that it had concluded a rig contract to drill at the Alkaid #2 well. Spudding, the initial drilling, will commence in July. 

Through complex analysis, the business believes that the oil zone in this well is “substantially thicker” than previously thought. 

It’s possible that this well could have 2.6bn barrels of oil in place. It’s estimated that about 400m barrels could be recoverable. If recovered, this may be very good news for the PANR share price, as more oil enters into production.    

It should be noted, however, that the nature of exploration can mean that recovery rates may be lower than estimated.

Overall, this correction to the PANR share price may seem like a big move down in the short term. However, given the substantial amounts of oil that may be in place, I think the company could soon flourish as oil production begins later in the year. I see this recent price movement as a good opportunity to add to my portfolio and I will be purchasing more shares soon. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Andrew Woods owns shares in Pantheon Resources. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Woman using laptop and working from home
Investing Articles

2 top stocks to buy with dividends yielding more than 3%

When I’m looking for stocks to buy, big dividends can be attractive. On my radar right now is a FTSE…

Read more »

man in shirt using computer and smiling while working in the office
Investing Articles

2 FTSE 250 high-dividend stocks I’d buy for passive income!

Buying shares with above-average dividend yields can have a spectacular effect on long-term passive income. Here are two high-dividend stocks…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Should I buy this dirt-cheap penny stock for growth and returns?

This Fool delves deeper into a penny stock that could be primed to grow and provide lucrative returns in the…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

3 points I’ve learned from Warren Buffett’s whopping $43.8bn loss

Jon Smith shares some of his takeaways after seeing the Q2 reported loss for Warren Buffett's company, Berkshire Hathaway.

Read more »

Happy couple showing relief at news
Investing Articles

The Aviva share price is climbing. Here’s why I’d buy more

After what seems like years of going nowhere, the Aviva share price is finally showing signs of life. I take…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

This is one of the best shares to buy for juicy dividends!

Jabran Khan is hunting for the best shares to buy. This commodities business offers an enticing dividend yield to boost…

Read more »

Young female analyst working at her desk in the office
Investing Articles

Can I trust Rio Tinto’s 10.3% dividend yield?

Rio Tinto offers one of the biggest dividend yields on the FTSE 100 today. But does this make it a…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Lithium prices skyrocket: 2 UK shares I’d buy to capitalise 

Lithium has quickly become the most in-demand metal in 2022. I am looking at two UK shares in the EV…

Read more »