Ahpun - Unique Location for Development

In May 2024, Pantheon received an Independent Expert Report from Lee Keeling & Associates (LKA) on the Ahpun Alkaid horizon, updating the January 2020 IER on the Alkaid horizon (formerly referred to as the 'ZOI' and/or 'Alkaid Deep') within the Ahpun field. The original report was issued after the successful re-entry and test of the Alkaid-1 well during the winter of 2019. The update benefitted from the additional data gathered from the 5,200 feet horizontal completion and 90-day flow test of the Alkaid-2 well drilled in 2022. In the report, LKA estimates 79 million barrels of recoverable reserves, comprised of base case Possible Reserves of 5 million barrels, and Contingent Resources totally 74 million barrels of marketable liquids. LKA's economic modelling of the overall Alkaid horizon estimates real rates of return in excess of 20%. This supports Pantheon’s previous assessment that the Alkaid-2 long term production test demonstrated the commerciality of the Alkaid horizon in Ahpun. The Alkaid horizon is the smallest and deepest development candidate in Pantheon's portfolio, with poorer reservoir quality than the Ahpun topsets and Kodiak reservoirs, however, the advantage of its immediate proximity to pipeline and road infrastructure creates optionality for early economic development.

In June 2024, a report was received from Cawley Gillespie & Associates (CGA) on the Ahpun western topset horizons (formerly referred to as the ‘SMD’). CGA estimates the 2C contingent recoverable resources to be 282 million barrels of liquids. This IER incorporates data obtained from the successful completion and test of the shallower topset horizon in the vertical section of the Alkaid-2 well in Q4 2023. For that test, Pantheon utilised a revised frac design with significant success, including using finer mesh sand and at a lower concentration in a slick water stimulation. This resulted in a materially improved frac efficiency compared to the completion in the horizontal section of Alkaid-2 and will be the starting point for all future frac designs.

Alkaid-2 reached a total measured depth of 14,300 ft, which included a horizontal lateral of 5,300 ft. A 5 ½ inch liner was run, set, cemented at the bottom and tested for integrity.

Flow testing commenced in October 2022, and production rates were announced in March 2023. The IP30 production rate is calculated at c. 505 bpd of liquid marketable hydrocarbons consisting of c. 180 BOPD oil, c. 325 BPD of condensate and NGL, along with c. 2,300 mcfpd natural gas, after shrinkage.

The quality of data received from the Alkaid-2 well has been high and the flow testing operation generated significant data which has de-risked the play. This data has been extensively examined by a variety of experts, concluding that the result successfully demonstrated commerciality despite the restricted performance during the flow test in this particular wellbore. Analysis of the frac efficiency suggest scope for significant improvement (Alkaid-2 efficiency of 20% vs a benchmark in the Midland Basin of 80%) and a doubling of the lateral section to 10,000 ft is expected to increase initial flow rates and ultimate recovery per well.

The final analysis of the production test at Alkaid-2 concluded that under a revised and optimised development well completion, the EUR per well could be conservatively improved from 0.3 to up to 1.2 million bbls marketable liquids if only half the frac efficiency improvement were achieved, which is modelled to deliver an IP30 of 1,500 (vs 500 barrels per day at Alkaid-2). If achieved, this would represent a particularly exciting oil development opportunity. The economic case at Ahpun could be significantly enhanced by the upcoming test of the SMD within the Alkaid-2 well bore. The data collected to date indicates the SMD has significantly better reservoir properties than the Alkaid Zone of Interest and a successful test would firm up a significant resource base in better quality reservoir rocks.

Initial Stage of Ahpun Development (Eastern Portion)

Pantheon has already been awarded Production Units over the Alkaid and Talitha units (now part of Ahpun and Kodiak) where it submitted a First Plan of Exploration (POE) in November 2020, outlining its proposed activities in relation to the unit. Recently, the Company has begun the process of permitting the “hot tap” connection into the TAPS main oil line some 2 miles north of the Alkaid pad which is estimated to be completed within 24 months. A “hot tap” connection directly into TAPS will allow Pantheon to control its own production without additional complications of negotiating to use proprietary (not common carrier) third party infrastructure.

This initial stage of the Ahpun development anticipates drilling and completion of the first four production wells and water/gas disposal wells to begin in around 21 months. The initial production wells will be drilled from the two already permitted pads at Alkaid and Phecda with production sent directly from the Company’s existing modular processing facilities to the metering point and entry into the TAPS main oil line. The existing facility that was used for the long term flow test of the Alkaid 2 well will need to be upgraded to incorporate natural gas liquids stripping to maximise liquids volume (planned for eventual relocation to a Central Processing Pad).

The blend of production streams from Prudhoe Bay, Kuparuk River and all the other fields feeding into the TAPS constitutes Alaska North Slope Blend, which is exported by tankers at Valdez and delivered to US West Coast refineries. The quoted benchmark, ANS Blend, is the price of the blended Alaska North Slope liquids stream when delivered to the US West Coast so the value at the entry to the TAPS main oil line is less than the quoted ANS Blend price by the cost of seabourne transport from Valdez and the TAPS tariff.

The liquid hydrocarbons that Pantheon will produce have a different composition than the legacy production through the pipeline. The principle by which a common carrier pipeline allocates barrels injected into the pipeline vs barrels lifted from the export point is to ensure that, so far as possible, each shipper gets out the same value of ANS blend as the value of the liquids that they put in. Therefore, Pantheon’s production from Ahpun and Kodiak would be subject to what is known as a Quality Bank adjustment resulting in an expected 10% shrinkage factor through TAPS (Ahpun Field export volume vs ANS lifted volume at Valdez). Excess associated gas not used to produce electricity will be re-injected into reservoir and water injected into a suitable disposal well.

The near term benefits of using modular early production units in the early stages of the production operation are to expedite early cashflow and minimise up-front capex, while acquiring valuable production data to assist future development planning. It also reduces development risk as the Company builds towards the target of financial self-sufficiency. In due course, a Central Processing Unit (CPU) with full facilities will optimise investment in full field capacity as the Company exploits the entire resource potential.

The process for regulatory approvals is expected to take up to 2 years, allowing Ahpun Final Investment Decision (FID) towards the end of 2025/2026 with first production expected thereafter.

Results of Alkaid-2 recompletion in the topset horizon and the increase in flow rate following incorporation of results of GeoMark analysis:

In October 2023 Pantheon conducted a re-entry and flow test at Alkaid-2. The Company had three clear objectives going into this programme: (i) To assess the efficacy of the revised frac design; (ii) To gather representative fluid samples for pressure-volume temperature analysis ("PVT"), and; (iii) To better determine the initial reservoir pressure.

All three objectives were successfully completed. The Company's preliminary estimate of the efficiency of this revised frac is 50% of theoretical design performance and compares favourably with the calculated frac efficiency of c. 20% experienced in the Alkaid-2 operations in the deeper ZOI accumulation carried out in 2022. This efficiently executed new frac design has validated Pantheon’s confidence in the commerciality of the project. GeoMark carried out PVT analysis of fluid samples gathered during the test, which resulted in a calculated GOR for the Ahpun topset of 1,012 scf/bbl, materially less than the calculated 2,000-3,000 previously reported for the Alkaid ZOI. GeoMark also reported 35o API oil with a liquids yield of 162 bbls*/mmcf, compared to 42o API oil with 98 bbls*/mmcf produced from the Alkaid ZOI, meaning a much richer stream. Pressure transient analysis following the retrieval of the downhole pressure gauge indicates greatly improved reservoir quality compared to the Alkaid ZOI. The calculated effective permeability of the Ahpun topset is estimated to be at least two orders of magnitude (i.e. 100x) better.

*C5+ Liquids

Following incorporation of results of GeoMark analysis, the flow rate during the Alkaid-2 recompletion in the Ahpun topset was calculated to be 50-140 barrels per day ("bpd") of marketable liquids, 20-40 bpd higher than the originally announced flow rate of separator liquids (oil) and without including propane and butane that can also be exported through the TAPS main oil line.

Pantheon has provided an illustrative model based on Company estimates of the Ahpun topset type well performance. This results in an IP30 of 4,000 bpd of marketable liquids, with a first year average production rate of 2,000 bpd, and estimated ultimate recovery of 2 million barrels ("mmbl") of marketable liquids per well. This is based on the development well design of 10,000 feet lateral length, improved frac design, and recognising the improved reservoir and fluid characteristics. Projections for cumulative cashflows and funding requirements based on these estimates reinforce the robustness of the Ahpun development strategy and the ability to deploy cashflows from the initial wells to fund the expansion to a multi-rig programme and to fund the Kodiak Field development after its FID (expected by the end of 2028).

Future stages of the Ahpun oil development project involve exploiting the resources further from the Dalton Highway (nearer the Talitha-A well) which is predominantly found in the shallower SMD horizons.

Geology

Independent experts at AHS Baker Hughes conducted a ‘Volatiles Analysis Service’ (VAS) at Talitha-A and confirmed the presence of oil in all cuttings taken over a 3,700 ft section within the wellbore. In early 2022, several of these oil-bearing zones in the Talitha-A wellbore were tested.

Advances such as horizontal drilling and reservoir stimulation now enable the economic development of these type of reservoirs, which might otherwise be considered uneconomic. This application of “unconventional” completion techniques to conventional, but lower quality reservoirs than have been developed to date opens up significant potential development on the Alaska North Slope (ANS), which already boasts some of the largest onshore conventional oil discoveries in the world.

The Shelf Margin Deltaic (SMD) is the shallowest of discrete oil bearing intervals encountered at Talitha. The SMD interval itself is comprised of three individual components: the SMD-A, the SMD-B and the SMD-C.

During the winter 2021 programme, the SMD was the last test in the Talitha-A well bore. The Company had to suspend testing of the SMD horizon due to suspected blockages in the well bore. Other than the small amounts of oil, no reservoir fluids were produced.

The VAS work conducted by AHS Baker Hughes has indicated the SMD has the potential to produce better than the two lower zones already tested.

Pantheon now interprets that the SMD extends across the Alkaid project area as part of the Ahpun oil accumulation where the zone is proven oil bearing, and better developed as it extends southeast across the Dalton Highway. This significantly increases the resource potential near the highway and pipeline providing big upside to any Ahpun development.

An enormous volume of high-quality data has been collected from drilling Talitha-A which has both de-risked these zones for future drilling and increased confidence of their commercial viability.

*For the SMD-B only estimated by Lee Keeling & Associates