Pantheon Resources : Proposed Placing - July 2017

27 July 2017

THIS ANNOUNCEMENT, INCLUDING THE APPENDICES AND THE INFORMATION CONTAINED HEREIN, IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL. THIS ANNOUNCEMENT HAS NOT BEEN APPROVED BY THE LONDON STOCK EXCHANGE, NOR IS IT INTENDED THAT IT WILL BE SO APPROVED.

Pantheon Resources plc ("Pantheon" or "the Company"), the AIM-quoted oil and gas exploration and development company with a working interest of 50%-58% in several conventional projects in Tyler and Polk Counties, onshore East Texas, is pleased to announce a proposed placing to raise approximately US$12.5 million.

• Proposed placing of new ordinary shares of £0.01 pence each in the Company (the

  "Placing Shares") in order raise gross proceeds of approximately US$12.5 million.

• The price per Placing Share will be 43 pence (the "Placing Price").

• Pantheon is in late stage negotiations to acquire an additional 25% working interest ("WI") in the VOBM#4 well, as well as an option to acquire an additional 25% WI in 7,820 mineral acres surrounding the VOBM#4 well in Tyler County. Whilst negotiations are advanced, there is no certainty that the acquisition and/or option will be completed.

• The proposed cost of acquiring an additional 25% interest in VOBM#4 is the payment of 40% of the forward costs of drilling the sidetrack, estimated to be $500,000. In the event of success, an additional estimated $200,000 will be required to complete the well for production.

• Pantheon's proposed cost to exercise the proposed option over the 7,820 acres is estimated to be c.US$1.5m, increasing the Company's WI to 75% in this area. Importantly, it is proposed that this option can be exercised after completion of the VOBM#4 sidetrack.

• Bobby Gray, the principal of Vision, Pantheon's working interest partner in the leases and operator, Vision Gas Resources LLC ("Vision"), is also proposing to increase his personal working interest in VOBM#4 from 16.67% to 25%.

• Alongside existing cash of c.US$3m, the new funds will primarily be used to accelerate the Company's exploration, appraisal and development programme. This is anticipated to include:

  • a second well targeting the Wilcox formation, a well-known and significant regional producing formation;

  • an additional Polk County Eagle Ford sandstone vertical well;

  • a centre basin test well, targeting the Eagle Ford sandstone in Tyler County that was initially the main target for the VOBM #4 well;

  • an exploration well on 'Prospect D', the West West Double A prospect in Polk County; and

  • the installation of a new gas processing facility in Tyler County to monetise discoveries in the first half of 2018, adding to production anticipated from the new 15mmcf/d production facility in Polk County.

The placing is being conducted through an accelerated bookbuilding process (the "Bookbuild"), which will be launched immediately following this Announcement and will be made available to eligible institutional investors. The Bookbuild is expected to close no later than 8 a.m. on 28 July 2017, but the Sole Bookrunner and the Company reserve the right to close the Bookbuild earlier or later, without further notice.

Stifel has been appointed as Sole Bookrunner and Panmure Gordon has been appointed as Co-Lead Manager in respect of the Placing.

The Placing Price is equivalent to a discount of 4.4 per cent. to the closing share price on AIM on the 26 July 2017 (being the last Business Day prior to this Announcement).

The number of Placing Shares to be issued will be determined based on the exchange rate between the U.S. dollar and pound sterling on the date on which the Bookbuild is closed. Any reference to gross or net proceeds in this Announcement or any other amount in this Announcement stated in US$ assumes an exchange rate of 1:0.76, being the exchange rate between the U.S. dollar and pound sterling on 27 July 2017.

John ("Jay") Bishop Cheatham, CEO and Justin Hondris, Finance Director have indicated that they intend to participate in the Placing for an aggregated amount of £70,000. The ultimate allocation to the Directors is at the absolute discretion of the Sole Bookrunner and the Company.

Jay Cheatham, CEO of Pantheon Resources, said:

"This is an opportunity that rarely comes along in the oil and gas business; the ability to increase our working interest from 50% to 75% over 7,820 acres after the unexpected discovery of the potentially commercial Wilcox zone in VOBM#4 was an easy decision. Following the excellent logs we retrieved across the Wilcox zone, we have sought shareholder support to increase our position here and if the sidetrack is successful it will have significant implications across this acreage.

"This in no way diminishes the potential of the Eagle Ford sandstone which remains our primary objective and indeed will be providing us with our first production and cashflows from our Polk County acreage. Importantly, the acreage covered by the proposed option offers potential from all four regionally productive zones: the Wilcox, Navarro, Austin Chalk and Eagle Ford Sandstone.

"This proposed placing will not only give us the means to acquire an increased WI in some of our key licence areas, but it will allow us to accelerate our drilling programme, to continue to unlock the resource potential in Polk and Tyler Counties. We continue to have real confidence in the outlook for the business, our recent drilling campaign, although hit by operational difficulties has allowed us to learn a lot of valuable lessons about appropriate drilling and completion techniques, which we will apply going forward. We have also strengthened our operational capability with the appointment of Philip Gobe and technical consultants Sierra Hamilton and our estimated operating costs remain best in class, estimated to be below $5 per barrel of oil equivalent."

Justin Hondris, Director, Finance and Corporate Development

Nicholas Rhodes Ashton Clanfield

Atholl Tweedie Tom Salvesen

Ed Westropp James Styles

Pantheon has with its lease co-venturer, Vision, been focused on exploring and developing its acreage and has, since July 2015, drilled five exploration and development wells, all of which have discovered hydrocarbons. These discoveries have helped to prove the Company's study on the Eagle Ford study that it completed in partnership with Vision and the Bureau of Economic Geology at the University of Texas, at Austin.

As previously detailed, the Company is currently planning to start frac operations on the VOBM#2H in early August 2017 and will commence drilling of the side track and subsequent testing of the VOBM#4 well at the end of August 2017. The Company is also continuing to progress to first production with the construction of the Kinder Morgan gas processing facility in Polk County estimated to be complete by September 2017.

The Company is keen to progress its exploration and development activities across its Polk and Tyler county acreage, and intends to use the proceeds to accelerate its drilling programme across its acreage.

Wilcox#2 Well

With the discovery of the Wilcox formation at the VOBM#4, Pantheon and the operator Vision have matured additional drilling targets to further delineate the Wilcox formation across the acreage position.

VOBM#5 Well

The operator intends to drill a development step out well from the Company's existing Polk County wells. This well will, if successful contribute to the Company's planned production Polk County.

Centre Basin Test Well

With new funding in place, the Company can also move forward to drill the centre basin test in Tyler County, which would be designed to appraise the lateral extent of the significant Eagle Ford sandstone basin.

Prospect D Well

The Company will drill a well on Prospect D in the West West Double A Prospect in Polk County. This well will target a significant exploration prospect to the west of the Company's existing Polk county discoveries.

Tyler County Gas Plant

Following the successful testing of the VOS#1 well and depending on results of the VOBM#4 well and the subsequent proposed Wilcox#2 well, the Company intends to order and install a gas processing plant in Tyler County, as already done in Polk County.

The gross proceeds receivable by the Company pursuant to the Fundraising are expected to be US$12.5m. The Company intends to use the proceeds together with its existing cash resources, which as at 27 July were c.US$3 million and potential future cash flow from production to fund its forward capital programme:

Balance of Polk County Gas Plant 0.6

Completion of VOBM#2H Frac 0.3

Completion of VOBM#4 Sidetrack 0.3

Lease Renewals (1) 1.4

G&A(1) 0.7

Exercise VOBM#4 Well Option 0.7

Exercise Tyler County Acreage Option 1.5

Wilcox#2 Well (75% WI) 1.9

VOBM#5 Well (58% WI) 2.0

Centre Basin Test Well (50% - 75% WI) 3.0 - 4.5 Tyler County Gas Plant 1.3

Prospect D Wells 2.5