Panzeri, 26, made nine birdies in 12 holes to reach 8 under par, just ahead of 11 other players who all sit within three shots of the lead.
"To be honest, that's one of the best stretches I've had ever," said Panzeri. "Birdie-wise, nine in 12 holes, I've never done that."
Eugene Wong of North Vancouver, Matt Daniel of Richmond and Americans Stephen Bidne and Carlos Sainz Jr., are all tied in second place at 7 under.
"I've been playing as of late and it's been fun to keep the momentum going," said Sainz, who earned a spot in the event through an open qualifying tournament two weeks ago.
Wong, the 2010 Jack Nicklaus Award winner as the top golfer in the NCAA, made five birdies to post a 67 and said he was happy with his putting game on Friday.
"Without my short game I wouldn't be where I am right now," said Wong.
"I made a lot of long birdie putts too, which is a nice bonus."
Defending champion Stuart Anderson of Sooke is tied for 17th after a 3-under 68.
Sixty-three players made the cut at 1-over, while Canadian Tour Order of Merit leader Matt Hill missed the cut.
