TIDMPHAR
RNS Number : 0462T
Pharos Energy PLC
20 July 2022
20 July 2022
Pharos Energy plc
("Pharos" or the "Company" or, together with its subsidiaries,
the "Group")
Trading and Operations Update July 2022
Pharos Energy plc, an independent oil and gas exploration and
production company, issues the following Trading and Operations
update in advance of the Company's half-year results on 14
September 2022. The information contained herein is not audited and
may be subject to further review and amendment.
Summary
-- Group working interest H1 producti on 7,961 boepd net:
o Egypt production 2,100 bopd
o Vietnam production 5,861 boepd
-- 2022 Full year Group working interest production guidance
remains unchanged from 19 May 2022 trading update:
o 1,350-1,800 bopd in Egypt (equivalent to gross production of
3,000-4,000 bopd)
o 5,000-6,000 boepd in Vietnam
-- Group revenue for H1 2022 of c.$129m before hedging loss of c.$17m
-- Cash balances as at 30 June 2022 of $47.5m, net debt of $38.1m
-- Forecast cash capex for the full year of c.$29m, post carry in Egypt
-- Planning well advanced for TGT & CNV development drilling
programme, due to commence in September 2022
-- Work on 3D seismic processing in Block 125 in Vietnam nearing completion
-- Development drilling continues in El Fayum, drilling rig secured on long-term contract
-- Commencing today and announced separately, initiation of $3m share buyback programme
Jann Brown, Chief Executive Officer, commented:
"The first half of 2022 has seen us deliver on both our
strategic and operational objectives with strong progress made on
all fronts across the portfolio. In Egypt, following the farm-out
to IPR, investment has recommenced and production levels are
starting to rebuild. Securing a rig on long-term contract positions
us for continuous drilling in El Fayum over the next year and
beyond, to monetise the significant 2P reserves base under the
enhanced fiscal terms secured. In Vietnam, the three well
development drilling programme is on track to commence in
September, focused on sustaining production levels in the current
high netback, fast payback environment. These operational plans
build on the strong cash flows generated in H1 2022 and give us the
confidence to allocate capital to commence a share buyback
programme, announced today, in recognition of the significant
discount value we see in our shares at the current price. Value
creation and shareholder returns remain top of our agenda and we
remain focused on the near term opportunities in the current
portfolio."
Operational Update
Egypt
El Fayum Production
The transaction with IPR and transfer of operatorship completed
on 21 March 2022. Working interest production is therefore reported
as 100% through to completion and 45% thereafter. Production for
the first half of 2022 from El Fayum averaged 3,142 bopd gross and
2,100 bopd net to Pharos. The Group's Egypt production guidance for
2022 remains unchanged at 1,350-1,800 bopd, equivalent to gross
production of 3,000-4,000 bopd.
El Fayum Development and Operations
Development drilling in El Fayum continues. Gross oil production
from El Fayum has steadily increased from 2,800 bopd in January to
c.3,400 bopd in June. IPR's current development plan is focused on
drilling high value wells with a planned ramp up in activities to
allow the incorporation of new subsurface learnings and
optimisation of future well locations and is based on their
experience in other operations in Egypt.
Petrosilah, the El Fayum joint operating company (JOC), has now
secured a rig on a long-term contract, one year firm plus an option
for a second year, starting in Q4 2022, and continues to assess the
availability of other rigs. The new rig will allow a continuous
drilling campaign which is essential to adding new barrels to
production as well as providing a stable platform for additional
drilling activities.
Two workover rigs continue to contribute to production through
low-cost well repairs and recompletions.
North Beni Suef (NBS)
Planning for the commitment well due to be drilled in Q4 2022 is
advancing, and the request for an extension to the exploration
period has been submitted to EGPC.
Vietnam
Vietnam Production
Production for the first half of 2022 from the TGT and CNV
fields net to the Group's working interest averaged 5,861 boepd, in
line with our previously published guidance of 5,000-6,000
boepd.
During the period, production from TGT averaged 15,133 boepd
gross and 4,490 boepd net to Pharos. CNV production averaged 5,483
boepd gross and 1,371 boepd net to Pharos.
Vietnam Development and Operations
On Block 16-1 - TGT Field, two additional development wells are
planned in H2 2022.
On Block 9-2 - CNV Field, one development well is planned in H2
2022. The revised field development plan, including the additional
well, has been approved by the Vietnam Ministry of Industry and
Trade on 19 April 2022.
A Letter of Award has been signed with Velesto for the Naga 3
drilling rig. Rig contract negotiations are well advanced with
drilling due to commence in September 2022.
Work on the submission of licence extension requests for both
TGT & CNV is progressing well within the JOCs.
Vietnam Exploration
On Block 125, final 3D seismic processing is well underway. Once
completed, the Group will continue to work to identify prospects
with a view to secure a funding partner before drilling the
commitment well in 2023.
Israel
Relinquishment is being finalised amongst partners.
Financial Update
Revenues and hedging
Revenues
Group revenues for the six months to 30 June 2022 were c. $129m
prior to a hedging loss of c.$17m. The revenue includes $7m from
Egypt due to the Third Amendment to the El Fayum Concession
Agreement, as announced in our Preliminary Results on 16 March
2022. The H1 2022 average realised oil price per barrel achieved
was approx. $111/bbl from Vietnam, representing a premium of just
over $3/bbl to Brent, and approx. $99/bbl from Egypt, a discount of
just under $6/bbl to Brent. Egypt price realisations exclude the
additional $7m revenue due to the Third Amendment to the El Fayum
Concession Agreement. The dated Brent prices used for Vietnam and
Egypt are driven by their respective sales volumes by daily prices
as calculated throughout the period.
As previously announced in May 2022, the H2 2022 premium for TGT
crude in Vietnam has been agreed at $5.65/bbl, a significant
increase over the H1 2022 premium of $3.13/bbl.
Hedging
In the first six months of 2022, 42% of the Group's production
was hedged, securing a minimum price for the hedged volumes of
$67.2/bbl. For the remainder of 2022, 25% of the Group's forecast
production is hedged, at a minimum price of $69.1/bbl. The Group's
reserve based lending facility (RBL) requires the Company to hedge
at least 35% of Vietnam RBL production volumes and the current
hedging programme meets this requirement through to June 2023,
leaving 75% of Group production unhedged.
Cash / net debt
The Company entered the year with cash of $27.1m and net debt of
$57.5m. Cash balances as at 30 June 2022 were c.$47.5m with net
debt of c.$38.1m.
We have a solid record of converting revenues earned in Egypt
into cash and believe that we remain well placed to do so,
notwithstanding the impact of recent global macroeconomic
volatility which has seen both a devaluation of the Egyptian Pound
and restrictions on outgoing US Dollar (USD) transfers by the
Central Bank of Egypt. We have received payment in USD as recently
as late June. In the event of any delay in our El Fayum invoices
being paid, we have access to our facility with the National Bank
of Egypt (NBE), which allows us to draw down 60% of the value of
each invoice in USD. The amount drawn under the NBE facility as at
30 June 2022 was $7.5m, which is included in our net debt
calculation. We will continue to closely monitor our working
capital position across the group with a view to expediting cash
conversion and will keep the market updated on progress.
Cash expenditure
Capex
Forecast cash capital expenditure for 2022 is c.$29m, post carry
in Egypt, of which c.$10.0m was incurred in H1, including c.$5m for
the 3-well programme in Egypt prior to completion of the farm out.
Approximately $24m is allocated to Vietnam for the 3 well
development drilling campaign on TGT and CNV and the exploration
programme on Blocks 125 & 126.
RBL
The June redetermination process under the RBL has now completed
with a principal repayment of $0.2m made in July 2022, highlighting
the strong reserves base and commodity pricing.
Corporate Update
Initiation of Share Buyback Programme
In a separate release made today, we are announcing the
initiation of a share buyback programme to purchase up to
approximately US$3 million (excluding stamp duty and expenses) of
the Company's ordinary shares. The programme will commence today
and is expected to take three to six months to complete, depending
on trading volumes.
The Board believes that the Company's shares are trading at a
material discount to their underlying net asset value, despite the
performance across the Group's asset base, and this programme forms
part of our broader strategy to deliver value to our
shareholders.
Strong cash generation in the first half of the year has put us
in a position where we can be confident that this modest amount of
capital can be allocated to the programme alongside the investments
being made in Vietnam, while the work programme in Egypt is fully
carried by our partner, IPR, for 2022 and beyond. Given the
discount noted above, the Board is of the view that share buybacks
are an appropriate means of returning value to shareholders at this
time and will enhance NAV, earnings and dividends per share over
time, by reducing the number of shares in issue.
Outlook
We approach the second half of 2022 with a confident outlook,
having successfully delivered the two key strategic goals in the
first six months:
-- Signature of the Third Amendment to the El Fayum Concession
Agreement in January 2022, which increased the Cost Recovery
Petroleum percentage from 30% to 40%, and Contractor's share of
revenue from c.42% to c.50%; and
-- Completion of the farm-out of our Egyptian assets in March
2022, with a smooth transition of operatorship to IPR, reshaping
both our portfolio and our financial position to maximise the
potential of these assets.
In Egypt, IPR has proven itself to be an excellent partner and
we are now positioned to deliver the next stage of growth together,
with an important first building block being the JOC securing a
drilling rig on a long-term contract.
In Vietnam, the next phase of development drilling is due to
commence and work is well underway to submit requests for licence
extensions for both TGT and CNV.
Underpinning our production, development and exploration
activity is a strengthened balance sheet and a focus on capital
discipline to deliver value for stakeholders responsibly and
sustainably.
Pharos is strongly positioned for the future.
Enquiries
Pharos Energy plc
Tel: 020 7747 2000
Jann Brown, Chief Executive Officer
Sue Rivett, Chief Financial Officer
Camarco Tel: 020 3757 4980
Billy Clegg | Georgia Edmonds | Rebecca Waterworth
Notes to editors
Pharos Energy plc is an independent oil and gas exploration and
production company with a focus on sustainable growth and returns
to stakeholders, which is listed on the London Stock Exchange.
Pharos has production, development and/or exploration interests in
Egypt, Vietnam and Israel. In Egypt, Pharos holds a 45% working
interest share in the El Fayum Concession in the Western Desert,
with IPR Lake Qarun, part of the international integrated energy
business IPR Energy Group, holding the remaining 55% working
interest. The El Fayum Concession produces oil from 10 fields and
is located 80 km southwest of Cairo. It is operated by Petrosilah,
a 50/50 joint stock company between the contractor parties (being
IPR Lake Qarun and Pharos) and the Egyptian General Petroleum
Corporation (EGPC). Pharos also holds a 45% working interest share
in the North Beni Suef (NBS) Concession in Egypt, which is located
immediately south of the El Fayum Concession. IPR Lake Qarun
operates and holds the remaining 55% working interest in the NBS
Concession. In Vietnam, Pharos has a 30.5% working interest in
Block 16-1 which contains 97% of the Te Giac Trang (TGT) field and
is operated by the Hoang Long Joint Operating Company. Pharos'
unitised interest in the TGT field is 29.7%. Pharos also has a 25%
working interest in the Ca Ngu Vang (CVN) field located in Block
9-2, which is operated by the Hoan Vu Joint Operating Company.
Blocks 16-1 and 9-2 are located in the shallow water Cuu Long
Basin, offshore southern Vietnam. Pharos also holds a 70% interest
in, and is designated operator of, Blocks 125 & 126, located in
the moderate to deep water Phu Khanh Basin, north east of the Cuu
Long Basin, offshore central Vietnam. In Israel, Pharos, together
with Capricorn Energy PLC (formerly known as Cairn Energy PLC) and
Israel's Ratio Oil Exploration, has eight licences offshore Israel.
Each party has an equal working interest and Capricorn Energy is
the operator.
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