TIDMPHAR
RNS Number : 6964X
Pharos Energy PLC
27 April 2023
27 April 2023
Pharos Energy plc
("Pharos" or the "Company" or, together with its subsidiaries,
the "Group")
Annual Report & Accounts and Notice of Annual General
Meeting ("AGM")
The Annual Report & Accounts of the Company for the year
ended 31 December 2022 (in pdf and ESEF compliant format), a
Shareholder Circular, which includes Notice of the 2023 AGM are now
available on the Company's website and can be accessed via
www.pharos.energy .
Hard copies of the above two documents, together with a Form of
Proxy, have been mailed to those shareholders having elected to
receive paper copies.
In accordance with LR 9.6.1, copies of the above documents have
also been submitted to the FCA's National Storage Mechanism and
will shortly be available for inspection on the National Storage
Mechanism's website,
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
This dissemination announcement is based upon the Company's
announcement of Preliminary Results for the Year Ended 31 December
2022 made on 22 March 2023 with the addition of information
required by Disclosure and Transparency Rule (DTR) 6.3.5R set out
below in the Appendix.
Annual General Meeting
The 2023 AGM will be held at Storey Club, 100 Liverpool Street,
London, EC2M 2AT on 25 May 2023 at 2.00 p.m.
After the disruption to our normal meeting format over the last
three years, the Company is pleased to invite shareholders to
attend the Company's 2023 AGM in person.
For reasons of cost and logistics we are not offering the option
of virtual participation in this year's AGM, but the Board
recognises that some shareholders may still have reservations about
attending the meeting in person. We also recognise that the AGM is
an important event for shareholders in the corporate calendar, and
we are committed to ensuring that shareholders can exercise their
right to vote and ask questions in connection with this meeting.
Accordingly, for those shareholders that do not wish to attend, or
those that wish to attend and are unable to do so, questions in
connection with the business of the AGM can be submitted on
reasonable notice in advance of the meeting by email to
info@pharos.energy. In so far as relevant to the business of the
meeting questions will be responded to by email and taken into
account as appropriate at the meeting itself.
Shareholders wishing to vote on any of the matters of business
at the AGM are encouraged to submit their votes as soon as
possible, and in any event no later than the relevant deadline,
2.00 p.m. on 23 May 2023, through the proxy and electronic voting
facilities. Voting at the AGM will be carried out by way of a poll
so that the votes cast in advance by all shareholders appointing
the Chair of the Meeting as their proxy can be taken into account.
As is usual, the results of the AGM will be announced as soon as
practical after it has taken place.
Enquiries
Pharos Energy plc Tel: 0207 603 1515
Tony Hunter, Company Secretary
Camarco Tel: 020 3757 4980
Billy Clegg | Georgia Edmonds | Rebecca Waterworth | Kirsty
Duff
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 and Vietnam. 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 (CNV) 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.
Appendix
Following the release of the Company's Preliminary Results for
the Year Ended 31 December 2022 made on 22 March 2023, additional
information is set out below in accordance with DTR 6.3.5R.
1) The following is extracted from page 160 of the Company's
Annual Report and Accounts 2022 at www.pharos.energy.
D i r ecto r s' R e sp o nsib i l i ty S t a t e m ent
(a) the Financial Statements set out on pages 171 to 202, which
have been prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006 and International Financial Reporting Standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union and in accordance with International Financial
Reporting Standards as issued by the IASB, give a true and fair
view of the assets, liabilities, financial position and loss of the
Company and the Group taken as a whole;
(b) this Directors' Report along with the Strategic Report,
including each of the management reports forming part of these
reports, includes a fair review of the development and performance
of the business and the position of the Company and the Group taken
as a whole, together with a description of the principal risks and
uncertainties that they face and how these are being managed and
mitigated as set out in the Risk Management and Risk Report on
pages 47 to 60; and
(c) the annual report and the Financial Statements, taken as a
whole, are fair, balanced and understandable and provide the
information necessary for the shareholders to assess the Group's
position, performance, business model and strategy.
Approved by the Board and signed on its behalf.
Sue Rivett
Chief Financial Officer
21 March 2023
2) The following description of the principal risks and
uncertainties is extracted from the Risk Management Report (pages
47 to 60) of the Annual Report and Accounts 2022 at
www.pharos.energy .
Principal Risks and Uncertainties
A summary of the key risks affecting Pharos and how these risks
are mitigated to enable the Company to achieve its strategic
objectives is as follows.
Key to change in likelihood: á Increase ß à No Change â Decrease
N New Risk
STRATEGIC
Principal risks Change Causes Risk Mitigation
in
likelihood
----------- ------------------------------------------------------------------- --------------------------------------------------------------------
1. Further lockdowns * Emergence of new variants or other viruses * Continue to maintain and promote precautionary
dampening oil demand â measures to minimise disruption to business
* Sub-optimal pricing on commodity sales * Waving efficacy of vaccinations and boosters
* Procure long lead items as early as possible from
reliable suppliers / contractors
* Reduced revenue to finance operations * COVID-19 infections continue to go up
* Tight cash management and forecasting
* The virus maintains its pandemic status throughout
2023
* Hold back on discretionary spend
* Social disorder as poorer nations / populations fall
behind on vaccination programmes * Oil price hedging
* The bulk of our output sold on the local markets
where demand remains strong
* Closely follow and comply with all applicable law,
regulation and public health guidance relating to the
COVID-19 pandemic
----------- ------------------------------------------------------------------- --------------------------------------------------------------------
2. Insufficient â * Reallocation of capital away from oil and gas * Regular review of funding options
funds to meet commitments
* Inability to invest in line with growth strategy * Huge swings in oil and other commodity prices * Stress testing forecast
* Assets bubble bursts * Proactive dialogue with banks and other providers of
capital
* Global debt crises emerging
* Opportunity screening
* Inadequate cost control
* Effective project management and resourcing
* Poor technical data to support allocations
* Cost carry by farm-in partner(s)
* High inflation
* Thorough capital allocation process
----------- ------------------------------------------------------------------- --------------------------------------------------------------------
3. Production levels ß * Inadequate waterflood responses * Develop a clear wells strategy, focusing on
below expectation à performance improvement, regulatory compliance and
increased activity
* Sub-Optimal well performance * Incorrect well placements
* Increase drilling activity / plan-drill additional
* Reduced drilling * Development wells uncommercial injection wells / frac injection zone
* Poor reservoir models * Reduce cost of well construction
* Lack of financing for drilling programme * Increase surveillance and intervention rates
* Perform Target workovers on Producer /injection wells
* De-risk best prospects / drill best prospects
* Improve Reservoir models
* Implement planned drilling programmes
* Active participation in dialogue with JVs/JOCs
----------- ------------------------------------------------------------------- --------------------------------------------------------------------
4. Health, Safety, * Business disruption due to workforce affected by * Improve structural and Asset Integrity through strong
Environmental and ß COVID-19 operational and maintenance processes which are
Social Risk à critical to preserving a safer environment
* Reputational * Health and safety and environmental risks of major
explosions, leaks or spills * Comply with all legislative / regulatory frameworks
and transition to a goal based approach focused on
* Operational outages leading to lower production improving safety
* High risk operating conditions and HSES risks
* Promote a positive health and safety culture where
* Climate change impacts on the sector, such as extreme workers are given proper training and incentives to
weather, sea level rise and water availability work safe with a zero tolerance for non- compliance
affecting production
* Environmental and Social Impact Assessments relating
* Gas venting and flaring hazards and risks - well blow to, for example:
outs, land/water contamination
o climate impacts and
* Non-alignment of new acquisitions' HSES practices need to adapt to changing
with Pharos Corporate standards climate conditions over
the life of the asset
o regulatory developments
* Increased disparities and societal risks in health, * Enhance emergency preparedness and spill prevention
technology or workforce opportunities plan
o Controlled venting
o Control and management
of pressurised oil and
gas from boreholes
o Use of low impact
extraction chemicals
where alternatives exist
o Water management -
securing of a sustainable
water supply, recycling
and reuse wastewater
o Marine management
plan - especially for
offshore drilling
o Carry out scenario
exercises to improve
preparedness
o Active participation
in dialogue with JOC
to influence them on
best work practices
* Maintaining adequate energy insurance for our assets
and operations
----------- ------------------------------------------------------------------- --------------------------------------------------------------------
5. Climate Change á * Pressure on investors to divest / avoid fossil fuel * Transparent reporting and participation in Carbon
- transition and companies / projects Disclosure Project (CDP)and Water questionnaire
physical risks
* Lack of Capital * Inability to find economically viable CO(2) reduction * Continue alignment with TCFD recommendations
solutions
* Reputational * Net Zero commitment on all assets by 2050, detailed
* Lack of alignment between our key stakeholders' roadmap coming in 2023
priorities and climate change concerns
* Increased capex and operating costs
* Establishment of an Emission Management Fund, under
* Global transition to a lower carbon intensity economy which we will set aside $0.25 for each barrel sold at
* Physical Damage to an oil price above $75/bbl to support emissions
management projects
* Increased climate regulation and disclosure
assets
* Lower oil prices * Transparent reporting and participation in Carbon
* Increase in carbon taxes / decarbonisation charges Disclosure Project (CDP) Climate Change and Water
Security questionnaires
* Stranded assets
* transformational shifts leading to reduced demand for
fossil fuels * Continue alignment with TCFD recommendations
* Regulatory changes -
* Climate activists pressing prominent institutions and * Further integrate climate risk management within
potential taxes investors to abandon fossil investments - "greening" Pharos Risk Management Framework
the financial system
* Stress test our going concerns under a Net Zero
* Increased frequency of extreme weather events Emissions price scenario and carbon tax
* Supply chain disruptions causing delay/ shutdowns to * Embed Climate change scenarios and evaluate decisions
operations on key business operations / directions
* Lack of partner alignment on decarbonisation * Continuous improvement of GHG emissions management
initiatives and get JOCs to support CO(2) emissions reduction
initiatives
* Update our Climate Change Policy and keep it fit for
purpose and in line with evolving decarbonisation
developments
* Comprehensive insurance cover for Physical Damage
* Regional close monitoring of extreme weather
developments so that evacuation or shut-down are
activated in good time
* Regular and timely control of inventories to ensure
essential spares are sourced in advance
* Prepare business case or back study to support
decarbonisation initiatives
----------- ------------------------------------------------------------------- --------------------------------------------------------------------
FINANCIAL*
Principal risks Change Causes Risk Mitigation
in
likelihood
----------- --------------------------------------------------------------- ------------------------------------------------------------------
6. Commodity Price ß * On-going market volatility and uncertainties from * Oil commodity Hedging
risk à COVID-19
* Uncertainty on planning o Comply with RBL requirements
* Geo-political factors and international conflicts o Maintain robust processes
around treasury, governance,
* Inability to fund work programme / dividend forecasting, credit
* Pressure on investors to divest / avoid fossil fuel and risk
companies / projects * Close monitoring of business activities, financial
position cash flows
* Lower long-term prices tighten the margin of error
for investments * Control over procurement costs / effective management
of supply chains derived from third parties -
suppliers, joint venture partners, investors, and
* Forecasting volatility swings are more complex as it contractors
is challenging to gauge what that means for the
industry as market dynamics are influenced by the
speed of recovery from COVID-19 and growing ESG * Stress test scenarios and sensitivities via principal
pressures compound risk analysis to ensure a level of
robustness to downside price scenarios
* Negative cash flows & earnings degradation
* Capital discipline with focus on controlling and
managing costs
* Market speculation and trading in oil futures
* Discretionary spend actively managed
* Resurgence of new COVID-19 variants
* Maintain and cultivate good relationships with
* Repercussions of the Russian invasion of Ukraine lenders
----------- --------------------------------------------------------------- ------------------------------------------------------------------
7. Rising Operational ß * Global inflation * Regular updates to yearly budgets and forecasts
Costs à
* Reduced profits * Turmoil in the energy markets causing sharp price * Focus in discretionary spend
hikes
* Strain on cash flows * Secure long-term contracts where appropriate without
* Sudden unplanned rate increases for oil and gas lock-ins
services
* Shortages in skilled labour
* Explore applying new technological advances, focus o
n
prevention and early detection
----------- --------------------------------------------------------------- ------------------------------------------------------------------
8. Egyptian economy N * Inability to repatriate cash earned from Egypt * Pharos have opted not to accept the payment of our
receivables balance in EGP unless required for
* The impact of the war on Egypt's economy is operations
especially significant * Further devaluation of the Egyptian pound
* Revolving credit facility with the National Bank of
Egypt (NBE), which allows us to draw down 60% of the
value of each invoice in USD (extended the current
$18m facility on the same terms to 31 March 2024)
----------- --------------------------------------------------------------- ------------------------------------------------------------------
OPERATIONAL
Principal risks Change Causes Risk Mitigation
in
likelihood
----------- ------------------------------------------------------------------- -------------------------------------------------------------------
9. Reserves Risk ß * Inaccurate reserves estimates * Monitor and maintain standards of reserves reporting
à by adhering to three key considerations: of
* Future cash flows and value depend on producing our consistency, transparency and utility, including
reserves * Subcontracting certain reserves estimation work to disclosure of movements in reserves on a
independent reserve engineers outside the direct country-by-country basis, disclosure of material
control of the Group projects and moderation of subjective judgements
* Earlier impairment triggers due to low commodity * On-going evaluation of projects in existing and
price potential new areas of interest and pursue
development opportunities
* Capital constraints jeopardise planned exploration /
development initiatives * Regular reviews of reserves estimates by independent
consultants
* Inherent uncertainties in the evaluation techniques
to estimate the 2P reserves * Ensure continuing adherence to industry best practice
regarding technical estimates and judgements
* Increased DD&A costs
* Ensuring peer and independent verification of future
production profiles and reserve recovery
* Lower than expected well performances and drilling
results
* RBL facility compliance - Vietnam Reserves are
audited independently by reserves consultants
* Slower drilling programmes approved by lenders
----------- ------------------------------------------------------------------- -------------------------------------------------------------------
10. Partner Alignment á * FPSO Tie-in Agreement from other Operator * Active Participation in JOC management
Risk
Vietnam * Delay in the Field Development Plans * Direct secondment
* Misalignment at JV/JOC level can delay investment
* Technical disagreement caused by quality of JV staff, * Build Senior Management level relationship with local
* Adverse impact on Production and Cash flow Partners
work ethic, low productivity,
competency issues * Continue good relationship with other Foreign Partner
* Geological Modelling differences resulting in
sub-optimal well locations
Egypt * Close collaboration with JOCs partners
* Technical Misalignment of JV/JOC level can delay
investment * JOC partner (IPR and EGPC) divergent views on
investments, and difference in value-drivers. * Support JV training initiatives
* Adverse impact on Production and Cash flow
* Engage with JV Exploration Manager. Achieve technical
buy-in to ERCE model
* Waterflood analogue success education
----------- ------------------------------------------------------------------- -------------------------------------------------------------------
11. Cyber risk á * Sophistication and frequency of cyber-attacks * Update Service level agreement with IT providers
increasing
* Major cyber security breach may result in loss of key
confidential data * Offsite Installation of back-up system and Business
* Heavy reliance on and disruption to critical business Recovery / continuity Plan in place
systems
* Unavailability of key systems
* Enhance our Cloud back-up data and solutions
* Infiltration of spam emails corrupting our systems
* Prevention & detection of cyber threats via a
* Critical reliance on remote working in light of programme of effective continuous monitoring
COVID-19 pandemic and expectation of longer-term
hybrid working practices
* Plan for staged integration (new acquisition) and
upgrade of IT systems
* The war in Ukraine has raised acute concerns about
cyber operations
* Cyber Security and Phishing training for all our
workforce globally in 2022
----------- ------------------------------------------------------------------- -------------------------------------------------------------------
12. Human Resource ß * Failure to recruit and retain high calibre personnel * Remuneration Committee retains independent advisors
Risk à to deliver on and implement growth strategy to test the competitiveness of compensation packages
for key employees
* Good skilled people are essential to ensure success
* Challenges in the recruitment & integration of
additional technical expertise for any new
acquisition * On-going succession planning
* Negative view of the oil and gas industry amongst
younger professionals, particularly in light of * Maintain a competitive remuneration mix re bonus,
climate change impacts long-term incentive and share option plans
* High costs of recruiting experienced workforce * Build and use people networks in each country and
advertise vacancies in these networks
* Weakened corporate culture and collegiate
responsibility due to remote working * Maintain a programme for staff wellbeing
* Restructuring workforce * Facilitate and encourage workforce communication via
employee surveys and shared feedback
* Board re-composition and retirements
* The Board was reduced from 9 to 6 (two Executive
Directors and four Non-Executive Directors)
--
----------- ------------------------------------------------------------------- -------------------------------------------------------------------
REPUTATION
Principal risks Change Causes Risk Mitigation
in
likelihood
----------- ------------------------------------------------------------------ -------------------------------------------------------------------
13. Sub-optimal ß * Scarcity of capital for investment projects * Carry out robust economic analyses based on
capital allocation à opportunities high-grading to support capital
allocation
* Adverse reaction from current / future stakeholders * A volatile macroeconomic environment resulting in
significant differences to key assumptions
underpinning investment decisions * Key KPIs such as NPV, IRR and payback used to compare
* Investment decisions based on realistic / achievable across many project scenarios
economic assumptions
* Pressure to invest and produce growth and returns in
the short term to maintain dividend payments * Rig count investment scenarios are stress-tested
against a range of Brent oil price
* Shareholder focus on increasing returns in conflict
with wider strategic considerations * Seeking to maximise influence to promote best
practice in non-operated ventures -
* Inability to "switch-off" drilling / investment
commitments if economic assumptions change rapidly * Seek the views of stakeholders through direct and
indirect engagement
* Lack of partner/stakeholder alignment on
decarbonisation initiatives * Maintain a balanced investment portfolio which allows
a degree of resilience in adjusting short-term
investment commitments
* Prepare business case or back pay study to support
decarbonisation initiatives
----------- ------------------------------------------------------------------ -------------------------------------------------------------------
14. Political and á * Operations in challenging regulatory and political * Canvass support in risk management by using both
Regional risk environments international and in-country professional advisors
* Energy sector exposed to a wide range of political
developments which may impact adversely on operating * Changes to fiscal regimes without robust * Engage directly with the relevant authorities on a
costs, compliance and taxation stabilisation protections regular basis
* Protracted approval processes causing delays * Assess country risk profiles, trend analyses and
on-the-ground reports by journalists / academics
* Government reform, political instability and/ or
civil unrest * Thoroughly evaluate the risks of operating in
specific areas and assess commercial acceptability
* Impact of of financial sanctions, export controls and
other trading restrictions on industry counterparties * Maintain political risk insurance at appropriate
and sectors (in particular, Russian state-controlled levels of cover
entities, or certain other connected entities or
Individuals, arising from the continuing conflict in
Ukraine) * All operations are located outside of the EU and USD
is the main currency of our business
* Active working group monitoring sanctions arising
from conflict in Ukraine and assessing/managing
associated risk to Group
* Adoption in May 2022 of new standalone Group
Sanctions Policy, to supplement existing Group Code
of Business Conduct and Ethics
* Develop and maintain mitigation planning in relation
to certain counterparties with potential to come
within the future scope of sanctions
----------- ------------------------------------------------------------------ -------------------------------------------------------------------
15. Business Conduct ß * Present in countries with below average score on the * Ensure adequate due diligence prior to on-boarding
and Bribery à Transparency International Corruption Index with a risk-based approach,including independent "Red
flags" checks
* Reputational damage and exposure to criminal charges
* Lack of transparent procurement and investment
policies * Annual training, testing and compliance
certifications by all associated persons
* Non-compliance with Criminal Crime Offences (CCO)
and/or UK Bribery Act * Increase awareness of the Group's Code of Business
Conduct and Ethics and related policies for all
employees and associated persons
* Corruption and human rights issues
* Mandatory Gifts and Hospitality declaration and
register
* Group Whistleblowing Policy and confidential ethics
24-hour hotline supported by EthicsPoint with numbers
displayed in all offices
* CCO risk assessment and on-going implementation of
adequate procedures to prevent facilitation of tax
evasion across all operations
* Comply with the principles of the Extractive
Industries Transparency Initiative
----------- ------------------------------------------------------------------ -------------------------------------------------------------------
3) The following is extracted from Note 35 to the Financial
Statements (page 199) of the Annual Report and Accounts 2022 at
www.pharos.energy .
RELATED PARTY TRANSACTIONS
During the year, the Company recorded a net cost of $0.01m
(2021: net cost of $0.01m) in respect of services rendered between
Group companies.
Remuneration of key management personnel
The remuneration of the Directors of the Company, who are
considered to be its key management personnel, is set out below in
aggregate for each of the categories specified in IAS 24 Related
Party Disclosures. Further information about the remuneration of
individual Directors is provided in the audited part of the
Directors' Remuneration Report on pages 136 to 142.
2022 2021
$ million $ million
============================= =========== =============
Short-term employee benefits 3.0 4.5
============================= =========== =============
Post-employment benefits 0.1 0.2
============================= =========== =============
Share-based payments 1.0 3.1
============================= =========== =============
4.1 7.8
============================= =========== =============
Directors' transactions
Pursuant to a lease dated 20 April 1997, Comfort Storyville (a
company wholly owned by Mr Ed Story) has leased to the Group,
office and storage space in Comfort, Texas, USA. The lease, which
was negotiated on an arm's length basis, has a fixed monthly rent
of $1,000.
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