The latest research note from Shore Capital presents a constructive view on Pharos Energy (LON:PHAR), highlighting a business that still has meaningful scope to generate cash flow from its existing portfolio while also looking for opportunities to add greater scale. Research analyst James Hosie sums up the current mood neatly, calling Pharos “Aspiring to do more”.
That feels like a fair description of where the company stands today. Pharos is not being presented as a finished story. Instead, the note points to a company with producing assets, a debt free balance sheet, and several near-term catalysts that could shape the next phase of growth. Shore Capital says Pharos ended FY25 with about $40.2 million of cash and no debt, giving it financial flexibility as management considers how best to expand the business.
A large part of the current investment case centres on Vietnam. According to the latest research note from Shore Capital, the TGT-18X appraisal well could add reserves and production if successful, while the CNV-5X appraisal well may offer similar upside later in the second quarter. The note also says recent infill drilling appears to have helped maintain output at a level similar to the first quarter of FY25, and management believes appraisal success could lift net production by around 20%, pushing FY26 Vietnam production towards the top end of guidance at 4.0 to 4.95 kboe/d.
Egypt is also beginning to attract more attention again. Shore Capital notes that an improved receivables position during the second half of FY25, together with an expected payment of overdue invoices during Q2, has strengthened management’s appetite for its Egyptian assets. While forecast production from Egypt remains modest at 1.2 to 1.45 kboe/d in FY26, the region accounts for more than half of Pharos’ net 2P reserves, and the company and its partner are committed to a six well programme. That could matter over time, especially if dependable payment flows continue.
The financial outlook in the note is also more encouraging than before. Shore Capital increased its FY26 Brent oil price assumption to around $80 per barrel from $64, and as a result lifted several key forecasts. Revenue for FY26 is projected at $149.2 million, EBITDAX at $94.9 million, funds from operations at $53.4 million, and net cash at year end at $43.5 million. The note also forecasts adjusted EPS of 2.4 cents for FY26, compared with a loss in FY25, while the annual dividend is expected to hold at 1.33p per share.
There is also useful context in Shore Capital’s oil price sensitivity analysis. On page 2, the chart indicates that at $80 per barrel, Pharos could generate operating cash flow of about $56 million and free cash flow of about $9 million in FY26. The note adds that free cash flow breakeven before the dividend is estimated at roughly $70 per barrel, which helps show how higher oil prices can support the company’s plans.
FY25 highlights
- Revenue of $114.6 million.
- EBITDAX of $55.7 million.
- Funds from operations of $22.7 million.
- Free cash flow of $27.8 million.
- Year end cash of $40.2 million, with no debt.
- Dividend increased to 1.33p per share.
- FY25 net production of 5.4 kboe/d.
Another important feature of the latest research note from Shore Capital is its emphasis on optionality. Only 25% of Pharos’ FY26 entitlement oil production is hedged, which means the company retains meaningful exposure to stronger near-term oil prices, particularly in Vietnam. Shore Capital’s view is that the added cash flow could help management pursue acquisitions rather than simply boost shareholder returns. That is significant because management has made clear it wants to acquire additional production, or near production, assets that would complement and diversify the existing portfolio.
The note does not ignore risk. The outcome of the Vietnamese appraisal wells remains important, and oil prices can clearly move sharply. Even so, the overall tone is constructive because Pharos appears to have several things going for it at once, producing assets, appraisal upside, renewed momentum in Egypt, and a strong enough balance sheet to consider broader portfolio growth. Final thoughts, Shore Capital’s latest research note suggests Pharos Energy has a credible platform for progress, with near-term drilling results likely to be the next major test of how far that potential can go.
Pharos Energy is an independent oil and gas company focused on building value from a portfolio of production, appraisal and development assets in Vietnam and Egypt. The business is centred on generating cash flow from its existing operations, supporting reserve growth through further drilling, and maintaining financial flexibility with a debt free balance sheet and cash on hand. The latest Shore Capital research note also highlights management’s aim to expand the company through acquisitions that add scale and diversify the portfolio.
