Pharos Energy plc (LON:PHAR) has now established a robust platform for future growth and shareholder returns, according to Craig Howie, Research Analyst at Shore Capital. Pharos Energy provided a Trading and Operations Update on 16 January 2024.
Financial highlights were as follows:
Pharos Group revenue for 2023 was c.$168m with minimal hedging losses (2022: $221.6m before hedging loss of $22.5m). Vietnam contributed c.$149m and Egypt c.$19m of revenues.
Cash balances as at 31 December 2023 were c.$32.6m; net debt c.$6.5m (2022: cash balances $45.3m; net debt $28.9m).
Egypt receivable position as at 31 December 2023 stood at $37.3m (31 Dec 2022: $24.2m).
The December redetermination process under the RBL completed with a principal repayment of $12.6m made in December 202. Following that repayment, the remaining amount drawn under the RBL stands at $30.0m.
Jann Brown, Chief Executive Officer, commented on the update:
“Pharos delivered a strong operational performance across the portfolio in 2023 and there is significant operational momentum going into 2024. The Group had success on drilling in both Vietnam, with the CNV well coming in strongly, and in Egypt, with discoveries on the first NBS exploration well and the El Fayum exploration well. On Block 125, parallel discussions with several potential farm-in partners are ongoing and we have joined forces with another operator in the region to enhance our position in the rig market.”
Shore Capital in their recent note, commented:
“We believe that the company is now an underappreciated cash generator which would continue to stand up to scrutiny at much lower oil prices. Whilst receivables in Egypt currently remain elevated, we believe that Pharos’ long-established portfolio in Vietnam is where the bulk of the value lies – as a result of its stronger netbacks and outsized contribution to group production.”
Shore Capital highlight scope for a successful farm-out of Blocks 125/126 in Vietnam to provide a powerful re-rating catalyst. Pharos continues its efforts to bring in a farm-in partner for Blocks 125/126 and secure a rig prior to drilling this very high-impact play. The company itself describes an “asymmetric” risk-reward profile for investors here.
“Our forecasts conservatively assume US$70/bbl Brent in FY24F and FY25F and indicate a healthy financial performance in FY24F and FY25F, for which we estimate revenues of >US$145m, FFO of >US$50m and free cash flow comfortably in excess of US$20m,” noted Shore. Shore Capital expects an even stronger performance this year, because of its higher FY23F Brent price deck.
Pharos Energy plc (LON:PHAR), is a growth-driven energy company, with a portfolio of production and exploration assets in South East Asia and the Middle East.
