Pharos Energy Plc (LSE: PHAR): FY24 in line. All eyes on Vietnam drilling and licence consolidation in Egypt
• FY24 production was 5,801 boe/d including, 1,440 bbl/d in Egypt and 4,361 boe/d in Vietnam. This is in line with expectations.• The FY25 production guidance has been set at 5.0-6.2 mboe/d, including 3.6-4.6 mboe/d in Vietnam and 1.4-1.6 mboe/d.
• The FY25 production guidance for Egypt is below our expectations, which had assumed a normalization of the business environment. This normalization would have led to increased investment and production. Consequently, we have deferred this growth in Egypt to 2026. Finalizing the consolidation of the Egyptian concessions will enable the company to commit more capital to Egypt and enhance production.
• The FY25 capex budget is US$33 mm, including US$8 mm for Egypt (Auctus: US$22 mm), US$15 mm for TGT and CNV in Vietnam (in line) and US$8 mm for long items for Blocks 125 & 126 (Auctus: US$5 mm).
• A positive result at the TGT appraisal well in 4Q25 could derisk ~3.5 mmboe and unlock further development wells. The well will be put on production if successful and boost FY26 production.
• Pharos held US$16.5 mm in cash at YE24. Our forecast of US$18 mm assumed a faster repayment of receivables in Egypt (down by US$1.5 mm since the end of September).
• As we incorporate YE25 net cash, the FY25 production guidance and work programme and a slower repayment of receivables in Egypt during 2025 (US$6 mm vs US$15 mm previously), we have changed our target price to £0.50/sh. The approval of the new FDPs for TGT and CNV, would increase our Core NAV by £0.03/sh. Successful appraisal at TGT and CNV would derisk ~5 mmboe of resources with an unrisked value of £0.15/sh.
Refections on EnQuest’s acquisition of assets in Vietnam
EnQuest is acquiring 7.5 mmbbl of net 2P reserves and 4.9 mmboe of net 2C resources (YE24) in Vietnam from Harbour Energy. The cash payment on closing in 2Q25 is expected to be ~US$35 mm. Assuming completion in mid-2Q25 and accounting for 5.3 mboe/d production in the interim period, EnQuest is effectively paying US$35 mm for 6.8 mmboe of 2P reserves at closing, implying a cost of around US$5.1/boe of 2P reserves. However, the break-even for Harbour’s assets is ~US$40/boe with minimal capex. This compares with less than US$20/boe opex plus ~US$6/boe royalty for Pharos, resulting in a US$14/boe netback difference in favour of Pharos.
Valuation
Our updated 2P NAV for the company is £0.29/sh, while our new ReNAV is £0.49/sh. We forecast that Pharos will hold ~US$25 mm in cash at YE25 after the payment of a dividend similar to 2024 (~4% yield).
Soco International is an oil and gas exploration and production company. Co. has exploration, development and production interests in Vietnam, and exploration and appraisal interests in the Republic of Congo and Angola. As of Dec 31 2016, Co.'s commercial reserves were 33.3 million barrels of oil equivalent.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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