Pharos Energy Plc (LSE: PHAR): Net cash up by ~US$21.5 mm in four months

• Production from January to the end of April was 5,755 boe/d including 4,347 boe/d in Vietnam and 1,408 bbl/d in Egypt. This is in line with the company FY24 guidance of 5.2-6.5 mboe/d including 3.9-5.0 mbpoe/d in Vietnam and 1.3-1.5 mbbl/d in Egypt.
• The FY24 capex guidance is unchanged. The key near term news flow remains the farm-out of an interest in Blocks 125 & 126 in Vietnam. Several interested farm-in parties are awaiting confirmation of timing of a rig slot and clarity on the well cost.
• In Egypt, Pharos has received total payments of US$13.8 mm including US$10 mm in US$. Receivables in Egypt were US$31 mm at the end of April (US$30 mm at the end of March).
• Net cash at the end of April was US$15 mm. This compares with a net debt position of US$6.6 mm at YE23 and represents an improvement of US$21.5 mm in the net cash position over the period. We understand that the cash position at the end of April did not include the proceeds of a lifting in Vietnam to be received later in 1H24.
• We reiterate our target price of £0.50 per share.

Egypt unconventionals
TAG Oil announced a very good flow rate at an unconventional horizontal well in the Abu-Roash “F” tight carbonate reservoir in the Badr oil field. During flowback, the oil production rates ranged between 400 and 800 bbl/d from a restricted lateral section of only 308 m as the well unloaded. With only 23% of the frac water recovered so far, oil production from the well is expected to increase. A longer lateral of 1,000 m would also boost production. This is important for Pharos given the same play extends onto Pharos’ licences. The unconventional oil in place resources on TAG Oil’s assets are estimated by the company at 500 mmbbl. TAG Oil has a market cap of C$79 mm (~US$ 55 mm). Pharos estimates 1bn bbl oil in place of unconventional resources in the same play on its licences. Everything else being equal, the read through value for Pharos 45% WI could be US$50 mm (or £0.10 per share). While going after these resources would require some work including the consolidation of the licences with better fiscal terms (in line with TAG Oil’s), the prize is very large.

Valuation
We continue to forecast Pharos will hold US$15-20 mm in net cash by YE24 after distributing US$9 mm to shareholders. Our Core NAV and ReNAV are unchanged at £0.33/sh and £0.53/sh respectively. The approval of a 5 year extension of the TGT and CNV licences would unlock a total of £0.30/sh.