Pharos Energy Plc (LSE: PHAR): Operations on track. Guidance re-iterated. 1p per share dividend to be paid in July
• Pharos has re-iterated its FY23 production guidance of 6,050-7,500 boe/d including 4,700-5,700 boe/d for Vietnam and 1,350-1,800 bbl/d for Egypt (3,000-4,000 bbl/d gross) with ~US$22 mm cash capex.• YE22 2P reserves were estimated at 27.2 mmboe, down from 53 mmboe at YE21 due to the divestment of 55% WI of the Egyptian assets (-20.7 mmbbl), production during 2022 (-2.6 mmboe) and technical revisions (-2.5 mmboe) in Egypt (low production combined with licence duration) and Vietnam (lower performance from certain wells and reduced production due to maintenance combined with licence duration).
• Pharos also held 19.7 mmboe of net 2C resources at YE22.
• Repatriation of US$ from Egypt continues to be constrained and a second drilling rig to resume production growth is not now expected until next year.
• In Vietnam, drilling will resume at TGT in early 2024. An extension to the licence term on Block 125 is expected to be obtained in 2023 with a farm-in partner to be secured in 2H23.
• We re-iterate our target price of £0.55/sh.
Dividend, G&A and net debt
• The YE22 net debt based on cash and debt of US$29 mm had already been reported. In addition, YE22 current receivables and payables were respectively ~US$61 mm and US$14 mm. Adjusting the YE22 net debt for these two items would have led to a YE22 net cash position of US$18 mm.
• The FY22 G&A was only US$10 mm, below our expectations of US$12 mm. FY23 G&A is budgeted at US$9.5 mm.
• Pharos intends to declare a 1p per share dividend (US$5.3 mm in cash being ~10% of FY22 operating cash flow) that is expected to be paid in July. The interim dividend for 2023 (1/3rd of the FY23 dividend) is planned to be paid in January 2024 with the balance due in July 2024.
• The US$3 mm share buyback programme is ongoing with only a fraction of that amount having been deployed so far.
Valuation
Our Core NAV and ReNAV of respectively £0.43/sh and £0.58/sh are broadly unchanged. Key upcoming newsflow include the extension of the licences in Vietnam and the association sanction of further drilling that could unlock the conversion of up to 10 mmboe 2C resources into the 2P reserves category and add over £0.20 to our Core NAV.
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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