Pharos Energy Plc (LSE: PHAR): Vietnam licence extension key step to unlocking value
• Pharos has been awarded a two year extension to Phase One of the Exploration Period (from 8 November 2023 to 7 November 2025) of Blocks 125 & 126 in Vietnam.• While this was expected, it is an important development. The licence is estimated to hold very large prospects and the licence extension increases the likelihood of the company securing a farm-in partner.
• Pharos is also looking for a rig to drill a well next year.
• The extension allows Pharos to postpone the drilling commitment by up to two years. Without the extension, Pharos would have been required to pay the minimum US$15 mm commitment or fund a shallow well by November. The extension therefore has positives implication for Pharos’ balance sheet.
• We re-iterate our target price of £0.55/sh.
Egyptian receivables and production
While the company has received some small payments from Egypt, receivables continue to slowly build-up. Pharos continues to use its Egyptian credit facility that is limited to 60% of the total receivable amount with a cap of US$18 mm. We understand that the assets continue to perform well (including the recently drilled horizontal well in Vietnam).
Valuation
While we have trimmed down our Brent price assumptions for 2023 by ~US$1.5/bbl, our Core NAV and ReNAV are broadly unchanged at £0.39 per share and £0.53 per share. Receivables in Egypt at the end of May were estimated at US$29 mm (£0.06 per share).
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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